Kevin Drum - August 2012

Does Obama Regret Reappointing Ben Bernanke?

| Tue Aug. 21, 2012 12:54 PM EDT

John Cassidy thinks President Obama was wrong to reappoint Ben Bernanke as Fed chair in 2009. I thought so too, so obviously I agree. Matt Yglesias agrees too, but he doubts that Obama himself has had second thoughts:

An interesting further nuance is provided by [Cassidy's] very last line, which says "I'd bet that right about now the president is wishing he'd made a different choice."

What's interesting is that my read of the situation is that Obama doesn't wish this, even though he ought to. The key evidence is that Bernanke is hardly the only member of the Federal Reserve's Open Market Committee who Obama has appointed, and none of his appointees are calling for monetary expansion. Instead the strongest voices at the Fed for expansionary policy are regional bank presidents—Charles Evans of Chicago has been the champion, followed by Eric Rosengren of Boston and John Williams of San Francisco.

....This is a Fed full of Obama appointees pursuing a disastrous policy trajectory that's creating all kinds of problems for Obama. But I've never read any reporting indicating that the Obama economic team is upset about monetary policy....

OK, hold on right there. On the subject of Bernanke in particular, I don't know what he thinks in his heart of hearts. Would he support a more expansionary monetary policy if he had enough backing on the Fed board? Would he have more backing if Obama had appointed better colleagues? Could better colleagues have won Senate confirmation? There's reason to doubt it.

We don't know much about this because the inner workings of the Fed have always been pretty opaque. But here's what perplexes me: Why am I perplexed about what Obama thinks of this? The inner workings of the West Wing are the exact opposite of opaque. As with most administrations, there's been an absolute mountain of reporting on the inner workings of the Obama White House. And yet, I've barely read a word about what Team Obama really thinks of the Fed. Why is this? I, for one, would sure like to know.

UPDATE: Jonathan Bernstein thinks Obama could have had a better Fed if he'd tried a little harder:

Ben Bernanke received 70 votes for confirmation — and 77 votes for cloture. That sounds like there was room for someone else, especially since Bernanke lost some Democratic votes (even on cloture). Two other nominees were approved in September 2010 on voice votes. Both nominees approved in 2012 — after the Democratic majority was slimmed down considerably — still cleared 70 votes.

Nor is this an area where I think anyone has made an argument that Barack Obama employed a full-court press on the Senate. Yes, there was some lobbying on Bernanke, but overall it's clearly been a back-burner issue for Obama....I'm open to arguments on this one, but I just don't see any evidence that Obama couldn't have had a significantly different Fed if he had wanted one.

I definitely agree that Obama could have appointed a more liberal Fed chair than Bernanke. High profile appointments are different. It's the others I'm not so sure about. But I'm open to arguments on this too.

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Dean Baker Says We Need to Reduce Our Trade Deficit. But How?

| Tue Aug. 21, 2012 11:53 AM EDT

Dean Baker argues today that it's wrong to view bad housing policy as the main thing holding back the economy. I think that's right, and it's a point worth making:

Bubble-inflated house prices created close to $8 trillion dollars of housing equity. The housing wealth effect implies that people would spend between 5 to 7 cents on the dollar of this additional wealth, creating between $400 billion and $560 billion in additional annual consumption....When the bubble burst, there was nothing to replace the lost demand. Residential construction fell by more than 4 percentage points of GDP ($600 billion annually in today's economy). It fell below normal levels because the boom of the bubble years had led to record vacancy rates. Consumption plunged because the housing bubble equity disappeared.

....All of this seems clear and simple. We lost $1.2 trillion to $1.4 trillion in annual private sector demand. Some of this has been replaced by the federal government's budget deficits, but not enough to fill the gap.

Even though I'm not quite as convinced as Dean that the wealth effect alone explains the Great Recession, it explains a lot. Home prices had to fall, and demand was always going to fall along with it, no matter how many underwater mortgages got rewritten.

