Kevin Drum

Free Riding

| Tue Mar. 3, 2009 3:49 PM EST
Felix Salmon thinks the rest of the world is shirking:

Justin Fox has an interesting breakdown of global stimulus packages by country: the US, China, and Spain have big ones, while the rest of the world just doesn't seem to be trying so hard....He's right, and no amount of "buy American" provisions in the bill will prevent money from leaking overseas in a globalized economy. Liquidity, you might say, always finds its level. At the margin, it does seem that countries such as the UK are freeloading on the US bailout — both in terms of the stimulus package and in terms of the bank bailout.

I don't know about Spain, but the U.S. was able to pass a big stimulus bill because we had a shiny new left-wing president with lots of political capital to spend, and China was able to do it because they're an autocracy. Conversely, most European governments range from the not-very-shiny (Germany, say) to the downright superannuated (Britain).  They don't have a yearlong campaign of hope and change to draw from.  What's more, as Matt Yglesias and Megan McArdle point out, there are also institutional and cultural issues holding Europe back.  The Germans are still scared of a resurgence of the Weimar Republic, and the European Central Bank humors them by keeping monetary policy absurdly tight.  The EU's stability and growth pact probably doesn't help things either.  The upshot is that Europe isn't doing much to fight the meltdown, and that's especially true of Germany, which ought to be leading the charge since it runs a big current account surplus and could afford to spend much, much more.  Instead, it's one of the chief obstacles to recovery.

I don't have any brilliant suggestions for getting Europe to become a little more proactive on the let's-avoid-another-great-depression front.  Just one more job for the Obama economic team to work on, I suppose.  Maybe someday Treasury will actually hire someone besides Tim Geithner and we can start pushing on this a little harder than we are now.

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Healthcare for the Middle Class

| Tue Mar. 3, 2009 2:10 PM EST
David Corn just got back from a breakfast meeting hosted by Nancy Pelosi, who outlined the Democratic messaging strategy on healthcare reform:

The "appeal" of this push, she said, will not be that 48 million people don't have health care insurance. "What is important to the bigger population," she explained, "is their own health care."

....The bottom line: the battle cry will not be, "Health care for all!" Instead, it will be "Better health care for you — and also the rest of us." Given how the Hillary Clinton-led crusade for health care reform flamed out terribly in the 1990s, this sort of tactical shift may be warranted. It may even be wise.

I'd go further than that.  Even as far back as 1993, Bill Clinton understood that fear of change among the already insured was the key issue in building public support for national healthcare.  Unfortunately, even though he got this, he still didn't emphasize it enough, and that's one of the reasons his plan failed.

Since then, however, this has become conventional wisdom.  Like it or not, universal healthcare will never get passed on the grounds that it will help the 48 million Americans who are currently uninsured.  It will only pass if the other 250 million Americans are assured over and over and over again that the new plan will be at least as good for them as what they have now.  The tactical shift Pelosi is talking about isn't just wise, it's absolutely indispensable.

More importantly, however, both David and Ezra Klein report that Pelosi's real priority this year isn't healthcare at all.  It's energy policy — specifically, getting a cap-and-trade bill passed.  My sense from Obama's non-SOTU last week was that this was his priority as well, so it wouldn't surprise me at all if serious healthcare reform ended up getting pushed off until next year.

Moron of the Day

| Tue Mar. 3, 2009 1:14 PM EST
The competition for dumbest news story of day/week/month is way too competitive to ever declare a definitive winner.  But Jon Chait sure has a contender today, a piece by ABC's Emily Friedman that's based on the idea that the tax rate on your entire income will jump under Obama's proposed tax reform if your income exceeds $250,000.  Supposedly this makes it worthwhile to get your income a few pennies under the limit, and supposedly lots of people are working on this.  Needless to say, though, the tax code doesn't work this way.  Only the income above $250,000 will be taxed at the higher rate:

The article [] quotes a financial advisor who explains the way that tax brackets rates work, but then quotes a right-wing business professor and the subjects of her article fulminating about class warfare. Pretty clearly the reporter started off on her mistaken premise, found some subjects who shared her ignorance, and then came across a financial advisor who gently corrected her. But, instead of nixing the collosally uninformed article, or writing a different kind of article ("Rich Morons Decreasing Own Income Due To Lack of Tax Code Knowledge") she instead plowed ahead with her initial premise.

Friedman's piece is a train wreck.  What happened to ABC News' editors on this one?

