Kevin Drum

Obama's Had a Helluva Good Month Since the Midterms

| Wed Dec. 17, 2014 3:37 PM EST

So how have things been going for our bored, exhausted, and disengaged president? He's been acting pretty enthusiastic, energized, and absorbed with his job, I'd say. Let us count the things he's done since the November 4th midterm elections:

  • November 10: Surprised everyone by announcing his support for strong net neutrality.
  • November 11: Concluded a climate deal with China that was not only important in its own right, but has since been widely credited with jumpstarting progress at the Lima talks last week.
  • November 20: Issued an executive order protecting millions of undocumented workers from the threat of deportation.
  • November 26: Signed off on an important new EPA rule significantly limiting ozone emissions.
  • December 15: Took a quiet victory lap as Western financial sanctions considerably sharpened the pain of Vladimir Putin's imploding economy.
  • December 16: Got nearly everything he wanted during the lame duck congressional session, and more. Democrats confirmed all important pending nominees, and then got Republican consent to several dozen lesser ones as well.
  • December 17: Announced a historic renormalization of relations with Cuba.

I guess you can add to that a non-event: In its second year, Obamacare signups are going smoothly and ahead of target. Am I missing anything beyond that? Maybe. It's been quite the whirlwind month for our bored, exhausted, disengaged president, hasn't it?

All of these things are worthwhile in their own right, of course, but there's a political angle to all of them as well: they seriously mess with Republican heads. GOP leaders had plans for January, but now they may or may not be able to do much about them. Instead, they're going to have to deal with enraged tea partiers insisting that they spend time trying to repeal Obama's actions. They can't, of course, but they have to show that they're trying. So there's a good chance that they'll spend their first few months in semi-chaos, responding to Obama's provocations instead of working on their own agenda.

Was that part of the plan? Beats me. But it seems to be working pretty well so far.

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The Person Who Cares Most About Barack Obama's Approval Rating is Hillary Clinton

| Wed Dec. 17, 2014 1:41 PM EST

Peter Beinart thinks President Obama is due for a comeback. Paul Waldman agrees:

I think Beinart is probably right, and the economy is the main reason; it swamps every other consideration in evaluating the president. We could have some major shock that upends the momentum it has been gaining, but if things proceed for the next two years on the trajectory they're on, the Obama presidency will be one of the best for job creation in recent history. But it's also important to understand that an Obama revival, should it happen, is going to look different than that of other presidents.

In this case, "look different" means that even in the best case Obama will end his presidency with approval ratings in the mid-50s, but no higher. The country is just too polarized to produce anything better. Conservatives of nearly all stripes are going to disapprove of Obama come hell or high water, and that puts a ceiling on how high his approval rating can go. Ditto for any other president these days.

But it's true that the economy seems to be doing pretty well these days, and it's usually the economy that drives approval ratings. That's good news for Obama, but it's far better news for Hillary Clinton. For Obama, leaving office with a strong economy is nice for his legacy, but that's about it. For Hillary, it almost certainly means the difference between winning and losing the presidency. If the economy is sluggish or worse in 2016, there's simply no way she overcomes voter fatigue toward Democratic rule. But if the economy is ticking along strongly, she just might.

So that's that. The person who cares most about Obama's approval rating isn't Barack Obama. It's Hillary Clinton. It's the tailwind she needs if she wants to become the first woman to occupy the Oval Office.

Battered Ruble Stabilizes -- For Now

| Wed Dec. 17, 2014 11:49 AM EST

I promise not to post this chart every day, but since I've put it up for the past two days when the ruble was crashing, I figure I should let everyone know when the crash has halted. For a few hours, anyway, thanks to some dubious measures from Russian banking authorities:

The currency was trading 8% stronger against the dollar at 62.1 on the Moscow exchange, while Russia’s RTS Index was up 17%, after the central bank eased regulations on the banking system in a bid to provide some relief on capital adequacy for banks and convince Russians to keep their money in rubles.

