WRAP-UP: This was an odd, off-kilter debate. Neither Romney nor Obama seemed entirely comfortable. Romney struck me as too hyper, insisting in every segment on going over every single claim Obama had just made. The result was a bunch of laundry lists that never cohered into recognizable points. Obama seemed oddly hesitant and halting, as if he wasn't quite sure what points he wanted to make. Transcript here.

Neither candidate landed any serious blows. Obama came the closest, I thought, in the last half hour when he attacked Romney for all his secret plans. After noting that Romney wouldn't tell us which tax deductions he wants to cut, or how he wants to replace either Obamacare or Dodd-Frank, Obama delivered the best line of the night: "Is the reason that Governor Romney is keeping all these plans secret because they’re too good? Is it because somehow middle-class families are going to benefit too much from them?"

Did that make up for the fact that Obama was strangely incompetent at attacking Romney on his tax plan in the first half hour? Hard to say. But honestly, going after Romney on the tax deduction front seems pretty obvious, and I don't understand why Obama never really did it. Sure, he made a crack about "the math," but he didn't come straight out and ask Romney if he planned to get rid of the home mortgage deduction, for example. That would have hit home a lot harder than hauling out a wonkish point about the "independent analysts" who say Romney's plan doesn't add up.

Romney avoided any big mistakes, and certainly projected more energy than Obama. But I didn't think he really delivered any great lines, or got off any really crisp explanations of his policies. I don't think tonight's performance will hurt him, but I doubt that it really helps him either.

Final score: I give Obama a B-, Romney a B.

Forget all that newfangled Twitter nonsense. We're going retro with some old school liveblogging of tonight's debate between Barack Obama and Mitt Romney. Let's do it.

10:24 - Lehrer: "We've lost a pod."

10:23 - Romney is seriously rambling on education.

10:22 - Obama keeps pulling back when he's obviously about to attack Romney. Not sure why.

10:21 - No zingers so far. A few obviously canned lines, but nothing delivered with any zest.

10:16 - "I love great schools." Uh huh. "I reject the idea that I don’t believe in great teachers." Oh please. The faux outrage doesn't work here.

10:15 - Obama's tic of constantly saying "What I've said is...." is annoying.

10:13 - So Lehrer's approach for every topic is to ask the candidates if they think there are any differences between them? This really isn't working. It's just an invitation to give a stump speech.

10:12 - Romney is answering with a bunch of possible options? Weak. Now retreating to talking points.

10:11 - Ah, finally the attack on details. Romney won't tell us what deductions he'll cut. He won't tell us what he'll replace Dodd-Frank with. He won't tell us what he'll replace Obamacare with. "Is the reason that Governor Romney is keeping all these plans secret because they're too good?" Very good line.

10:04 - Obama's IPAB explanation wasn't bad, but his speech is oddly halting and staccato tonight. He just doesn't seem fully in command of what he wants to say.

10:03 - "We didn't cut Medicare. Of course, we don't have Medicare." Oops.

10:01 - "The irony is that we’ve seen this model work really well — in Massachusetts." Good line.

9:59 - "Let me tell you exactly what Obamacare did." Finally! Now let's see if he does a good job.

9:54 - Starting to think that the old 60-second limits were a good idea.

9:53 - Do most viewers know what Dodd-Frank is? Do they know what leverage limits are?

9:47 - Obama's attack on vouchers is fairly effective. "If you’re 54 or 55, you might want to listen ‘cause this will affect you."

9:44 - Romney's attack on the $716 billion that Obama cuts from Medicare was OK, but he should have stuck with it instead of flitting around to whatever other attack popped into his mind.

9:43 - Obama is right that Social Security needs nothing more than modest tweaks.

9:40 - Romney is all over the map trying to respond to every last thing Obama said.

9:38 - "It's actually an accounting treatment...." That's really not a good phrase to come out of Romney's mouth.

9:36 -  So far, neither of these guys has really done a crisp job of explaining their programs.

9:34 - Romney going all in on the dynamic scoring fairy.

9:33 - "You’ve been president four years. You said you’d cut the deficit in half. It’s now four years later." That's a good line.