Earmarks

| Tue Mar. 3, 2009 12:57 PM EST
As it happens, I think all the hyperventilating over earmarks is kind of silly.  Getting rid of them wouldn't reduce the federal budget by a dime (the earmarked money would just go elsewhere), and in any case I don't have a huge issue with senators having some say in where money is spent in their states.

Still, there's plenty of hyperventilation on the subject, and you can certainly make a good case that it's gotten out of hand.  So as a public service, Taxpayers for Common Sense has itemized all the earmarks in the current budget and tallied them up by senator.  The full spreadsheet is here.  The top ten earmarkers are below — six Republicans and four Democrats.  Keep their names (and party affiliations!) in mind the next time the hyperventilating starts to reach fever pitch on your TV.

Bernanke on the Stimulus

| Tue Mar. 3, 2009 12:17 PM EST
Ben Bernanke's profile has been a little bit lower since Barack Obama took office, but today he testified before Congress and backed Obama's aggressive spending plans:

U.S. Federal Reserve Chairman Ben Bernanke on Tuesday appeared to back the White House's efforts to stimulate the economy, saying aggressive action is needed now to avoid an economic calamity even as it adds trillions of dollars in new government debt.

...."By supporting public and private spending, the fiscal package should provide a boost to demand and production over the next two years as well as mitigate the overall loss of employment and income that would otherwise occur," Mr. Bernanke said in prepared testimony to the Senate Budget Committee.

Basically, Bernanke had nothing good to say about our current mess.  Things are bad and getting worse.  Interestingly, however, he did have one slightly encouraging thing to say about the long-term deficit: he thinks it will be mitigated somewhat when we start selling off all the toxic waste that we're buying up right now. "If all goes well," he said, "the disposition of assets acquired by the Treasury in the process of stabilization will be a source of added revenue for the Treasury in the out years."

If all goes well, that might be true.  I wonder what the odds are of all going well?

A Deal With Russia?

| Tue Mar. 3, 2009 2:31 AM EST
Peter Baker of the New York Times reports on the latest diplomatic move from Barack Obama:

President Obama sent a secret letter to Russia’s president last month suggesting that he would back off deploying a new missile defense system in Eastern Europe if Moscow would help stop Iran from developing long-range weapons, American officials said Monday.

....The officials who described the contents of the message requested anonymity because it has not been made public. While they said it did not offer a direct quid pro quo, the letter was intended to give Moscow an incentive to join the United States in a common front against Iran.

....The officials who described the contents of the message requested anonymity because it has not been made public. While they said it did not offer a direct quid pro quo, the letter was intended to give Moscow an incentive to join the United States in a common front against Iran.

I'm not sure what to make of this.  The story shows every sign of being an official leak, something that Obama wanted to make public prior to Hillary Clinton's meeting with the Russian foreign minister later this week.  But does making it public really help its chances of being accepted?  Doesn't seem like it.  Or perhaps the leak was designed more to put pressure on Iran than it was to put pressure on Russia?

Very odd.  Consider me mystified by this.

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Oops

| Mon Mar. 2, 2009 10:56 PM EST
We're still waiting for the release of many of the Bush-era legal opinions that were used to justify warrantless wiretapping, torture, and indefinite detention.  Today we got to see a few of them, including a remarkable memo written by George Bush's own Office of Legal Counsel during the final week of his presidency:

In a memo written five days before President Barack Obama took office, Steven Bradbury, the then-principal deputy assistant attorney general, warned that a series of opinions issued secretly by the Justice Department's Office of Legal Counsel "should not be treated as authoritative for any purpose."

The memo, unusual for its critique of a current administration's legal opinions, was released by the Justice Department Monday along with eight other previously secret opinions.....Attorney General Eric Holder said Monday that he planned to release as many of the Bush administration's OLC memos and opinions as possible "while still protecting national security information and ensuring robust internal executive branch debate and decision-making."

The full memo, written on January 15, is here, and retracts nine separate opinions from the Yoo/Bybee/Haynes era at the OLC.  In particular, it turns out that one of the early Yoo opinions made the risible argument that the FISA act didn't apply to Bush's warrantless wiretap program because the text of FISA didn't specifically say it applied to national security matters.  The January memo calls this "problematic and questionable, given FISA's express references to the President's authority."  Orin Kerr at the Volokh Conspiracy is more scathing:

If I'm reading this correctly, then, the original Yoo memos on the TSP had argued that FISA didn't apply because there was nothing in the statute that indicated clearly an intent to regulate national security surveillance. This would have been an extremely lame analysis, though....It's hard to read the phrase "procedures in . . . the Foreign Intelligence Surveillance Act of 1978 shall be the exclusive means by which electronic surveillance . . . may be conducted" as not clearly indicating an intent to regulate electronic surveillance in the national security area. Indeed, much of the point of FISA was to regulate that.

