Kevin Drum - 2013

A Long Shutdown Would Seriously Hurt Economic Growth

| Thu Oct. 3, 2013 10:49 AM EDT

Via Dylan Matthews, here's a chart that summarizes some of the leading estimates of the cost of a government shutdown. A brief shutdown (in blue) wouldn't do too much damage. But a longer shutdown (in green) would. The average of the five estimates is that it would reduce fourth quarter GDP by about 1 percentage point. As CRFB points out, estimates of fourth quarter growth are only a little above 2 percent right now, so this would be a big hit.

Think about this. Without any headwinds, fourth quarter GDP growth would probably clock in around 3 percent or so. The sequester has already cut that down to about 2.3 percent. A long shutdown could cut it further to 1.3 percent. If this happens, it means that Republican economic folly will have reduced economic growth in the fourth quarter by half or more. Thanks, Republicans!

Advertise on MotherJones.com

Does the Government Shutdown Delay the Debt Ceiling Indefinitely?

| Thu Oct. 3, 2013 10:05 AM EDT

The government is shut down. Since Social Security, Medicare, and other mandatory programs make up the bulk of federal spending, this doesn't mean we're no longer spending money. But we're spending a lot less. At least a third less, I think, and that should put us pretty close to balanced budget levels of spending. We might even be under that.

So....does this mean that we're no longer running up new debt? And does that in turn mean that we're not going to hit the debt ceiling as long as the government remains shut down? Have we gotten any kind of estimate from the Treasury Department about this?

POSTSCRIPT: Just to make this clear, I'm aware that once the shutdown is resolved all the money not being spent now will be disbursed. (Assuming that Congress approves back pay for furloughed workers, which I'm not sure I'd bet on.) But that's only after the shutdown is resolved. In the meantime, we're no longer barreling toward a breach of the debt ceiling, are we?

Don't Blame John Roberts for the Medicaid Mess

| Thu Oct. 3, 2013 9:48 AM EDT

The New York Times notes today that lots of poor people won't benefit from Obamacare because the states they live in have rejected the Medicaid expansion that was part of the law. Matt Yglesias comments:

Something that's worth noting here more prominently than they do is that this is not an oversight of the law or of the Obama administration. It's due to the actions of Chief Justice John Roberts and then to a number of Republican Party state and local elected officials....The authors of the law decided to make state governments an offer they couldn't refuse—on the one hand, expansion would be nearly 100% paid for by the federal government while on the other hand failure to expand would come with significant financial penalties.

Then came Roberts. In his landmark ruling upholding the constitutionality of the individual mandate, he burnished his conservative cred by striking down the penalties portion of the Medicaid expansion.

I think this is unfair. In fact, there were only two justices who upheld the Medicaid expansion (Ginsburg and Sotomayor). All the rest, including the liberals Breyer and Kagan, struck it down. So it wasn't even a close call. The vote against the Medicaid provision was 7-2.

And as much as I dislike the result, I can't find a lot of fault with this. The basic holding was simple: given our federalist structure, states can't be forced to help fund new federal programs like Obamacare's Medicaid expansion. They have to be given a genuine choice. If rejecting the program merely means losing the benefits even though your state's income tax dollars are helping to fund it, that's a tough choice, but still a real one. Conversely, if you're threatened with losing not just the funds for the expansion, but your entire existing Medicaid program, it's not a real choice at all. Nobody could even dream of doing that. In practical terms, you're being forced to accept the expansion and you're being forced to pay for it with state dollars.

I can't find a problem with that logic. I don't like it, since my personal preference is for more federal control over national policies, but given our laws and constitutional structure, it's hard to argue with. If Congress really wanted Medicaid to apply universally, they should have federalized the program and funded it completely out of federal dollars. That would have been unquestionably constitutional. But they didn't.

