Kevin Drum - 2012

Why the Super Rich Have Turned So Bitterly Against Obama

| Wed Nov. 28, 2012 7:45 PM EST

Ezra Klein talks to Chrystia Freeland about why the super rich dislike Obama so bitterly:

Klein: My experience is that the very rich are open to higher taxes in the context of a deficit deal....But they don't like the idea that their money should be redistributed simply because they have too much of it....And so that's part of the tension: They don't like why Obama is raising their taxes. And they certainly don't like the lack of admiration he's showing while trying to do it. They see it as punishing their success.

Freeland: I completely agree. I think Obama and the economists around him have a very sophisticated understanding of both globalization and the technology revolution and the impact they're having on the world economy and the way they're creating these winner-take-all spirals. The positive scenario, which I think is a bit pollyannaish, is all you need to do is improve the education system and change the skill set and all will be well. And even that takes a lot of investment and a lot of time. But there's actually the possibility that in order to have a healthy middle class, you're going to need to have a more redistributive society, at least for awhile. I think that's something the American super-rich don't think about much. One guy who's a liberal Democratic guy, who has worked in Washington for Democrats, who I quote in my book, he said to me, maybe this is how the world is. Maybe the 1950s were an aberration and the way the economy naturally works is this wide difference in distribution.

I'd add something to this. I think it's quite possible for rich individuals to agree, in the abstract, that things have changed over the past 30 years in a way that's benefited the rich tremendously as a class. But that doesn't mean they agree, in concrete terms, that they themselves have benefited from anything in particular. And they don't like being made to pay a price for something they feel they aren't personally responsible for.

A Wall Street lawyer who makes $500,000 per year probably would have made half that much in 1980. The extra pay is solely due to broad economic and political trends, not because the 2012 lawyer works harder or knows more. That's easy to concede in the abstract. But it's quite another thing to suggest that the 2012 lawyer should therefore pay higher taxes to make up for this. That doesn't feel like fairness, it feels like punishment. And that's how they view it.

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Inside the Conservative Bubble

| Wed Nov. 28, 2012 3:18 PM EST

Bruce Bartlett has a piece in The American Conservative that tells the story of his excommunication from the conservative movement, and it's gotten a lot of attention on the left. I'm already familiar with the outlines of what happened, so I only now got around to reading his story. And it turns out that the most interesting passage has nothing to do Bartlett per se. It's what happened after Ron Suskind published a New York Times piece that quoted some of Bartlett's criticism of George Bush and the GOP:

Interestingly, a couple of days after the Suskind article appeared, I happened to be at a reception for some right-wing organization that many of my think tank friends were also attending. I assumed I would get a lot of grief for my comments in the Suskind article and was surprised when there was none at all.

Finally, I started asking people about it. Not one person had read it or cared in the slightest what the New York Times had to say about anything. They all viewed it as having as much credibility as Pravda and a similar political philosophy as well. Some were indignant that I would even suspect them of reading a left-wing rag such as the New York Times.

I was flabbergasted. Until that moment I had not realized how closed the right-wing mind had become. Even assuming that my friends’ view of the Times’ philosophy was correct, which it most certainly was not, why would they not want to know what their enemy was thinking? This was my first exposure to what has been called "epistemic closure" among conservatives—living in their own bubble where nonsensical ideas circulate with no contradiction.

That's remarkable. Even with the low opinion I have of modern movement conservatives, it never occurred to me that they literally thought of the New York Times as simply a left-wing version of Fox News. Yikes.

The Optimal Tax Plan Is Also the Least Likely Tax Plan

| Wed Nov. 28, 2012 2:34 PM EST

What would be the best thing to do with the Bush tax cuts? Letting them expire on December 31 is a bad idea because the economy is still in fragile shape and a big tax increase would probably send the U.S. back into recession. Extending them permanently is a bad idea because we need to raise more revenue in the future and reduce the medium-term deficit. Letting only the high-end tax cuts expire is OK, but it's not optimal either. It doesn't raise enough money in the long term and it feeds the fiction that middle-class taxes will never have to go up.

