Kevin Drum

Deer in Headlights

| Tue Sep. 16, 2008 6:15 PM EDT

DEER IN HEADLIGHTS....This is pretty laughable:

At a rally [in Tampa], Mr. McCain vowed to take aim at what he called the "unbridled corruption and greed that caused the crisis on Wall Street."

Mr. McCain — who has said for months that he believes that the fundamentals of the economy are strong — has used the word "crisis" a lot on the last day to describe the financial situation. He did so in a series of television interviews Tuesday morning, where he called for the creation of a commission to study the problem, along the lines of the commission that investigated the Sept. 11 attacks.

McCain has been running ads for weeks saying that he'll "reform Wall Street and battle Big Oil" — claims that usually prompt me to burst out laughing when they pop up on my TV. If there's a person in the entire country less likely than John McCain to reform Wall Street or battle Big Oil, I'm not sure who it is.

Of course, it would be a lot easier for Democrats to scoff at McCain if they hadn't mostly supported all the same financial deregulation that he did. I have my doubts that repealing Glass-Steagall contributed much to our current problems, but in any case the repeal was supported by Robert Rubin and Larry Summer and signed into law by Bill Clinton. Ditto for the Commodity Futures Modernization Act a year later. What's more, Democrats were mostly pretty happy about the rapid growth of subprime loans to low-income house buyers during the boom years, and a bunch of them supported the 2005 bankruptcy bill too. Hell, last year Senate Democrats couldn't even bring to a vote the biggest no-brainer of all time: a bill to close the carried interest loophole that allows billionaire hedge fund owners to avoid paying income tax at normal rates.

It's true that Barack Obama has some good ideas about re-regulation of Wall Street, and it's noteworthy that he's had these ideas for a while. McCain, conversely, is like a deer in headlights: he has no clue what's going on, so all he can do is keep repeating the word "crisis" like a windup doll and then call for a commission to dig up some answers for him. Not exactly inspiring leadership.

Still, Obama's job would be a lot easier if Democrats had spent the past eight years acting like Democrats. Think they'll learn a lesson from this?

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All Downhill Now

| Tue Sep. 16, 2008 2:54 PM EDT

ALL DOWNHILL NOW....Did Sarah Palin peak 10 days ago and we just didn't know it? Maybe! John Sides has the chart.

Stamp Tax

| Tue Sep. 16, 2008 2:23 PM EDT

STAMP TAX....Dean Baker proposes a simple way to put a modest damper on Wall Street — just enough of a damper, he suggests, to keep irrational exuberance from becoming too irrational:

The basic point is very simple. We impose a modest transactions tax on all financial transactions, for example a tax of 0.02 percent on the purchase or sale of a future contract or a tax of 0.25 percent on the purchase or sale of a share of stock. (The United Kingdom has had a tax of 0.25 percent on stock sales and purchases for many decades.) Such a tax could easily raise a $150 billion a year, enough to pay for a national health care program or a major clean energy initiative.

A tax of this magnitude will have almost no impact on someone who intends to buy and hold a financial asset. No airline is going to be discouraged from hedging on jet fuel futures because of a 0.02 percent tax, nor will any farmer be dissuaded from hedging on her corn crop.

....The only people who will really be hit by the tax are speculators; people who buy futures at 2:00, with the intentions of selling at 3:00. Even a modest tax can put a serious dent in the profits of those whose business is short-term speculation. We will therefore see less of this speculation, but it is hard to see why we should care.

This is sort of like the idea of charging a tiny fee for sending email: normal people wouldn't even notice it, but it's more than enough to make spamming a losing proposition. The difference is that an email tax is technologically impossible, while financial transaction taxes are generally quite simple and reasonably enforceable.

I only have two brief comments. First, I don't know if this is a good idea on the merits. However, I've always had a temperamental aversion to ultra-short-term speculation, so it seemed worth passing along just to spark some discussion. Second, unless I'm mistaken, this wouldn't have had any effect on our ongoing credit crisis, which was fundamentally caused by systemic mispricing of risk and the assumption of insane amounts of leverage, not too much speculation. (Also, perhaps, a bit of fraud here and there, but that's a little less clear.) So this shouldn't be taken as a proposal directly aimed at the current mess.