Measures including allowing banks not to take provisions against souring loans and weakening assets they hold, and allowing lenders to use last quarter’s exchange rate when settling some foreign-exchange transactions.

I'm not sure that loosening banking regulations is a great response to a currency crisis, but I guess you never know. In any case, it seems to have stabilized things for the time being. In the longer term, storm clouds are still brewing. Stay tuned.

Surprise! Obama Plans to Normalize Relations With Cuba.

| Wed Dec. 17, 2014 11:31 AM EST

A couple of weeks ago, National Review's Jay Nordlinger suggested that maybe President Obama's next executive action would be normalization of relations with Cuba. That struck me as something out of left field, since I'd heard not even a hint of a peep of a rumor that anything along these lines was in the works. But congratulations Jay! You were right:

The United States will restore full diplomatic relations with Cuba and open an embassy in Havana for the first time in more than a half century after the release of an American contractor held in prison for five years, American officials said Wednesday.

In a deal negotiated during 18 months of secret talks hosted largely by Canada and encouraged by Pope Francis who hosted a final culminating meeting at the Vatican, President Obama and President Raul Castro of Cuba agreed in a telephone call to put aside decades of hostility to find a new relationship between the island nation just 90 minutes off the American coast.

....The United States will ease restrictions on remittances, travel and banking relations and Cuba will release 53 Cuban prisoners identified as political prisoners by the United States government. Although the decades-old American embargo on Cuba will remain in place for now, the administration signaled that it would welcome a move by Congress to ease or lift it should lawmakers choose to.

Oddly enough, I don't see any reaction yet from Nordlinger, or indeed, from anyone over at National Review. Perhaps the intercession of Pope Francis is giving them pause?

In any case, this is good news. I don't personally care an awful lot about Cuba or our relations with them, but half a century of pointless enmity really ought to be enough. Fidel Castro may not have been an admirable guy, but Fulgencio Batista was no great shakes either, and it's long past time to stop pining away for the days when he was in power. So let it go, folks. We don't have to approve of everything Cuba does in order to act like adults and conduct normal relations on both sides. We manage to do it with Russia and Venezuela and Pakistan, after all.

In any case, that's that. The next step is lifting the trade embargo, but I suppose it's unlikely that a Republican Congress is going to act on that any time soon. Too bad. There's no longer any reason for it, and I'll bet the majority of cigar smokers are Republicans. They want their Havanas, so lifting the embargo would, in a sense, be nothing more than a routine bit of base maintenance. Perhaps if Republicans think of it as just another political payoff for their strongest supporters, they can be talked into it.

Wall Street Salivating Over Further Destruction of Financial Reform

| Wed Dec. 17, 2014 10:37 AM EST

Conventional pundit wisdom suggests that Wall Street may have overreached last week. Yes, they successfully managed to repeal the swaps pushout provision in Dodd-Frank, but in so doing they unleashed Elizabeth Warren and brought far more attention to their shenanigans than they bargained for. They may have won a battle, but with the public now suitably outraged and alert for further mischief, they're unlikely to keep future efforts to weaken financial reform behind the scenes, where they might have a chance to pass with nobody the wiser.

Then again, maybe not. Maybe it was all just political theater and Wall Street lobbyists know better than to take it seriously. Ed Kilgore points to this article in The Hill today:

Banks and financial institutions are planning an aggressive push to dismantle parts of the Wall Street reform law when Republicans take control of Congress in January.

Fresh off a victory in the government funding debate that liberals decried as a giveaway to Wall Street, advocates for the financial sector aim to pursue additional changes to Dodd-Frank that they say would lighten burdens created by the 2010 law. Among the top items on the wish list: easing new requirements on mortgages, loosening restrictions on financial derivatives and overhauling the Consumer Financial Protection Bureau....Another fight on the horizon is the push for “regulatory relief,” as financial institutions and Republicans seek to require agencies to pursue more cost-benefit analysis when writing rules.