One quibble, though: This doesn't mean we wouldn't have benefited from better housing policy early in the Obama presidency. Just because it wouldn't have solved our entire problem doesn't mean it wouldn't have solved some of it. Better housing policy would have helped, and could have been an effective part of broad set of tools to boost the economy.

At this point, though, the bigger question is what to do going forward. Dean again:

The simple story is that we need a new source of demand to fill the gap left by the collapse of the housing bubble. In the short term that can only be the government. In the longer term it will have to be trade, which means a reduction in the trade deficit. That means first and foremost getting the value of the dollar down, but macho politicians in Washington don't talk about a lower valued dollar. The folks on Wall Street don't like it.

True enough. But I demand a follow-up post! The theory of trade deficits is murky enough on its own, but the actual practice of reducing trade deficits is positively swamplike — especially when the world is full of countries that also want to reduce their trade deficits and pretty much bereft of countries willing to give up their trade surpluses in order to help us out. So what should we do? On a purely mechanical, operational basis, how do we eliminate our trade deficit? No fair assuming that we'll stop importing oil, either.

Todd Akin's Real Opponent

| Tue Aug. 21, 2012 11:11 AM EDT

The whole Todd Akin fiasco is kind of fascinating, isn't it? It's hard to remember the last time the Republican establishment has turned against one of their own quite so fast or quite so furiously. Normally they'd circle the wagons and invent some bizarrely creative reason why Akin had done nothing wrong, and even if he had, Democrats have done far worse.

But not this time. This time the lynch mob is out. Why? I think it's because they learned a lesson from 2010: the tea party yahoos can seriously hurt them. Candidates like Sharron Angle, Ken Buck, and Christine O'Donnell cost them Senate seats that they could have won, and with control of the Senate genuinely within reach in 2012 they're just not willing to take any risks this time around. Claire McCaskill is a sure goner running against any halfway normal Republican opponent, and no one wants to let Todd Akin get in the way of that. Ideological purity may be important, but winning elections is even more important. Right now, Akin isn't running against McCaskill, he's running against the ghosts of Angle, Buck, and O'Donnell.

David Brooks Badly Misrepresents the Romney/Ryan Medicare Plan

| Tue Aug. 21, 2012 12:21 AM EDT

David Brooks writes today that Medicare is our biggest budget problem going forward (true) and that President Obama deserves some credit for tackling Medicare reform (also true). Still, he says, all Obama has done is "trimmed on the edges" of entitlement spending. Mitt Romney, by contrast, has shown "surprising passion" about reining in Medicare. And for all you non-tea partiers out there, it gets even better:

By picking Paul Ryan as his running mate, Romney has put Medicare at the center of the national debate....When you look at the Medicare reform package Romney and Ryan have proposed, you find yourself a little surprised. You think of them of as free-market purists, but this proposal features heavy government activism, flexibility and rampant pragmatism.

The federal government would define a package of mandatory health benefits. Private insurers and an agency akin to the current public Medicare system would submit bids to provide coverage for those benefits. The government would give senior citizens a payment equal to the second lowest bid in each region to buy insurance.

This system would provide a basic health safety net. It would also unleash a process of discovery. If the current Medicare structure proves most efficient, then it would dominate the market. If private insurers proved more efficient, they would dominate. Either way, we would find the best way to control Medicare costs. Either way, the burden for paying for basic health care would fall on the government, not on older Americans.

How can Brooks write something like this? It just isn't true. The Romney/Ryan proposal for Medicare is an almost pure free-market plan. Its only cost-control mechanism is competitive bidding, and Romney has very specifically rejected all the cost-control mechanisms currently in the Affordable Care Act. If competitive bidding doesn't work, there's no flexibility, no pragmatism, no Plan B at all.

Beyond that, how can he ignore the growth cap in the Romney/Ryan plan?1 Neither man has promised that "the burden for paying for basic health care would fall on the government, not on older Americans." Quite the opposite, in fact. They have very specifically refused to say who would pay if competitive bidding fails to keep costs below their growth cap. And unless they stand willing to adopt the kind of command-and-control measures they say they reject, the only possible answer is older Americans.