In Syria, We Don't Want Rebels to Lose, But We Don't Want Them to Win Either

| Wed Oct. 2, 2013 11:28 PM EDT

I've written a couple of times before about the apparent policy of the Obama administration in Syria: to arm the rebels just enough to produce a stalemate. Why? Because we don't really have anyone we like in this fight. "In a nutshell," I wrote in June, "the idea here is that we want both sides to be evenly matched so the fighting continues as long as possible. That will weaken pretty much everyone we hate: Assad, Hezbollah, Iran, and the Al Qaeda groups among the rebels. As long as these folks continue killing each other, we're happy."

Until now, there's been some evidence that this was Obama's strategy, but nothing conclusive. Today, however, Greg Miller reports that this really is what Obama is doing:

The CIA’s mission, officials said, has been defined by the White House’s desire to seek a political settlement, a scenario that relies on an eventual stalemate among the warring factions rather than a clear victor. As a result, officials said, limits on the agency’s authorities enable it to provide enough support to help ensure that politically moderate, U.S.-supported militias don’t lose but not enough for them to win.

....U.S. officials said the classified program has been constrained by limits on CIA resources, the reluctance of rebel fighters to leave Syria for U.S. instruction and Jordan’s restrictions on the CIA’s paramilitary presence there. But the limited scope also reflects a deeper tension in the Obama administration’s strategy on Syria, one that has sought to advance U.S. interests but avoid being drawn more deeply into a conflict that the United Nations estimates has killed more than 100,000 people since it began in 2011.

This is something of a moral nightmare, no? However, the alternatives aren't much more appealing:

The Obama administration has explored the idea of using the U.S. military to expand the training program to what some officials have described as “industrial strength.” But Defense Department officials said there has been no decision to do so and cited significant obstacles.

It is unclear whether Jordan would welcome such a large U.S. military footprint, which would mean converting a covert program into one officially acknowledged by the United States. There are also legal impediments, including a measure known as the Leahy Law that would require a determination that no recipients of U.S. military assistance had committed human rights abuses.

No thanks. Aside from John McCain, not many people like the idea of seriously ramping up US aid and starting up another Afghanistan. At the same time, there's also not much support for a policy of doing nothing at all. (That would be my preference, but I'm in a distinct minority.) Like it or not, then, the stalemate strategy is what we're left with. Boo yah.

Chart of the Day: Wall Street Is Starting to Get Nervous About the Debt Ceiling

| Wed Oct. 2, 2013 5:33 PM EDT

James Pethokoukis passes along the chart on the right from Goldman Sachs, which shows the yield curve on treasury bills maturing at various dates. The curve on September 16 was pretty flat. The curve on September 30 showed a bit of an uptick for bonds maturing in the second half of October. A day later, on October 1, the yield curve went nuts. Bonds maturing in the second half of October—which are at risk of delayed payment if the debt ceiling is reached—cratered in value, which means they're now sporting big yields. If you buy a bond that matures on October 31, you can expect a return of more than 8 percent.

Treasury bonds aren't at any risk of genuine default, so what explains this? Two things. First, there's apparently some genuine risk that bond coupons might not get paid if we hit the debt ceiling on October 18. This has to do with the fact that the Treasury's computer systems can't easily prioritize payments, which means that, willy nilly, maybe some bond coupons will be missed. Among large investors, there's also a worry that Wall Street systems can't easily distinguish between bonds that are in technical default and those that aren't, and this could cause bonds maturing within the danger zone to be rejected on the repo market if you try to use them as collateral. I don't know if either of these fears is really reasonable, but that's the chatter right now.

I'll defer to anyone who knows more about this than me—a very large class of people, I imagine—but if I'm reading this right, market fears are taking the following form:

  • Bonds maturing after October 18 might end up in technical default, which reduces their usefulness as collateral in the repo market and thus their value.
  • In addition, these bonds might also get paid late, and with maturity dates only a few weeks away, even a few weeks of delay has a big effect on their value.
  • Bonds maturing after October 31 are safer, since everyone is assuming that things will be settled one way or another by mid-November at the latest.

I've mentioned before my theory that the now-combined budget/debt ceiling crisis could end up being resolved only by some kind of market crash. Pleading from the business community may be falling on deaf ears at the moment, but the one thing that really does seem to get the attention of even tea party Republicans is a market catastrophe. I don't know if we'll get to that point, but this chart seems to suggest that if the budget/debt ceiling standoff continues for another couple of weeks, that's what will finally put an end to it. Even John Boehner will finally tell the tea partiers that enough is enough if the repo market has seized up and U.S. treasury bonds are selling at about the same premium as those from Greece.