....In the face of loud opposition, financial lobbyists say they have a compelling case for revisiting the law. While the economy is improving, they argue the new rules have made it exceedingly difficult to obtain loans, including mortgages.

Will Democrats in the Senate manage to stick together and filibuster these efforts to weaken Dodd-Frank? Or will enough centrists peel off to allow a few of them to pass? I'd like to think that Elizabeth Warren has made unity more likely, but then again, I have an uneasy feeling that Wall Street lobbyists might have a better read on things than she does. Dodd-Frank has already been weakened substantially in the rulemaking process, and this could easily represent a further death by a thousand cuts. After all, as the Wall Street flacks say, the economy is improving. And who needs a bunch of fussy rules when the economy is good?

Republicans Cave In, Begin Traditional Holiday Backbiting, and Head For Home

| Wed Dec. 17, 2014 1:09 AM EST

Earlier today, Harry Reid pushed through Senate confirmations of Tony Blinken to be deputy secretary of State and Sarah Saldaña to head up Immigration and Customs Enforcement. At that point, Republicans, finally tired of staying in session and convinced that Reid wasn't bluffing about continuing to hold confirmation votes, caved in:

Dozens of nominees were confirmed unanimously or by voice vote as the clock ticked on, building on Democrats’ progress pushing through several bitterly contested nominations during the last days of their majority. After fighting Democrats tooth and nail for more than a year on lifetime judicial appointments, Republicans waved the white flag on fighting Reid’s attempts to confirm a dozen judicial nominations and allowed eleven of them to go through without dissent.

Wait. Dozens of nominees? How many dozen?

Democrats controlling the Senate also secured agreements from Republicans to confirm at least six dozen of President Obama’s nominees to serve as federal judges, agency bosses and on myriad government boards, a last-minute coup for the White House since most of the picks faced tougher odds next year once Republicans take full control of Capitol Hill.

And of course everyone knows who to thank for all this:

Most of the day was consumed with nominations, none more irritating to many Republicans than the ones who received a vote because of an impulsive move by one of their colleagues. And with the book now closed on the 113th Congress, they could go down as the Cruz Confirmations — the batch of the president’s nominees who were confirmed by the Senate only after Senator Ted Cruz, Republican of Texas, forced his colleagues to stay in session for 10 hours on a bleak December Saturday.

“No, we would not have had all of these 24 confirmations, and I think most people know that,” said Senator Orrin G. Hatch, Republican of Utah, referring to the two dozen nominees that Senator Harry Reid of Nevada, the majority leader, forced votes once Mr. Cruz made his move.

Merry Christmas!

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On Torture, Dick Cheney Isn't the Problem. We Are.

| Tue Dec. 16, 2014 6:50 PM EST

Rich Lowry is a satisfied man:

After a week of condemnations of the CIA interrogation program, and talk everywhere of how it violated our values and weakened our standing in the world, the verdict of public opinion is in: People support it....In the case of Cheney v. Feinstein, Cheney wins—at least with the public.

This is the most discouraging part of the whole torture debate. It's one thing to learn that Dick Cheney is every bit the vicious wretch we all thought he was. But time after time since 9/11, polls have shown that the American public is basically on his side. As a nation, we simply don't believe that a comprehensive program of state-sanctioned torture is wrong. On the contrary: we think it's just fine as long as it's done to other people. If we're a Christian nation, as we're so often reminded, we're still an Old Testament one.

The Great Paradox of Bitcoin: If It Ever Succeeds, It's Doomed

| Tue Dec. 16, 2014 2:55 PM EST

Will Bitcoin ever become a major competitor to the world's more conventional currencies? It certainly has some advantages over existing payment networks, thanks partly to its technical structure and partly to the fact that it's largely free of regulation. But Henry Farrell argues that its freedom from regulation is a chimera:

Up to this point, regulators have largely tolerated Bitcoin as a curiosity and experiment....But if Bitcoin were ever to threaten to become a truly decentralized payments network, owned by no one, and with no one e.g. capable of implementing Know Your Customer rules, regulators would know very well what to do with it. They’d introduce regulatory guidances and pass laws to freeze it off from the regular financial system. Very possibly, Bitcoin could still survive at the margins (as the Hawala system has survived). However, it would be isolated, and in no position to threaten Visa or Mastercard, let alone the underlying payment and messaging services that really underpin the world financial system.