The best option is to let everything expire, and then pass a new tax cut that phases out over time. The new tax cut might be a reduction in rates equal to the Bush tax cuts, or it might be some other set of reductions. It doesn't matter very much. What does matter is that one-quarter of the cuts should expire in 2014, another quarter in 2015, another in 2016, and another in 2017. This would have a gradual effect on the economy, it would require no further congressional action, it would improve our medium-term deficit problem, it would take effect primarily while the economy is recovering, and it would do no more than eventually return us to the tax levels of the Clinton era. There are more complicated approaches you could think of—tagging the expiration dates to economic benchmarks, for example—but in this case, simpler is better. Just phase out the cut over four years and be done with it. That's easy for people to plan for.

So why won't this happen? Because there's no constituency for it. Republicans won't get behind it because they want permanent tax cuts. Obama won't get behind it because it's effectively a tax increase on the middle class, something he's promised to oppose. Independents might get behind it, but their political influence is approximately zero.

So that's the situation we're in. The best solution is probably the least likely to be enacted. Welcome to Washington.

White House Supports Filibuster Reform

| Wed Nov. 28, 2012 12:19 PM EST

This is not a big surprise, but today the White House announced its support for filibuster reform:

"The President has said many times that the American people are demanding action," White House Communications Director Dan Pfeiffer said in a statement to The Huffington Post. "They want to see progress, not partisan delay games. That hasn't changed, and the President supports Majority Leader Reid's efforts to reform the filibuster process."

This is important for more than PR reasons. Although there's some disagreement about how the filibuster rules can be changed, most observers agree that it requires a ruling from the president of the Senate, aka Joe Biden. And Biden isn't going to support filibuster reform unless his boss supports it too.

So while this is no surprise, it's a necessary piece of the puzzle. Harry Reid still needs to get 51 members of the Democratic Caucus to agree to a plan, but if he does there's nothing standing in the way of implementing it.

Social Security's Problems Are 20 Years Away, Not 75 Years

| Wed Nov. 28, 2012 12:10 PM EST

Matt Yglesias is unimpressed with Dick Durbin's proposal for a new commission to insure the long-term solvency of Social Security:

If people want to waste their time on this, I don't have a huge objection to the idea of somewhat higher taxes and somewhat skimpier benefits, but I think it's pretty silly. Recall that 75 years ago was 1937. Any minute spent in 1937 worrying about actuarial projections about 2012 as opposed to, say, Adolf Hitler or the Great Depression would have been a minute wasted.

....The deal worth trying to make on Social Security would be a deal that found a way to take the program outside the somewhat fantastical realm of trust fund accounting. Assessing the "affordability" of a social insurance scheme in terms of the state of its associated accounting instruments rather than the capacity of the economy to carry the load is very misleading. The actually policy question at any given time is what share of national resources should go to raising the living standards of the elderly.

I don't want to make this blog into Social Security Central, especially since I'm not super committed to finding a deal right this second. Still, this deserves some pushback. First, we aren't talking about a 75-year horizon. The latest projection from the trustees shows the Social Security trust fund running out of money in 2033. That's only 20 years away, considerably closer than Matt's own retirement, which I assume he's already planning for. At that point, Social Security benefits will suddenly drop 25% unless we do something about it.

Now, this projection might be wrong. The Great Recession has done a lot of damage to the trust fund projections, but we won't be in a recession forever. And these projections have been inaccurate before. However, although these are all arguments I've made myself in the past, I no longer believe I was right about them. The truth is that 20 years isn't a long time, and it's unlikely that the projections are off by more than a decade at most. This is a problem that's worth addressing.

Second, getting outside the realm of trust fund accounting is precisely what a deal would be about. Regardless of what you think about the trust fund, it's only going to last another couple of decades. After that, Social Security will have to be properly financed on a cash basis. This means that tax income in any given year needs to match benefit payments in that year. That's what this entire issue is about.