9:27 - "I’m going to stop the subsidy to PBS"? Seriously? "I like PBS. I love Big Bird. Actually I like you, too." Come on.

9:25 - Romney's habit of arguing about how much time he has is something he really needs to overcome. Sounds childish.

9:20 - Nope, no pushback on loopholes.

9:18 - Is this $5 trillion tax cut thing a trap for Romney? Now Obama can ask him to list the loophole disclosures to pay for that $5 trillion.

9:15 - Are these guys trying to be soporific?

9:09 - A pair of stump speeches. I've forgotten what they said already.

9:01 - CNN has voter reaction in real time! Squiggly lines!

8:58 - David Gergen says it's all about who's "looser." That's bad news already for Romney.

Sarah Binder writes today that she doesn't expect this year's lame duck session of Congress to conclude a deal that will avert the "fiscal cliff" our legi-lemmings are set to march over on December 31. She has three reasons, and the first two boil down to the fact that Republicans aren't likely to suddenly stop being crazy just because we had an election, even if Obama wins.1 I can buy that. But here's reason #3:

Third, I’m somewhat skeptical that Democrats would have the political fortitude to go over the cliff. Democrats could have stuck to their guns in the lame duck of 2010, forcing Republicans (still in the minority) to swallow an increase in upper income tax rates as the price for extending the middle class tax cuts. That’s not the strategy Democrats chose then, and it strikes me as equally unlikely in 2012 with a GOP House majority. Going over the cliff requires Democrats to take ownership of raising taxes on the middle class at Christmas. That might be the strategically wise move for bolstering Democrats’ leverage come January. But it also strikes me as an electorally doubtful holiday gift to voters.

I'm not so sure about that. In this case, I think I'm with the folks who like to refer to this event as a fiscal slope rather than a fiscal cliff. Their general point is that we don't all suddenly pay thousands of dollars in taxes and cut billions of dollars in spending at the stroke of midnight on January 1st. This stuff all phases in over time.

That's true, and I doubt very much that there would be any serious consequences to doing a deal in February or March instead of December. In the particular case of taxes, the only thing that happens on January 1st is that withholding rates would go up slightly — and maybe not even that. The IRS has a fair amount of latitude to leave withholding rates alone for a few months if it wants to. Either way, this means that Democrats don't really have to worry about "owning" the expiration of the Bush tax cuts for quite a while. (The payroll tax holiday also expires on December 31, but that was always unlikely to be extended anyway. It doesn't have much to do with the fiscal cliff.)

For a few months, then, taxpayers won't see much impact. Maybe none at all. As a result, I think Democrats could pretty safely stick to their guns and extend negotiations into 2013 without much risk. At that point, with the Bush tax cuts gone and rates back up to their Clinton-era levels, they'll still have to convince Republicans to introduce a bill that cuts only the middle-income rates, not the top marginal rates, and that won't be easy. But Republicans will be under as much pressure as Democrats by that point, and they might very well be willing to do a deal.

In short, as long as the composition of Congress doesn't change dramatically, I don't think the calculus is much different before and after January 1st. The cliff doesn't really start to get scary until later in the year.

1This entire post is predicated on the likelihood that Obama will win reelection and the House will remain fairly solidly in Republican hands. If either of those doesn't happen, the legislative calculus changes completely.

This is a bit of a placeholder post. Yesterday Mitt Romney told a Denver TV station that he had some new ideas about his plan to reduce tax deductions in order to make up for the 20% across-the-board rate cuts he's promised:

As an option you could say everybody's going to get up to a $17,000 deduction; and you could use your charitable deduction, your home mortgage deduction, or others — your healthcare deduction. And you can fill that bucket, if you will, that $17,000 bucket that way. And higher income people might have a lower number.

I haven't commented on this yet for several reasons. First, it was casually tossed out. It's not clear if Romney is serious about this. Second, it's a little unclear exactly what he meant: a $17,000 max on deductions from your gross income, or a $17,000 max on how much your tax bill can be reduced? Third, it's still missing crucial details. When Romney says "healthcare deduction," is he talking about the exclusion of healthcare benefits from your taxable income? Is that $17,000 cap for single filers or couples? Does it include the personal exemption and dependent exemptions? Etc. Fourth, he didn't provide a number for higher income people, just a hint that it might be lower than $17,000. Fifth, there's no telling how the math works out on this.