If Tim Lee and other Bitcoin fans want to make the case that Bitcoin can become a major payment network, they need to do one of two things. First, they could show that the U.S. and other major states would not feel threatened by a well-established payment system that they couldn’t control. Second, they could show that a Bitcoin financial network would survive the opposition of hostile states that have enormous control over the actually-existing financial systems that Bitcoin needs to connect to, as well as regulators, police, etc. I don’t see any very plausible arguments that would support either claim. It’s perfectly possible that the underlying technologies of Bitcoin (which help solve some interesting problems of trust and exchange) can be deployed to other valuable uses. But Bitcoin is doomed as a payments network — the very point at which it looks as though it is likely to be widely deployed is the point at which governments, like that of the United States, will crack down on it.

This is almost certainly correct, and the interesting question, I think, is whether Bitcoin and its ilk can figure out ways to operate on a large scale without being effectively shut down by real-world governments. At the moment, I don't see any way they can do that, but it's not impossible that this will change in the future.

The evolution of the internet itself provides conflicting guidance as an analogy. Generally speaking, national governments have had considerable difficulty regulating internet content. It's just too distributed and fast moving. So perhaps digital payment networks similar to Bitcoin will eventually thrive because they pose similar problems to would-be regulators. Like kudzu, they'll simply be impossible to contain.

On the other hand, countries like China have shown that internet content can be regulated. It merely requires sufficient motivation. And even less authoritarian governments have managed to throw a lot of sand in the gears when they rouse themselves to action. Given that regulating commerce and money is easier than regulating content, this bodes ill for the future of Bitcoin. There's not much question that it can harried into uselessness if national governments decide to do it.

Still, there are lots of currencies in the world, and it's possible that a medium-scale version of Bitcoin could stay alive by remaining fairly modest in its connection to any one currency, but fairly large when all of its connections to all the world's currencies are added up. This might cause problems of coordinated action that would end up defeating national regulators, especially if there were dozens or hundreds of different digital currencies to deal with. Maybe. Possibly. I'm not sure if the arithmetic here would ever add up to anything significant, but I'm also not sure it's impossible.

But if I had to put money on it? I'd say Bitcoin is doomed in the medium-term future. Farrell is right: it can be a bit of a curiosity, but if it ever enjoys wider success, that very success will kill it.

This Little History Lesson Should Terrify Vladimir Putin

| Tue Dec. 16, 2014 12:58 PM EST

Why did the Soviet Union lose control of its satellite states behind the Iron Curtain in 1989? Lots of reasons, but the proximate cause was a disastrous war in Afghanistan; plummeting oil prices; and a resulting economic crisis. Here is Yegor Gaidar:

The timeline of the collapse of the Soviet Union can be traced to September 13, 1985. On this date, Sheikh Ahmed Zaki Yamani, the minister of oil of Saudi Arabia, declared that the monarchy had decided to alter its oil policy radically. The Saudis stopped protecting oil prices, and Saudi Arabia quickly regained its share in the world market. During the next six months, oil production in Saudi Arabia increased fourfold, while oil prices collapsed by approximately the same amount in real terms. As a result, the Soviet Union lost approximately $20 billion per year, money without which the country simply could not survive.

The Soviet leadership was confronted with a difficult decision on how to adjust....Instead of implementing actual reforms, the Soviet Union started to borrow money from abroad while its international credit rating was still strong. It borrowed heavily from 1985 to 1988, but in 1989 the Soviet economy stalled completely. The money was suddenly gone. The Soviet Union tried to create a consortium of 300 banks to provide a large loan for the Soviet Union in 1989, but was informed that only five of them would participate and, as a result, the loan would be twenty times smaller than needed.