So: a Social Security deal would allow the program to operate without the trust fund, and it would keep the program solvent beyond the current trust fund exhaustion date of 2033. It would also probably make it solvent for the rest of the century, but that's just icing on the cake. This is a problem that's worth spending time on.

Everyone Hates the Idea of Raising the Medicare Age

| Wed Nov. 28, 2012 11:27 AM EST

One of the favorite entitlement-reforming proposals among both Republicans and Beltway centrists is raising the Social Security retirement age. It's a bad idea. Another favorite proposal is raising the Medicare eligibility age. This is also a bad idea, though for different reasons.

But it's more than a bad idea. It's also massively unpopular, as a recent ABC/Washington Post poll shows. It's not just unpopular among Democrats, it's also wildly unpopular among independents and even among Republicans. This has the potential of becoming a zombie idea every bit as bad as raising the Social Security age, and it really needs to be stopped in its tracks. It's unfair to the poor, it wouldn't save much money, and everyone hates the idea. It should be deep-sixed before it ever has a chance to catch on.

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Dick Durbin Wants to Make a Deal on Social Security

| Tue Nov. 27, 2012 9:29 PM EST

I'm a big fat granny-hating sellout, which probably explains why I think a deal to make Social Security solvent would be a good idea. But Dick Durbin is a liberal hero, and guess what? He wants to make a deal too:

I believe we need a new bipartisan commission to recommend a plan to keep Social Security solvent for the next 75 years. The commission should have a reasonable amount of time — eight months to a year — to present a plan to Congress. Congress should vote on the commission’s plan and any other bipartisan plan that makes Social Security solvent for 75 years. Whatever plans wins the most votes — beyond the 60 votes you need to pass anything of significance in the Senate — is the plan that ought to move forward.

Fine. But it's worth answering a few questions I've gotten about this. First question: I've suggested that a successful deal would take Social Security off the table for decades. But didn't the Greenspan Commission think they'd taken Social Security off the table forever back in 1983? Now it's popped back up. What's the deal?

Answer: That was never their intent. The commission's plan was to make Social Security solvent over 75 years by building up a surplus through 2020 and then using the surplus to pay off the retiring baby boomers through 2060. After the surplus had been used up, however, they knew perfectly well that Social Security would be insolvent again. In fact, on an ongoing basis, their estimate of Social Security's shortfall is pretty similar to our current estimate, as the charts below show:

Thirty years have passed since the Greenspan Commission's report, and our job now is to finish their unfinished business by figuring out how to make Social Security solvent after the surplus is exhausted. If we do this without trust fund gimmickry, it really will make the system fully funded more or less permanently.

Second question: Why bother with this now? At worst, the trust fund surplus will run out around 2040 or so. Why not wait and see how things work out?

Actually, I'm fine with that. Another ten years won't do any harm, and we'll have a better picture of where the economy is headed by then. Still, if we start earlier, it allows us to phase in changes more slowly, and I think there really is a benefit to this. It makes the impact on both current workers and current retirees smaller, and it allows everyone to plan better.

Third question: Why are people like me talking about a compromise approach that includes both tax increases and benefit cuts? Social Security isn't a very generous program to begin with. If it needs fixing, it should be done solely through tax increases.

That's a reasonable view, but I don't think it's a realistic one. I believe Social Security should be broadly financed, so I don't favor closing its shortfall with a whopping big tax increase on the rich. And benefits are scheduled to increase over the years, so what we're talking about here is a smaller increase, not a cut in absolute terms. A blended approach—say, two dollars of revenue increases for each dollar of benefit cuts—that gradually increased payments to low earners, reduced payments to higher earners, and increased taxes broadly, would be pretty tolerable if it were phased in over 20 or 30 years.

Fourth question: Isn't this just pie in the sky? Yes, it absolutely is. Even squishy sellouts like me are only in favor of a deal that includes both small revenue increases as well as small cuts in future benefit growth. However, there's approximately zero chance of Republicans agreeing to any revenue increases, which means no deal is really on the horizon.

