Kevin Drum - November 2012

The Republican Tap Dance on Entitlement Reform

| Mon Nov. 26, 2012 2:32 PM EST

It's a slow news day today, as everyone shakes off their tryptophan-induced comas, and this means that we have to invent things to talk about. Today's invention is about all the Republicans who have bravely suggested they might be willing to raise taxes ("a mob of three or four, at this point," says Ed Kilgore acidly) if Democrats, in turn, are willing to put entitlements on the chopping block.

There are several things to say about this. First, several of these Republicans have claimed an openness to tax increases in the past, so there's a lot less here than meets the eye. Second, none of this claimed openness has actually led to any tax increases in the past. And third, um, just what entitlement cuts are they talking about? Paul Waldman:

The problem with this is that while the Democrats' position is quite clear—the Bush tax cuts should expire for income over $250,000—the Republicans' position is extremely vague, on both the tax side and the entitlement side. Let's take taxes first. [Rate increases? Deduction caps? Or what?]

....Then we get to the price Republicans are going to want to exact for any agreement to stop the Austerity Trap, and this is where they're vague. They want "reform" of entitlements. And what is "reform," you ask? Well, nobody ever says. And the reason is that Republicans know perfectly well that the things they would like to do to Social Security and Medicare are unpopular. We can dispense with Social Security quickly: the program is basically fine, and you could eliminate future shortfalls in benefits with some minor tweaking of the financing, like raising the income cut-off for Social Security taxes, which is currently at $110,100. But the real budgetary challenge is Medicare.

Quite right. On Social Security, I continue to hold the unpopular view that liberals would be well served if they could make a deal. Raise the income cutoff to get more revenue, change the inflation formula to cut benefits a bit, toss in a few other smallish items that would be phased in over 20 years, and you're done. Social Security would be off the table for decades.

The problem, of course, is that this has nothing to do with the deficit over the next few decades, which means there's really no reason to make it a precondition for a deficit deal. So even though I'm in favor of a deal, I can't really think of any good reason to do it now.

But Medicare is different. It's funded partly out of the general fund and its growth projections are plenty scary. It has a lot to do with future deficits, so it makes sense to make it part of a medium-term deficit deal.

The problem is that, unlike Social Security, it's also insanely complicated. There isn't some easy basket of fixes that would restrain its growth, and the prospect of getting some kind of serious deal on Medicare over the next three weeks is laughable.

So we're stuck. Given the political will (unlikely, I admit), Social Security actually could be fixed in three weeks. But if it's the medium-term deficit you're worried about, there's not much point. Medicare and Medicaid, conversely, do have an effect on the medium-term deficit, but they couldn't be fixed in three months, let alone three weeks.

So what exactly are Republicans after? Do they just want the fig leaf of a supercommittee to study entitlements? Are they still obsessed with raising the retirement age and just want to get agreement on that? They can't seriously think that Paul Ryan's vouchercare is anywhere near being on the table, can they?

It's all very mysterious. Just what kind of entitlement reform do Republicans think they can get by December 21? It would be nice to hear at least a hint from them about what they're after.

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Republicans Threaten Senate Meltdown If Filibuster Reform Passes

| Mon Nov. 26, 2012 1:35 PM EST

After noting that Senate Republicans are threatening dire revenge if Harry Reid succeeds in passing filibuster reform, Ed Kilgore asks:

This raises the rather obvious question of exactly what Republicans could do to make the Senate less functional than it already is under the de facto 60-vote requirement for all legislation that they have so recently introduced?

This is a good question. Seriously. I'd like to hear from some of our congressional gurus on this. The Senate, of course, is generally governed by the rule of unanimous consent, which means that nothing can happen if even a single Senator objects. In theory, this gives Republicans lots of non-filibuster avenues for gumming up the works, but as far as I know they're already using them. These days, unanimous consent is just a quaint echo of a bygone era, never granted for even the most routine business.

Now, maybe I'm wrong about that. Maybe unanimous consent could be withheld even more than it is now. And there are other avenues for gumming up the works by insisting on the letter of the rules for things like committee meeting times and so forth. But is there really very much of this kind of thing left? Help us, Sarah Binder and Thomas Mann! Can Republicans really obstruct the Senate even more than they do now if they put their minds to it?

UPDATE: Ian Millhiser provides a handy top-ten list of obstruction tactics here. The first four are basically variations on the filibuster, but the rest of the list demonstrates that there are plenty of other ways to gum up the works too.