The first four of these things require more detail from Romney. The fifth requires an analysis from the Tax Policy Center or some similar outfit. In the meantime, there's not a lot of point in commenting on something with so many missing pieces.

So for now I'll limit myself to saying that it's highly unlikely that the math works out here. Josh Barro thinks that virtually everyone making under $200,000 would see either a net tax decrease or no change at all under this proposal. And we already know that even if every single deduction for those making over $200,000 were completely eliminated, they'd see a net tax decrease too. So no matter how Romney fills in the blanks, this would amount to a net tax decrease. There's just no way that it becomes revenue neutral, as Romney has promised, without a massive sprinkling of dynamic scoring fairy dust.

If Ed Kilgore can steal an old post of mine about the whole "statistical tie" fallacy, well, I can too. I was going to do it anyway because Nicholas Beaudrot told me to, so here it is:

The idea of a "statistical tie" is based on the theory that (a) statistical results are credible only if they are at least 95% certain to be accurate, and (b) any lead less than a poll's margin of error is less than 95% certain.

There are two problems with this: first, 95% is not some kind of magic cutoff point, and second, the idea that the MOE represents 95% certainty is wrong anyway. A poll's MOE does represent a 95% confidence interval for each individual's percentage, but it doesn't represent a 95% confidence for the difference between the two, and that's what we're really interested in.

In fact, what we're really interested in is the probability that the difference is greater than zero — in other words, that one candidate is genuinely ahead of the other. But this probability isn't a cutoff, it's a continuum: the bigger the lead, the more likely that someone is ahead and that the result isn't just a polling fluke. So instead of lazily reporting any result within the MOE as a "tie," which is statistically wrong anyway, it would be more informative to just go ahead and tell us how probable it is that a candidate is really ahead. Here's a table that gives you the answer to within a point or two:

Pretty handy, no? Most national polls have an MOE of about 3%, so you can usually just use that row. NBC, for example, puts Obama ahead of Romney right now by 49-46%. So what are the odds that Obama is really ahead, and this isn't just a statistical fluke? Answer: 84%.

But now for the bad news: As fun as it is to haul this thing out every few years, it's obsolete. If you want to know who's ahead, there are now loads of sites that aggregate multiple polls in various ways to provide estimates with far less margin of error than any single poll. If Pollster or RCP says that Obama is ahead by three points, then the odds are that he really is ahead by three points. There's still plenty of room for various kinds of error in these poll-of-polls averages, but pure sample error isn't really one of them any more.

For the record, as of today Pollster has Obama ahead by 4.3%; RCP has Obama ahead by 4.0%; Sam Wang's meta-margin has Obama ahead by 5.06%; and Nate Silver has Obama ahead by 3.9%. I think it's pretty safe to say that, at this moment in time, Obama is comfortably ahead.

Chris Mooney has a piece for us today arguing that public opinion is turning around on climate change. What's more, he says, recent studies suggest that climate can even be a winning political issue:

The first of these studies emerged in 2011 from Stanford pollster Jon Krosnick and his colleagues....Both Democrats and independents strongly favored a green candidate over a neutral one, while for Republicans it was basically a wash—neither a pro or anti-climate candidate moved them much. "By taking a green position on climate, candidates of either party can gain votes," Krosnick's team concluded.

....Their findings were reinforced earlier this year by researchers at Yale and George Mason who, in a March 2012 survey, similarly found that taking a stand on climate has the potential to motivate Democratic and independent voters, without causing damage among Republicans.

.... In a survey of 1,204 likely voters in May of 2012, [Andrew] Maxfield found that a "clean energy" candidate fared better than an "all-of-the-above" candidate who supported a variety of energy choices—coal, drilling, and also clean energy. Maxfield then went on to test a variety of climate messages—and the upshot, he says, is that "if you feel strongly about climate change, there is a way to talk about it that voters will understand and appreciate"—especially if candidates focus on recent extreme weather. "I was surprised at the strength of that, and the extent to which voters had begun to recognize the severe weather, and experience it," Maxfield says. 