As near as I can tell, the truth is almost exactly the opposite of what Brooks has written. He may not be impressed with Obama's plan, but that's not a good excuse for so badly misrepresenting what Romney and Ryan would do.

1I'm assuming that Romney supports the growth cap in Ryan's plan, since he's said that his plan is nearly identical to Ryan's. It's not really possible to know this for sure, of course, since Romney's plan is almost laughably thin and he has declined to produce any actual details about it. However, if there isn't a growth cap, then it's just a joke in the first place. It's vanishingly unlikely that competitive bidding on its own will seriously rein in Medicare costs.

POSTSCRIPT: It's worth repeating my assumption that what we're really talking about here is Paul Ryan's Medicare plan. The reason for this assumption is that Mitt Romney, almost literally, doesn't have a plan of his own. If you read through his description, what you learn is that (a) all seniors will get a voucher to buy health insurance, and (b) that's it. There are essentially no other details aside from the now pro forma assurance that current seniors won't be affected. It's really not even possible to assess this plan, let alone suggest that it shows "surprising passion" about reforming Medicare.

What is Chris Matthews Talking About?

| Mon Aug. 20, 2012 8:15 PM EDT

I've had Hardball on in the background for the past hour (I know, I know), and I just have to say that sometimes Chris Matthews stuns me. The topic was Todd Akin, and Matthews kept insisting that there was no difference — none, zero, nada — between Akin's infamous reflections on "legitimate rape" and Paul Ryan's view that abortion should be outlawed even in cases of rape and incest. He ended up badgering his guests over and over to admit that the two things were identical.

WTF? I assume Matthews is right about Ryan's view (though I'm not sure if Ryan has ever explicitly clarified this), but what does that have to do with Akin? I don't have any reason to think that Ryan believes some rapes are "legitimate" and others aren't. He simply believes that abortion is murder, and it's murder even if the fetus is the result of rape or incest. This is an extreme pro-life view, but it's hardly a fringe view.

Does anyone have any idea what Matthews was talking about?

UPDATE: The consensus in comments seems to be that Matthews wasn't referring to Ryan's view that abortion should be illegal even in cases of rape and incest. Instead, he was referring to a bill that Ryan and Akin (and most of the GOP caucus) cosponsored last year that would have narrowed Medicaid funding for abortion in rape cases. The legislation would have restricted Medicaid funding only to cases of "forcible rape."

The theory here is that "legitimate" is just another word for "forcible," and Ryan agrees with Akin that there's some kind of distinction here. Unless I missed something, Matthews didn't actually say this, but I suppose he might have meant it and just forgot to say the actual words. Or something.

The Offhand Taste of Even a Genius Is Still Offhand Taste

| Mon Aug. 20, 2012 6:16 PM EDT

Ryan Cooper points out that in the world of paid blogging, you don't get to write posts only when the mood hits you. You have to write every single day, no matter what's going on and what your mood is:

The expectation is that during the day you will write 10-12 posts. This includes an intro music video, a lunch links post, and evening links and/or video. So that means 7-9 short, punchy essays on something, with maybe 1-2 of those being longer and more worked out thoughts.

....If I had my dream job, I'd like to post 4-6 times during the day, and write longer pieces during the extra time. More importantly, I don't want to get into the situation where the demand for content pushes me so hard that I stop taking new stuff in. (I think I could get the hang of full-time blogging, say, but no more than that.) And Andrew Sullivan's habit of regular long breaks, disconnected from the machines, seems very smart, even necessary. I don't think I could keep up with the likes of Matt Yglesias or Joe Weisenthal, and trying looks like a recipe for burnout.