The Bizarre Apocalyptic Vision of Right-Wing Fundraisers

| Mon Nov. 26, 2012 1:05 PM EST

Over the years, I've ended up on mailing lists for a variety of liberal and conservative organizations. These are folks who want my money, and I've long been intrigued by the difference between the two.

There is, of course, hyperbole on both sides. Liberal pitches, for example, occasionally imply that Republicans want to forcibly impregnate every woman in America or allow Goldman Sachs to run the Treasury Department. But this is the exception, not the rule, and even where there is hyperbole, it's at least firmly grounded in a genuine, concrete issue of some kind. Republicans really would ban abortion if they had the power, and Wall Street really does have way too much influence on American economic policy.

But right-wing pitches are altogether different. I'll grant you that the stuff I get from official outlets like, say, the National Republican Senatorial Committee, tends to be (barely) on the sane side of things. But by far, most of the mail is from conservative groups that are just flat-out nuts. The United Nations is going to herd us all into urban concentration camps. George Soros plans to destroy the dollar. Obama is turning America into a slave state. The Army will be deputized to go house-to-house searching for guns as soon as Inauguration Day is safely past. Under Obamacare people with the wrong political attitudes will be denied the right to see a doctor. This stuff is simply endless.

Why? Andrew Sullivan links today to a Baffler piece by Rick Perlstein that I missed when it first came out, in which he walks us through the story of right-wing fundraising. It is, he says, a toxic blend of standard come-ons (get-rich-quick schemes, miracle cures suppressed by "the elites," etc.) and political come-ons (send money now to prevent the UN takeover of America):

The strategic alliance of snake-oil vendors and conservative true believers points up evidence of another successful long march, of tactics designed to corral fleeceable multitudes all in one place—and the formation of a cast of mind that makes it hard for either them or us to discern where the ideological con ended and the money con began.

…But the New Right's business model was dishonest in more than its revenue structure. Its very message—the alarmist vision of White Protestant Civilization Besieged that propelled fundraising pitch after fundraising pitch—was confabulatory too…And, in an intersection that is utterly crucial, this same theology of fear is how a certain sort of commercial appeal—a snake-oil-selling one—works as well. This is where the retail political lying practiced by Romney links up with the universe in which 23-cent miracle cures exist (absent the hero’s intervention) just out of reach, thanks to the conspiracy of some powerful cabal—a cabal that, wouldn’t you know it in these late-model hustles, perfectly resembles the ur-villain of the conservative mind: liberals.

In this respect, it’s not really useful, or possible, to specify a break point where the money game ends and the ideological one begins. They are two facets of the same coin—where the con selling 23-cent miracle cures for heart disease inches inexorably into the one selling miniscule marginal tax rates as the miracle cure for the nation itself. The proof is in the pitches—the come-ons in which the ideological and the transactional share the exact same vocabulary, moral claims, and cast of heroes and villains.

Rick is suggesting that rank-and-file conservatives simply have a cast of mind that makes them vulnerable to scary, conspiracy-minded sales pitches, and it doesn't matter much whether the sales pitch is for an investment opportunity to save you from the destruction of the dollar or a political opportunity to save America from the depradations of the UN. And this certainly fits what we know about brain science and ideology: People with a more fearful cast of mind tend to be political conservatives, while people with a more open cast of mind tend to be political liberals.

This explains the fear-based nature of most conservative appeals, but it still doesn't really explain why so many of those appeals are completely batty. Isn't it possible to scare people with (relatively speaking) plausible scenarios? The UN doesn't want to herd us all into cities, but liberals do want to make gasoline more expensive. (It's true! We do!) Likewise, nobody's going to confiscate your guns, but there are plenty of liberals who do want to pass an assault weapons ban.

So why the endlessly apocalyptic tone? Is the real stuff simply not scary enough to be effective? Or have conservatives gotten caught up in an arms race that long ago got out of control? What's the deal here?

It's a Great Time To Be a Banker in America

| Mon Nov. 26, 2012 11:41 AM EST

Matt Yglesias passes along this remarkable chart from Morgan Stanley's Adam Parker showing that 88 percent of all the profit growth in the S&P 500 this year has been concentrated in ten firms in a grand total of two industries: technology and finance. In particular, seven of the ten firms are financial companies. Keep this firmly in mind the next time some Wall Street titan complains yet again that Obama hates banks and is out to destroy them. This is not a sign that Obama has done anything serious to hurt the financial industry; it's a sign that America's bankers are comically thin-skinned whiners.