Unfortunately, I remain skeptical. In a vacuum, supporting green policies has always been a popular position. And it's always been true that there are good ways to talk about climate change and bad ways. I'm not sure anything big has changed here.

The problem is that you don't always get to talk about political issues the way you want to. Your opponents get to talk about them too. And they won't be shy about labeling virtually any serious green policy as a price hike for consumers and a regulatory burden for business. What's more, conservatives have an unusual advantage when they say this: it's actually true. Things like carbon taxes and cap-and-trade policies really will increase the price of energy for consumers. That's the whole point. Conversely, if you limit yourself to generally popular issues like CAFE standards and building more solar plants in the desert, voters will support it, but only because the price hike is small enough (and hidden enough) that it has only a modest impact on climate change in the first place.

What really matters, then, is what happens when potential voters are presented with messaging from both sides. To get an idea of how effective this is, take a look at the Gallup polls below. The first poll asks people if the threat of global warming is generally exaggerated or not, and it hits bottom in 2006, at about the time of the release of Al Gore's An Inconvenient Truth. Then it starts to rise as conservatives fight back, reaching a peak in 2010, shortly after the release of the "Climategate" emails. It's gone down since then, which is good news, but it's still way higher than it was even five years ago. Likewise, the bottom chart shows that even Democrats and Independents are far more likely to think that news of global warming is exaggerated than they were back in 2006.

So there's a long way to go before public opinion is anywhere near where it needs to be. We need to get to a point where even if people know that it means an increase in gasoline and electricity prices — even if their noses are rubbed in it — they still support serious green policies. This is the work ahead of us.

I've mentioned before my rough-and-ready theory of the 2008 financial crisis:

  1. Income inequality goes up.
  2. As a result, earnings of the middle class become sluggish....
  3. And earnings of the rich skyrocket, a trend reinforced by lower tax rates on both labor and capital income.
  4. Rich people eventually run out of sensible things to invest all this money in (because consumer demand is sluggish, see #2), so they get stupid.
  5. Stupid money finances stupid loans to middle-class borrowers who can't afford them (because their incomes are sluggish, see #2).
  6. This all works great until it doesn't. When it doesn't, the economy goes kablooey.

In the aughts, #5 took the form of increasing corruption in the mortgage loan market and increasingly baroque Wall Street financial concoctions to package up all those corrupt loans. It worked great for about five or six years, followed by a Wile E. Coyote moment where the economy was suspended in limbo for a year or so, followed by an epic crash that we still haven't dug our way out of.

I'm just a blogger, though, so there's no special reason you should take me seriously. However, a reader alerted me to a recent National Journal piece by Jonathan Rauch that suggests this theory is gaining ground among serious economists:

Once in a while, a new economic narrative gives renewed strength to an old political ideology. Two generations ago, supply-side economics transformed conservatism’s case against big government from a merely ideological claim to an economic one....Something potentially analogous is stirring among the Left. An emerging view holds that inequality has reached levels that are damaging not only to liberals’ sense of justice but to the economy’s stability and growth. If this narrative catches on, it could give the egalitarian Left new purchase in the national economic debate.

....As Christopher Brown, an economist at Arkansas State University, put it in a pioneering 2004 paper, “Income inequality can exert a significant drag on effective demand.” Looking back on the two decades before 1986, Brown found that if the gap between rich and poor hadn’t grown wider, consumption spending would have been almost 12 percent higher than it actually was.

....So inequality might suppress growth. It might also cause instability. In a democracy, politicians and the public are unlikely to accept depressed spending power if they can help it....They might, for example, create policies allowing banks to write flimsy home mortgages and encouraging consumers to seek them....That is not a bad description of what happened in the 1920s and again during these past few years. “When—as appears to have happened in the long run-up to both crises—the rich lend a large part of their added income to the poor and middle class, and when income inequality grows for several decades,” the IMF’s Michael Kumhof and Romain Rancière wrote, “debt-to-income ratios increase sufficiently to raise the risk of a major crisis.”

But wait. Which is it? Does inequality depress demand? Or does it inflate credit bubbles that maintain demand? Unfortunately, the answer can be both. If inequality is severe enough, there could be enough of it to cause the country to inflate a dangerous credit bubble and still not offset the reduction in demand.