I've long thought that although putting up a dozen posts a day may be good for your traffic numbers, it's a mistake to do it even if you have the talent to pull it off. It reminds me of one of my favorite passages from The Power Broker, about what happened to Robert Moses when he simply got too busy to pay attention to his building projects the way he had early in his career. Those early projects had been works of genius because Moses, for all his faults, was a genius. But later in the book, author Robert Caro passes along an anecdote from Richard Spencer Childs, who was in the room when architect Aymar Embury interrupted to present Moses with a stack of drawings for some new parks. Moses zipped though them, making split-second decisions about which ones to keep and which ones to discard:

"There were no hard feelings. Moses and Embury were good friend," [Childs said.]...."But here perhaps $100,000 worth of public business was settled on Moses' offhand taste." And, recalls Childs, when Moses finished with the drawings, Embury pointed to one he had rejected and said, "That one you threw away was the best of the lot."

Embury may well have been correct: the offhand taste even of a genius is offhand taste.

Even if you have the talent, it's hard to consistently produce good work, let alone memorable work, if you don't have time to think. And these days, I suspect that an awful lot of writers no longer really have time to think.

In any case, I have good news for Ryan: his dream job exists! The bad news is that I already have it. I try to write about half a dozen posts a day, not ten or a dozen, and I doubt very much that anyone misses the four or five posts that therefore never get written. And the extra time (mostly taken during the afternoon, West Coast time) allows me to spend a few hours reading stuff I might not otherwise have time for, and to escape the tyranny of my RSS feed for a bit and think a little more about what everyone else is saying. Or even to change my mind about something I've written myself. It also gives me time to write three or four longer-form pieces each year for the magazine.

If I had the sheer energy and stamina to write more posts each day, maybe I'd do it. There's no telling if I'd have the self-discipline to deliberately pace myself. But I don't, and in the end I think I'm better off for it — and my readers too.

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The 2012 Campaign Is More Petty Than Vicious

| Mon Aug. 20, 2012 2:50 PM EDT

Former Obama spokesman Blake Zeff is tired of the endless carping about 2012 being the nastiest campaign of all time:

The truth? Not only is this not the most negative campaign ever — it’s not the most negative campaign of your lifetime, unless you happen to be three years old.

He makes a pretty good case for this, comparing the various charges and countercharges that filled the airwaves during 2012, 2008, and 2004. And that's without even bothering to examine 2000, when the press corps itself waged a famously vicious campaign against Al Gore; or 1992, which was dominated by charges of philandering and pot smoking and consorting with communists; or 1988, when the GOP hauled out Willie Horton to help beat Michael Dukakis. And I'm only leaving out 1996 because I think I slept through that one. But I'll bet it was pretty vicious too.

Personally, what strikes me most about the 2012 campaign isn't its viciousness per se, but — how do I put this? It's somehow more petty in its viciousness than I remember in the past. Taken as a whole, the 2012 campaign has had plenty of days in the gutter, but the individual attacks all seem pretty forgettable. So far, anyway, there are no Swift boats, no Jeremiah Wright, no inventing the internet, no Gennifer Flowers, no Willie Horton. It's all small potatoes: Obama gutting work requirements for welfare, Romney killing people's wives, etc. Not very edifying stuff, to be sure, and I'm sure it has its intended effect when it's running 24/7 in the entire state of Ohio. Still, there's nothing that will ever make it into the Top Ten annals of dirty campaigning. It's the volume of new crap that's striking, along with the relentless daily invention of obscure new lies, not the viciousness of any one piece of it.

I dunno. Maybe my memory is playing tricks on me. What does the hive mind think?

Niall Ferguson Finally Renders Me Speechless

| Mon Aug. 20, 2012 12:44 PM EDT

What a bizarre spectacle we have today between Paul Krugman and Niall Ferguson. In the latest issue of Newsweek, Ferguson writes that Barack Obama broke his pledge that healthcare reform wouldn't increase the federal deficit. In fact, says Ferguson, the CBO concluded that it will increase the deficit. Krugman shot back that CBO said no such thing: "Anyone who actually read, or even skimmed, the CBO report knows that it found that the ACA would reduce, not increase, the deficit — because the insurance subsidies were fully paid for."