The Soviet Union then received a final warning from the Deutsche Bank and from its international partners that the funds would never come from commercial sources. Instead, if the Soviet Union urgently needed the money, it would have to start negotiations directly with Western governments about so-called politically motivated credits. In 1985 the idea that the Soviet Union would begin bargaining for money in exchange for political concessions would have sounded absolutely preposterous to the Soviet leadership. In 1989 it became a reality, and Gorbachev understood the need for at least $100 billion from the West to prop up the oil-dependent Soviet economy.

....Government-to-government loans were bound to come with a number of rigid conditions. For instance, if the Soviet military crushed Solidarity Party demonstrations in Warsaw, the Soviet Union would not have received the desperately needed $100 billion from the West....The only option left for the Soviet elites was to begin immediate negotiations about the conditions of surrender. Gorbachev did not have to inform President George H. W. Bush at the Malta Summit in 1989 that the threat of force to support the communist regimes in Eastern Europe would not be employed. This was already evident at the time. Six weeks after the talks, no communist regime in Eastern Europe remained.

This sounds awfully familiar, doesn't it? War, sanctions, an oil crash, and finally bankruptcy. And while history may not repeat itself, it sure does rhyme sometimes: 25 years later Vladimir Putin has managed to back himself into a situation surprisingly similar to the one that led to the end of the Soviet Union and the final victory of the West—the very event that's motivated almost everything he's done over the past few years. This is either ironic or chilling, depending on your perspective.

Gouging the Gougeable: Yet Another Triumph of the American Health Care System

| Tue Dec. 16, 2014 12:12 PM EST

Len Charlap has had a couple of outpatient echocardiograms recently. Elisabeth Rosenthal tallies up the damage:

The five hospitals within a 15-mile radius of Mr. Charlap’s home here charge an average of about $5,200 for an echocardiogram, according to an analysis of Medicare’s database. The seven teaching hospitals in Boston, affiliated with Harvard, Tufts and Boston University, charge an average of about $1,300 for the same test. There are even wide variations within cities: In Philadelphia, prices range from $700 to $12,000.

....In other countries, regulators set what are deemed fair charges, which include built-in profit. In Belgium, the allowable charge for an echocardiogram is $80, and in Germany, it is $115. In Japan, the price ranges from $50 for an older version to $88 for the newest, Dr. Ikegami said.

Because Mr. Charlap, 76, is on Medicare, which is aggressive in setting rates, he paid only about $80 toward the approximately $500 fee Medicare allows. But many private insurers continue to reimburse generously for echocardiograms billed at thousands of dollars, said Dr. Seth I. Stein, a New York physician who researches data on radiology. Hospitals pursue patients who are uninsured or underinsured for those payments, he added.

This is now such a common story that it's hard to work up the outrage it deserve. Is this practice corrupt? Merely venal? Or just crazy? I don't even know anymore. What I do know is that if an outpatient echo costs $80 in Belgium and $500 via Medicare, there's no conceivable justification for a $5,200 charge. It bears no relationship to the actual cost of the test, and is designed primarily to gouge the occasional uninsured patient who has no choice in the matter along with the (inexplicable) occasional insurance company willing to pony up even for obviously outrageous charges. One of the hospitals that performed an echocardiogram on Charlap didn't even bother denying that this is what they're doing:

In a statement, the hospital in Princeton that performed Mr. Charlap’s first, more expensive echocardiogram noted that “the vast majority of customers” paid much less than the listed prices. It added that its pricing reflected the need to offset losses because many programs, including Medicare, reimburse less than the cost of delivering services.

I doubt that Medicare is reimbursing less than the cost of performing an echocardiogram, but you can see what's going on here. The "vast majority" of patients do indeed pay far less than list price. So why have such a high list price? In order to gouge the tiny minority who are gougeable.

It's lovely the way American medicine works, isn't it?