The Effect on the Rich of a $50,000 Deduction Cap

| Sun Nov. 25, 2012 10:49 PM EST

Greg Mankiw suggests that instead of letting the high-end Bush tax cuts expire, we keep the lower Bush rates on the wealthy but limit their deductions to $50,000:

According to the Tax Policy Center, if we cap itemized deductions at $50,000 and keep tax rates as they are today, we’d raise $749 billion in tax revenue over 10 years. And 96.2 percent of the extra revenue would come from the top fifth of taxpayers, with 79.9 percent from the top 1 percent.

It's an interesting idea. But how would this affect the very wealthiest taxpayers compared to simply letting the Bush tax cuts expire? I was curious, so I took a look at the distributional analysis done a few months ago by the Tax Policy Center.

President Obama has actually proposed several changes aimed solely at high earners. First, he'd let top marginal rates go back up to 36 percent and 39.6 percent. Second, he'd limit deductions and reinstate the personal exemption phaseout. Third, he'd let the long-term capital gains rate go back up to 20 percent and he'd tax dividends at the same rate as ordinary income. So what effect would all this have on earners in the top 1% and top 0.1%?

The first set of numbers was done in 2010, while the deduction cap analysis was done in 2012, so the figures probably aren't precisely comparable. But they're pretty close. Bottom line: Thanks to Obama's proposed changes in taxation of dividends and capital gains, the rich would do slightly worse under his plan than they would with a deduction cap, but not by much. Obama's proposal would also raise a bit more money, but again, not by much. (The Treasury calculates that sunsetting the Bush tax cuts on the rich would raise about $848 billion over ten years.) Lower the deduction cap to $40,000 and both proposals would be very nearly identical.

So assuming I've done the arithmetic correctly, it looks as if both proposals would have a pretty similar effect on the very rich and a pretty similar effect on federal revenue. There might actually be the seeds of a compromise available here.

Today's Football Question

| Sun Nov. 25, 2012 3:59 PM EST

I don't watch much pro football, so I hope everyone will excuse my ignorance here. But I turn on pro games every once in a while, and as near as I can tell, the new normal is that if a team is way ahead then the network just gives up on the game and switches coverage to a different and supposedly better game. Is this really true? Or am I imagining things? 

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Black Friday Black Cat Blogging - 23 November 2012

| Fri Nov. 23, 2012 9:25 PM EST

I'm so embarrassed. I forgot about catblogging today. But better late than never, right? So here's Domino, eyes as wide as saucers for some reason or another, staring at something from the cat dimension that none of us mere humans can see. I think she's probably just thankful that she doesn't have to go out shopping today.

Today's Crazy Idea: Let's Get Rid of Tax Brackets for the Rich!

| Fri Nov. 23, 2012 1:46 PM EST

A few days ago I wrote a post about rich people who didn't understand how marginal tax rates worked, and therefore thought that under President Obama's plan they'd suddenly face a big hike in their tax bill as soon as they passed Obama's magic $250,000 threshold. Today I extend an abject apology to these people. That may not be how the tax code works now, but apparently it's not crazy to think that negotiators in Washington are discussing exactly that:

One possible change would tax the entire salary earned by those making more than a certain level — $400,000 or so — at the top rate of 35 percent rather than allowing them to pay lower rates before they reach the target, as is the standard formula....“Would you consider that a tax rate increase?” asked one aide familiar with the idea. “It would not impact the top marginal rate, and no one would have an effective rate over 35 percent.” But, he added, taxes would rise for the rich. He, like other aides, spoke on condition of anonymity because Congressional leaders want negotiations to be kept quiet.

A Democrat familiar with the proposal called it plausible, but said its future would depend on an official scoring of how much revenue it would raise. White House and Congressional aides “are looking at lots of creative options,” the Democrat said.

I'll make several observations here. First, it's crazy. Under this plan, when you crossed the magic threshold from $399,000 to $401,000, you'd suddenly owe about $30,000 in extra taxes. You really would have an incentive not to make more money if you were near that cutoff point. The dumb urban legend would become fact.

Second, it's a gift for the super rich at the expense of the merely ordinarily rich. It would have a big effect on someone making $400,000, but only a tiny effect on someone making, say, $10 million a year, since their effective tax rate would stay at 35%, instead of going up to 39.6% for the vast bulk of their earned income. This implies that Republicans are willing to throw the ordinarily rich under the bus in order to save the super rich.