If I'm reading this correctly, it might explain why Senators Feinstein & Specter introduced legislation back in '06, at the height of the legal controversy over the TSP, that would "re-state" that FISA was the exclusive means for national security surveillance. A lot of people giggled at this idea at the time: Why restate what Congress already said? However, if the Bush Administration at some point indicated to Specter and Feinstein what the reasoning was of the initial OLC memos, Feinstein and Specter would have known something we didn't. "Re-stating" the point in new legislation could have been designed to provide the "clear statement" that the Yoo memo argued was necessary.

It's hard to believe that even John Yoo seriously advanced this argument.  Given the plain text of the FISA statute, it simply can't be made in good faith.  But he did.

The Dynamic Duo

| Mon Mar. 2, 2009 3:41 PM EST
David Cho of the Washington Post reports that Larry Summers and Tim Geithner have become outsized voices on Obama's economic team. A few weeks ago, for example, they teamed up to keep Obama focused on the long-term deficit:

Meeting in January on the eighth floor of the transition team's office in downtown Washington, Geithner pressed the incoming president to commit to cutting the deficit to 3 percent of the economy over the next five years, which would keep the nation's debt roughly in line with normal economic growth. Summers quickly backed him.

Some, including economist Jared Bernstein, resisted, saying that such a strict limit would make it more difficult to confront the many challenges ahead and that the size of the government's emergency response to the economy and financial markets would make the cap tough to maintain.

In February, the entire economic team convened in the windowless Roosevelt Room in the White House. Obama abruptly ended the debate. Geithner and Summers would have their way.

Tim Fernholz says "this doesn't sound too good," but I think that's too quick a judgment.  Bernstein may have lost this battle, but he wasn't shut out of the conversation, and in any case it's a battle he probably deserved to lose.  The long-term deficit is important, both in substantive and optical terms.  Substantively it's important because it's related to the current account deficit, which eventually needs to start coming down.  We can't keep borrowing from China forever.  And optically it's important because Obama needs to appear fiscally responsible if he wants to achieve his long-term goals.  So far Republicans haven't been able to make the "wasteful spending" charge stick, but if they ever get any traction with it the public is likely to start turning against Obama's plans.  One way to keep that from happening is for him to take economic fundamentals seriously and to make sure the public knows he's taking them seriously.

If the Bernstein faction starts to lose every battle, then that's a problem.  But it's only been a few weeks so far, and I suspect that he's going to win a few on some other issues.  But Obama did the right thing this time.

Spending is Up!

| Mon Mar. 2, 2009 2:08 PM EST
Surprisingly, consumer spending increased in January.  Not by much, mind you: it came to about a 0.2% rise when adjusted for inflation.  But that's still better than nothing.

Or is it?  The Wall Street Journal rounds up reaction:

Do not be fooled by the rise in incomes and consumption this month.....It would be a huge mistake to assume that the January rise in consumer spending represents anything more than statistical noise....Rising unemployment and continued economic weakness makes it unlikely that spending will improve much if any in the months immediately ahead....Consumption will remain in the doldrums for some time yet....The trend in real consumption, however, remains downwards, and the further decline in consumers’ sentiment signals continued declines....The January monthly changes in income and spending paint a completely misleading picture of economic activity at the start of the first quarter.

On the bright side, there was this from Wachovia's analyst: "While this up-tick does not likely signal the start of a string of increases, we will take any good news on the economy these days."  Me too.  But it turns out that January's increase was mostly related to automatic cost-of-living adjustments in things like Social Security checks, so it's nothing to get very excited about.

Food Politics

| Mon Mar. 2, 2009 1:34 PM EST
Ezra Klein glosses a story from Haaretz:

Israel, it seems, has been denying shipments of pasta headed for Gaza. Senator John Kerry, who'd been visiting Israel, heard about the idle trucks filled with food aid and asked around. "Israel does not define pasta as part of humanitarian aid," he was told. "Only rice shipments." A call Kerry made to Ehud Barak quickly got the pasta added to the list of acceptable humanitarian aid. Comments from Representative Brian Laird helped lentils onto the list of officially allowed foods. American politicians do not like seeing starvation used to change electoral outcomes.

Of course, there's another way we could guarantee that food gets through to Gaza: tell the Sixth Fleet to escort UN aid ships into Gaza.  It'll never happen, but it would work, wouldn't it?