And, no, we’re not finished. Inequality may also be destabilizing in another way. “Of every dollar of real income growth that was generated between 1976 and 2007,” Rajan wrote, “58 cents went to the top 1 percent of households.” In other words, for decades, more than half of the increase in the country’s GDP poured into the bank accounts of the richest Americans, who needed liquid investments in which to put their additional wealth. Their appetite for new investment vehicles fueled a surge in what Arkansas State’s Brown calls “financial engineering”—the concoction of exotic financial instruments, which acted on the financial sector like steroids.

The whole thing is worth a read. This model of inequality and financial crises has some powerful proponents, but it's hardly a mainstream consensus at this point. It's worth keeping an eye on, though. There might be some serious explanatory power here.

Thanks to the Obama administration's sanctions regime, Iran's currency is collapsing:

While the value of the rial has eroded for the past few years as Iran’s economic isolation has deepened, the severity of the drop worsened with surprising speed in recent days as Iranians rushed to sell rials for dollars. By the end of the day on Monday, it cost about 34,800 rials to buy $1 in Tehran. The rate had been 24,600 rials as of last Monday.

“It’s sort of in a full-blown stampede mode today,” said Cliff Kupchan, a Washington-based analyst at the Eurasia Group, a political risk consulting firm. “There’s very little confidence among many Iranians in the government’s ability to adroitly manage economic policy.”

Dan Drezner comments:

Hey, it turns out that the sanctions against Iran really are crippling — so much so that even Mahmoud Admadinejad is admitting it and Benjamin Netanyahu now has sanctions fever. Based on my own sanctions model, I'd predict that the sanctions are now becoming so costly that Iran will in fact be willing to compromise on its nuclear program — but any concessions will seem tiny compared to how devastating the sanctions have been.

Regardless of what you think about Iran's nuclear program (and the sanctions regime itself), there's a lesson here: foreign policy isn't always — or even often — about who can bluster the hardest. Nor is it about "red lines" and toughness. It's messy. No one just sails from success to success. But Obama has pursued a sensible and persistent course against Iran's nuclear program: first getting the world on his side by demonstrating a genuine willingness to engage with Iran's leaders; pushing relentlessly for sanctions when that didn't work; declining to back down when Iran tried to split the coalition he'd built; consistently turning down policy options that might have turned Iran's people against him; and keeping military threats visible but always in the background.

Will it work? Anyone who claims to know for sure is a fool. It's just too nonlinear. But if the Bolton/Cheney crowd could see beyond the ends of their own eyelashes, they'd realize that although Obama may be quieter than they are, he's stuck to a pretty effective policy for years without blinking. And so far it looks like it's working. For those of us who think that bombing foreign countries is a sign of failure, not a first best option, Obama deserves a pretty solid grade for how he's handled things.

Michael Hiltzik writes today about who's really the most important moneybags in contemporary American politics:

The most influential billionaire in America is Peter G. Peterson. The son of Greek immigrants, Peterson, 86, served as Commerce secretary under President Nixon, then became chairman and chief executive of Lehman Bros. Subsequently, he made his big money as co-founder of the Wall Street private equity firm Blackstone Group.

....Peterson's views are subtly infiltrating the Washington debate — which is why Americans should start getting worried about him. He isn't content merely to express concern about the federal deficit. His particular targets are Social Security, Medicare and Medicaid, which he calls "entitlement" programs and which he wants to cut back in a manner that would strike deeply at the middle class.

Actually, I'd offer a different perspective on this, one that I'm reminded of because a few days ago I happened to receive a copy of Robert Ball's book about the Greenspan Social Security Commission. The year is 1983, and here's an excerpt from a section about the PR aspect of his job on the commission:

I encouraged Alicia Munnell [...] to write on what to do about Social Security and what not to do, particularly to rebut Wall Street banker Peter G. Peterson, then as now a strident critic of the program and an unrelenting prophet of demographic doom.

In other words, Peterson has been a prophet of doom for 30 years now, and so far his actual influence on Social Security has been approximately....zero. The 1983 commission didn't pay any attention to him, Bill Clinton didn't pay any attention to him, and the 2005 attempt to privatize Social Security failed utterly. His influence on the federal deficit has likewise been approximately zero, and his influence on Medicare has been, if anything, even less. He wears nicer clothes, but he's basically had about as much impact as your average curmudgeon holding forth on a soapbox in Hyde Park Corner.