Third, the Times article suggests something similar was part of the tax code "in the late 1980s." Really? I didn't know that. But if that's the case, I assume it didn't last long because, you know, it's crazy. Why would anyone think it's a good idea to resurrect this brain-dead idea?

My Annual Black Friday Post

| Fri Nov. 23, 2012 7:08 AM EST

According to the retail industry, "Black Friday" is the day when retail profits for the year go from red to black. Are you skeptical that this is really the origin of the term? You should be. After all, the term Black ___day, in other contexts, has always signified something terrible, like a stock market crash or the start of the Blitz. Is it reasonable to think that retailers deliberately chose this phrase to memorialize their biggest day of the year?

Not really. But to get the real story, we'll have to trace its origins back in time. Here's a 1985 article from the Philadelphia Inquirer:

[Irwin] Greenberg, a 30-year veteran of the retail trade, says it is a Philadelphia expression. "It surely can't be a merchant's expression," he said. A spot check of retailers from across the country suggests that Greenberg might be on to something.

"I've never heard it before," laughed Carol Sanger, a spokeswoman for Federated Department Stores in Cincinnati…"I have no idea what it means," said Bill Dombrowski, director of media relations for Carter Hawley Hale Stores Inc. in Los Angeles…From the National Retail Merchants Association, the industry's trade association in New York, came this terse statement: "Black Friday is not an accepted term in the retail industry…"

Hmm. So as recently as 1985 it wasn't in common use nationwide. It was only in common use in Philadelphia. But why? If we go back to 1975, the New York Times informs us that it has something to do with the Army-Navy game. The gist of the story is that crowds used to pour into Philadelphia on the Friday after Thanksgiving to shop, they'd stay over to watch the game on Saturday, and then go home. It was the huge crowds that gave the day its bleak name.

If we go back yet another decade we can find a Philly reference as early as 1966. An advertisement that year in the American Philatelist from a stamp shop in Philadelphia starts out: "'Black Friday' is the name which the Philadelphia Police Department has given to the Friday following Thanksgiving Day. It is not a term of endearment to them. 'Black Friday' officially opens the Christmas shopping season in center city, and it usually brings massive traffic jams and over-crowded sidewalks as the downtown stores are mobbed from opening to closing."

But it goes back further than that. A couple of years ago I got an email from a Philadelphia reader who recalled the warnings he got from the older women at Wanamaker's department store when he worked there in 1971:

They warned me to be prepared for the hoards of obnoxious brats and their demanding parents that would alight from the banks of elevators onto the eighth floor toy department, all racing to see the latest toys on their way to visit Santa. The feeling of impending doom sticks with me to this day. The experienced old ladies that had worked there for years called it "Black Friday."

"For years." But how many years? Ben Zimmer collects some evidence that the term was already in common use by 1961 (common enough that Philly merchants were trying to change the term to "Big Friday"), and passes along an interview with Joseph Barrett, who recounted his role in popularizing the expression when he worked as a reporter in Philadelphia:

In 1959, the old Evening Bulletin assigned me to police administration, working out of City Hall. Nathan Kleger was the police reporter who covered Center City for the Bulletin. In the early 1960s, Kleger and I put together a front-page story for Thanksgiving and we appropriated the police term "Black Friday" to describe the terrible traffic conditions. Center City merchants complained loudly to Police Commissioner Albert N. Brown that drawing attention to traffic deterred customers from coming downtown. I was worried that maybe Kleger and I had made a mistake in using such a term, so I went to Chief Inspector Albert Trimmer to get him to verify it.

So all the evidence points in one direction. The term originated in Philadelphia in the 50s or earlier and wasn't in common use in the rest of the country until decades later. And it did indeed refer to something unpleasant: the gigantic Army-Navy-post-Thanksgiving day crowds and traffic jams, which both retail workers and police officers dreaded. The retail industry originally loathed the term, and the whole "red to black" fairy tale was tacked on sometime in the 80s by an overcaffeinated flack trying to put lipstick on a pig that had gotten a little too embarrassing for America's shopkeepers. The first reference that I've found to this usage was in 1982, and by the early 90s it had become the official story.

And today everyone believes it, which is a pretty good demonstration of the power of corporate PR. But now you know the real story behind Black Friday.

Thanksgiving Cat Blogging - 22 November 2012

| Thu Nov. 22, 2012 11:23 AM EST

Happy Thanksgiving from everyone in the Drum household! May all your dreams of turkey come true today.