Shutdown Update: Obama, Reid Offer to Talk

| Wed Oct. 2, 2013 1:04 PM EDT

Here's the latest shutdown news: President Obama has called everyone to the White House to talk things over, and Harry Reid has sent a letter to John Boehner suggesting a "sensible, reasonable compromise." Reid says that although he deeply opposed the Iraq War, he never threatened to shut down the government over it, and likewise shutdown shouldn't be on the table over Republican opposition to Obamacare. So his offer is to go ahead and pass a clean CR, and then he'll agree to a conference committee to discuss "the important fiscal issues facing our nation."

That is indeed sensible and reasonable. It's also something that Democrats have been willing to do for months. Republicans have resolutely refused, so it's not clear what would change their minds at this point. But I guess we'll see.

Advertise on MotherJones.com

So Far, the Obamacare Rollout Looks Pretty Normal to Me

| Wed Oct. 2, 2013 11:33 AM EDT

I got an email today from a regular reader asking why I didn't seem to be much worried about all the glitches in Tuesday's Obamacare rollout. And it's true: I mentioned it briefly yesterday but didn't treat it like a big deal. Why?

I can't say for sure. But the answer probably lies in my background. I'm not an expert in rolling out massive software systems or anything, but I have been involved in dozens of big software launches in my life. And every one of them has gone exactly the same:

  1. Lots of smart people work really hard for a really long time.
  2. The launch is late anyway.
  3. When it does happen, the product has a bunch of bugs.
  4. Sometimes the bugs are really serious. If so, everyone panics and works their asses off for a while to fix them. Pretty soon, they get fixed and everyone moves on to whatever's next on the crisis agenda.
  5. Lather, rinse, repeat.

So....I dunno. I've seen this movie too many times before. Traffic on the Obamacare sites will settle down pretty quickly, and that will take care of most of the overloading problems. The remaining load problems will be solved with software fixes or by allocating more servers. Bugs will be reported and categorized. Software teams will take on the most serious ones first and fix most of them in short order. Before long, the sites will all be working pretty well, with only the usual background rumble of small problems. By this time next month, no one will even remember that the first week was kind of rocky or that anyone was initially panicked.

I might be wrong. I've been involved in a few rollouts that featured really serious bugs that took a long time to work out. It's certainly possible that one or two states will fall into this category. But I doubt it. Technologically speaking, nothing that happened yesterday surprised me, and I don't expect anything in the next month to surprise me much either.

UPDATE: A friend with more experience than me in this particular kind of software development emails to explain in more detail why the Obamacare rollout glitches are probably not very serious:

It's because this exact product has been built thousands of times....It's a bunch of forms on top of a bunch of conditional SQL. Nothing new, or innovative, or especially challenging. The problems are simply because of the scale, and with Google and Facebook and Twitter and the like, we've figured out how to do web-scale pretty well.

The "bugs" will be in the Java and SQL code, and they'll be easy to fix. Everything else is just web-scale infrastructure, memcached and database tuning, load balancing, edge routing, nuts & bolts stuff. I've never been worried about it at all, because it's just plain been done so many times before. Not exactly uncharted technological waters.

For what it's worth, I'll say this: If there are still lots of serious problems with these websites on November 1, I'll eat crow. But I doubt that I'll have to.

Which Helps Kids More: iPads or Eyeglasses?

| Wed Oct. 2, 2013 10:32 AM EDT

From an op-ed in the LA Times today by Austin Beutner:

There is a crisis in California's schools. More than a quarter of a million children, most of them from poor and minority backgrounds, lack the technology they need to succeed in school.

Oh man, that really irks me, especially after reading yet another story about LAUSD's idiotic, billion-dollar "iPad for everyone" program. Not to go all grampa on you, but technology isn't our problem. What we need is —

Wait. What? I should read beyond the first paragraph? Well, OK:

But what they need has nothing to do with mobile devices or educational apps. It's a technology nearly 800 years old: eyeglasses.