There are, of course, plenty of people who say they hate the deficit and plenty of people who have it in for Social Security and Medicare. It's just that most of them are tea party Republicans who adopt these positions when they're politically convenient and drop them when they aren't. Pete Peterson had almost nothing to do with it, and his influence within the tea party movement is pretty much nonexistent. He's had a bit more influence with the centrist Washington Post-ish crowd, but frankly, even there it's not at all clear to me that their opinions owe much to Peterson. This stuff is in their DNA.

I could be wrong, I suppose. Certainly Peterson has kept up a steady drumbeat of background noise about entitlement programs, and that kind of thing always sinks in at least a little bit. But he's never built up a serious political constituency, the way that folks like Grover Norquist and Karl Rove have, and the Beltway elites who take his money and cite his white papers are mostly people who already agree with him anyway.

Still, maybe this is his moment. Maybe after 30 years of futile effort, the current political atmosphere is finally providing him with a willing audience for his message. Maybe he's finally going to make a difference. But I kinda doubt it. Despite his money, he's just not a player. In fact, far from being America's most influential billionaire, Pete Peterson might well be the guy who's wasted more money on political causes than any other billionaire in history.

John Sides passes along this chart from a piece of research that Kim Fridkin did after one of the 2004 debates between John Kerry and George Bush. I've reconstructed it to make it prettier (we're all about the aesthetics here), but the results are the same no matter what the chart looks like. Test subjects who just watched the debate itself thought Kerry won in a landslide. Test subjects who watched the debate plus 20 minutes of analysis on NBC thought Bush won in a landslide. And test subjects who watched the debate plus 20 minutes of CNN commentary were more likely to think that neither candidate won. Obviously public perception of a debate can depend pretty heavily on the spin given to it afterward by the news coverage.

Likewise, as Sides says, Gerald Ford's famous "Poland gaffe" didn't even register with viewers until the next day, after the media had gotten hold of it. And Al Gore handily won his first 2000 debate with George Bush in every single overnight poll. His famous sighing only became a cause célèbre after the talking heads started talking about it nonstop.

This is why I always try to write up my thoughts on debates and speeches without listening to any commentary first. If I don't, it's nearly impossible to disentangle my own thoughts from those I've heard from the TV commentators. That way lies groupthink.

A few days ago I suggested that if Mitt Romney wasn't willing to tell us which tax deductions he'd eliminate to make up for his across-the-board tax rate cuts, somebody should at least ask him if there were any deductions that were off the table. Today, Paul Ryan answered exactly that question after a woman at a town hall event told him she was frustrated by his lack of specifics:

RYAN: If you subject more of their income to taxation — more of their income is taxed — and that allows us to lower revenues for everybody across the board. That means middle class taxpayers have lower tax rates, and there’s plenty of fiscal room to keep these important preferences for middle class taxpayers — you know, like charitable donations, or buying a home, or health care. Every time we’ve done this, we’ve created economic growth.”

Hoo boy. Now I really want to see that famous math that Ryan said he didn't have time to go through on Sunday. Greg Sargent comments:

By seeming to take some middle class deductions off the table, Ryan made the math even more hallucinatory. This might be good politics — Ryan is getting more specific in promising not to raise middle class taxes — but it further confirms that Romney and Ryan have completely jettisoned deficit neutrality as a goal of their plan, and that they are selling people a fiscal bill of goods that doesn’t pass the laugh test.

It's worth noting that Ryan didn't categorically promise never to touch the tax deductions he mentioned above. But he sure did come close, and he's plainly opened himself up to legitimate questions about whether these deductions are off the table in a Romney administration. If they are, Romney's plan becomes simply impossible to take seriously. After all, those three deductions, along with the tax preference for capital gains, account for about a third of all tax expenditures — and if those aren't going to be touched you have to somehow pay for the rate cuts out of the remaining two-thirds. At that point Romney's plan becomes not merely garden-variety impossible, but one of the all-time most laughable political panders of all time.