And let's make this more specific. Right now, there's a proposal on the table to change Social Security's inflation indexing formula in a way that would slow the growth of future benefits. This is a defensible idea (though see Dean Baker for a dissenting view), but under no circumstances should it ever be passed on a standalone basis. It should only be passed, if at all, if it's accompanied by a revenue increase that's at least as large.

That said, a compromise deal would shore up a key program of the liberal project and put an end to scary stories about how Social Security won't be around for today's younger workers. I'm in favor of young people having confidence in liberal programs, and that's why I think a deal would be good for us lefties. The only problem is finding enough Republicans who agree.

The Bill and Hillary Show

| Tue Nov. 27, 2012 4:46 PM EST

You know who should have a radio talk show? Bill Clinton. Or, better yet, Bill and Hillary. They could trade off weeks so they both have time for whatever other good works they want to engage in. I'll bet they could attract a bigger audience than Rush. And who wouldn't want to be a guest on their show? They'd attract an all-star roster without even trying.

Given their popularity and ability to explain things in language that ordinary people can relate to, this could be a bigger contribution to selling the liberal project than anything currently in existence. They should do it.

Yet More Shameless Attacks on Susan Rice

| Tue Nov. 27, 2012 4:25 PM EST

Here's a shocker. Susan Rice, in a meeting with John McCain and the rest of the Senate's Benghazi brigade today, acknowledged that her initial description of the attacks had been mistaken. This netted her....exactly nothing:

Ms. Rice’s acknowledgment, in a meeting on Capitol Hill with three Republican senators who had sharply criticized her earlier statements in a series of televsion interviews after the attack, seemed to do little to quell their anger. The senators emerged from the meeting voicing even deeper reservations about Ms. Rice’s role in the messy aftermath of the Benghazi attack, which resulted in the deaths of four Americans.

“We are significantly troubled by many of the answers that we got, and some that we didn’t get,” Senator John McCain of Arizona said to reporters. Senator Lindsey Graham of South Carolina said, “Bottom line: I’m more concerned than I was before” — a sentiment echoed by Senator Kelly Ayotte of New Hampshire.

These people are just shameless. By this point, they know perfectly well that Rice never said anything deliberately misleading. On September 15 she passed along the unclassified assessment of the intelligence community as of September 15, and that's it. But they just can't stand to admit that they were wrong. It's like watching a bunch of preening teenagers facing off in the schoolyard. It's all just a big game to them.

Chart of the Day: The GOP's Generation Gap Problem

| Tue Nov. 27, 2012 2:51 PM EST

Jon Chait points to a Pew study today that doesn't really say anything new, but definitely says something worth repeating: the Republican Party may have problems with blacks and Hispanics, but their biggest problem is probably with the young. During the Bush era, the combination of the Iraq War and the resurgence of the Christian right turned off younger voters in increasing numbers, and these young voters began voting in increasing numbers for Democrats. The chart below tells the story:

In fact, things are probably even worse than this. The Pew study reminds me of a great chart that the New York Times produced back in 2006 showing the effect that presidents have on brand loyalty to their party. Basically, a popular president gains the votes of 20-year-olds, and those voters retain much of their loyalty to the president's party for the rest of their lives. The opposite happens with an unpopular president. So Democrats spent eight years with a president that 20-somethings liked (Clinton), then Republicans suffered through eight years with a president they hated (Bush), and now Democrats have eight years of a president that 20-somethings like again (Obama). That's 24 years worth of 20-year-olds who are likely to retain a fairly strong loyalty to the Democratic Party.

Obviously this could change. This is a tendency, not an iron law. But as these 20-somethings age, they're going to vote at higher rates and they're going to become more influential. And the likelihood is that most of them are going to stay Democrats. It's hard to overstate how big a headache this is for the GOP. These are voters who, generally speaking, don't hate gay people, don't hate abortion, and aren't scared by a nonwhite future. This is a problem because, as Charles Murray put it, Republicans are viewed today as "the party of Bible-thumping, anti-gay, anti-abortion creationists." Murray seems to think this is unfair, but I don't see why. Until and unless this changes, this huge cohort of voters is likely to remain largely in the Democratic camp.