About 250,000 California schoolchildren don't have the glasses they need to read the board, read books, study math and fully participate in their classes. About 95% of the public school students who need glasses enter school without them....We assembled a team of dedicated eye doctors and turned a couple of buses into mobile eye clinics. We travel to public and parochial schools in low-income communities in Los Angeles and screen each and every student.

....We commissioned an independent study....researchers repeatedly heard about how students' classroom performance improved. They approached their schoolwork with more confidence and had more success....Parents reported a huge sense of relief. They said they could now understand their kids' previous academic struggles and why their children had been anxious about school. In the words of one parent: "The teacher told me that now I don't have to try to keep [my daughter's] focus....Now she sees and tries, and I don't have to be after her like before."

That's a technology program I can get behind. Beutner's operation, called Vision to Learn, says it's distributed about 10,000 pairs of eyeglasses in its first year for less than a thousandth of the cost of the iPad program. More like this, please.

Yes, This Really Is Only the 2nd Government Shutdown in Recent History

| Wed Oct. 2, 2013 9:22 AM EDT

Here's yet another in my series of quick reminders. Prior to 1980, everything kept on running pretty normally during budget impasses. True shutdowns didn't happen until after a series of Justice Department rulings at the tail end of the Carter administration. Since then, there have been a handful of shutdowns prompted by garden variety disagreements over funding levels for defense and domestic programs, but they've been so brief as to be barely noticeable. The only exception was the long shutdown of 1995, prompted by Newt Gingrich's demands.

So when you hear someone saying that there have been loads of government shutdowns in the past and this one is really nothing new, it just isn't true. In practice, there's only been one serious shutdown in recent history, and like this one, it was the product of Republican ultimatums.

Harry Reid and John Boehner Really Loathe Each Other

| Wed Oct. 2, 2013 12:39 AM EDT

In today's most fascinating inside baseball reporting, Robert Costa tells us that the biggest personality clash in DC right now isn't between Obama and Boehner or Obama and McConnell. It's not between Obama and anybody. It's between Boehner and Harry Reid. Quite simply, they loathe each other, a feeling that was amplified today when Reid's chief of staff decided to give Politico a bunch of embarrassing emails showing that Boehner had been desperately trying for months to save the healthcare subsidies for congressional staffers that he's now publicly demagoguing as "special treatment" for Congress.

Obviously Reid's chief of staff did this with the blessing of his boss, and afterward he twisted the knife further by giving an interview about the whole thing to National Review. "I took the action I did," he said in a statement, "because I refuse to stand by and watch those who pressed for this ruling turn around and attack the very thing they asked for, simply because they don't have the courage to stand up to a few whiners in their caucus. Integrity means owning in public what you advocate for in private."

Via Twitter, Costa reminds us that after the failed fiscal cliff negotiations late last year, the tea party caucus demanded that Boehner never again negotiate one-on-one with Obama. He complied. "Now, this seems like a small thing. But over past yr it has made Boehner and Obama unable to truly cut deals....So, into this vacuum that Boehner leaves in early '13 strolls... the senior staffers." Costa explains what this all means:

Reid and Boehner are the two people responsible for eventually brokering some kind of deal—and as gov't shuts, their staffers are at war....So, in tmw's papers you will read abt failed House votes and small CRs. But the real buzz today was bicameral bloodbath post Politico story

It's the small story that's a huge story. It's not that Reid and GOP ldrshp disagree; they priv and pub detest each other

All of this reminds me: talk of "clean CR" is surreal when u peel back curtain a bit. Entrenched msg'ing battles, deeply personal sniping....now, a Democratic aide has sent me copies of email exchanges btwn Boehner's CoS and Reid's CoS, as means of illuminating [Politico] story

What's notable: this isn't abt Obama for most Hill folks involved. He's non-essential. It's part of brutal, long war btwn Reid & House GOP....The Boehner-Reid relationship may be most overlooked in DC. Too often focus is Boehner-O, or O-Dems, etc.

More here.