Krugman is right, of course, and I was curious to know how Ferguson would respond. I'm gobsmacked to learn that this is Ferguson's defense:

I very deliberately said “the insurance coverage provisions of the ACA,” not “the ACA.” There is a big difference.

Krugman suggests that I haven't read the CBO's March 2010 report. Sorry, I have, and here is what it says:

“The provisions related to health insurance coverage—which affect both outlays and revenues—were projected to have a net cost of $1,042 billion over the 2012–2021 period; that amount represents a gross cost to the federal government of $1,390 billion, offset in part by $349 billion in receipts and savings (primarily revenues from penalties and other sources).”

But thanks for trying, Paul....

Seriously? That's it? By accounting only for the costs of ACA — that would be the insurance provisions — and not for any of the savings, Ferguson concludes that ACA increases the deficit? And then uses the CBO to back up his claim?

I'm speechless. How do you even react to something like this? Ferguson is like some clever middle schooler who thinks he's made a terrifically shrewd point by inserting "insurance coverage provisions" into his sentence so that he can later argue that it's technically correct if anyone calls him on it. You can almost hear the adolescent tittering in the background.

For the rest of us, the facts are simple: Covering 30 million people does indeed cost money, and Obamacare includes a number of offsetting savings to pay for that. This is what Obama promised to do: to pay for ACA. And CBO says he did. "Altogether," says their report, the various provisions of PPACA are "estimated to increase direct spending by $604 billion and to increase revenues by $813 billion over the 2012–2021 period." That's a net deficit reduction of $210 billion.

Here's more from Noah Smith, who managed to retain his powers of speech after reading Ferguson's piece. The worst part of the whole thing, I suppose, is that Tina Brown is probably delighted by all this. After all, food fights are good for circulation.

Can Todd Akin Survive in Missouri?

| Mon Aug. 20, 2012 11:12 AM EDT

Last week, out of a field of three candidates ranging from very conservative to whackaloon, Missouri Republicans chose the whackaloon candidate, Todd Akin. And as you probably know by now, he stepped in it big time yesterday while defending his belief that abortion should be illegal even in cases of rape and incest. In cases of "legitimate rape," Akin said, "the female body has ways to try to shut that whole thing down."

This is a fairly common fringe view among extreme social conservatives, but they normally don't promote it in public, and certainly not on mainstream television. Still, my first thought was: this is Missouri. Akin's a Republican, and Republicans never punish their own for being too conservative. It'll all blow over and he'll lose a couple of points in the polls, but that's it.

Or is it? Josh Marshall suggests Akin is in bigger trouble than we might think. "I checked what some people I consider key GOP operatives were saying on Twitter just now and they're running for the hills a bit more than I'd expected. To be more specific, they're advising all GOP candidates to disavow Akin as quickly as possible (no big surprise there) and don't seem particularly optimistic he can even stay in the race (that does sort of surprise me)." ThinkProgress collects some GOP reactions here.

I'm sticking with my prediction: it all blows over and Akin doesn't even lose much support. Am I right? Or has my cynicism about the GOP's bottomless tolerance for lunacy gotten the better of me? Comments are open.

3 Questions Mitt Romney Will Never Answer

| Mon Aug. 20, 2012 12:01 AM EDT

You might like to get answers to these questions. You might think the American public deserves answers to these questions before November 6. But you won't get them anyway:

  1. Gov. Romney, what tax loopholes will you propose closing to make up for the tax cuts on the rich that are part of your economic plan?
  2. Your Medicare plan is based on Paul Ryan's and relies on competitive bidding to bring down costs. But what if the bids all come in above your growth cap of GDP + 0.5 percent? Who pays the difference? Seniors?
  3. That 13 percent you say you paid in taxes over the past decade—that's federal income taxes, right? And it's based on AGI?