It still might be worth thinking about, though. Dean has more details in an old paper here.

Viral McCain

| Tue Sep. 16, 2008 1:16 PM EDT

VIRAL McCAIN....It's true that David Ignatius, Richard Cohen, and the Washington Post editorial board have become members of the Enough Club recently, all of them penning sad notes about the decline and fall of John McCain ("He has become the sort of politician he once despised," says former McCain groupie Cohen). But a friend emails to say that what's important isn't whether they say it, but whether anyone reads it. And judging from this morning's "Most Viewed Articles" list on the Post home page, people are reading it. And emailing it too. The McCain campaign has evidently decided that it's going to pretend not to care what anyone else thinks, but it looks like there's a chance that this won't work after all. Perhaps my faith in human nature will shortly be restored.

Engaging Iran

| Tue Sep. 16, 2008 12:36 PM EDT

ENGAGING IRAN....Should we engage directly with Iran, as Barack Obama suggests? The experts speak:

Five former U.S. secretaries of state said on Monday the next American administration should talk to Iran, a foe President George W. Bush has generally shunned as part of an "axis of evil."

....The five — Colin Powell, Madeleine Albright, Warren Christopher, James Baker and Henry Kissinger — all said they favored talking to Iran as part of a strategy to stop Tehran's development of a nuclear weapons program.

Sure, that's nearly every living former secretary of state in the last 30 years, but who listens to experts these days? Not John McCain! Listening to experts is for wimps.

Vote McCain, Lose Your Health Insurance

| Tue Sep. 16, 2008 2:47 AM EDT

VOTE McCAIN, LOSE YOUR HEALTH INSURANCE....Bob Herbert provides a preview of a new paper that analyzes the effects of John McCain's healthcare proposals:

A study coming out Tuesday from scholars at Columbia, Harvard, Purdue and Michigan projects that 20 million Americans who have employment-based health insurance would lose it under the McCain plan.

....According to the study: "The McCain plan will force millions of Americans into the weakest segment of the private insurance system — the nongroup market — where cost-sharing is high, covered services are limited and people will lose access to benefits they have now."

The net effect of the plan, the study said, "almost certainly will be to increase family costs for medical care."

Remember: this is a feature, not a bug. Republicans think Americans use too much healthcare, and they figure that the best way to fix this is to make it more expensive. So that's what McCain's plan does. It's a pretty typical specimen of the "more skin in the game" plan beloved of conservative think tanks.

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Gullible?

| Mon Sep. 15, 2008 6:49 PM EDT

GULLIBLE?....Mickey Kaus thinks, perhaps correctly, that trying to brand McCain as a liar is a losing strategy for Obama. Instead, he has a few other ideas, including this one:

6. There must be some way to disillusion the conservative base with McCain, at least a bit. I know the CW — Palin has locked in the base, freeing McCain to move left. But jeez, McCain isn't moving to the left just on immigration, and he isn't moving subtly. Listen to this new radio ad, which might as well be titled "Stem Cell Research, Stem Cell Research, Stem Cell Research, Stem Cell Research." That's how often the phrase is repeated. How much more Screw-You-I'm-Taking-You-for-Granted can McCain get? Are conservatives complete suckers?

As near as I can tell, yes they are. At the very least, they're certainly very cheap dates.

Joe Biden Speaks

| Mon Sep. 15, 2008 6:20 PM EDT

JOE BIDEN SPEAKS....Here's something interesting. A couple of days ago I was noodling, as we political junkies are wont to do, about what kind of ads Barack Obama ought to be running. I didn't bother posting about it, though, because we amateurs are forever thinking we have brilliant ideas along these lines and we amateurs are almost always wrong.

So imagine my surprise when I saw my imaginary ad basically being narrated by Joe Biden in a speech this morning at St. Clair Shores, Michigan:

Eight years ago, a man ran for President who claimed he was different, not a typical Republican. He called himself a reformer. He admitted that his Party, the Republican Party, had been wrong about things from time to time. He promised to work with Democrats and said he'd been doing that for a long time.

That candidate was George W. Bush. Remember that? Remember the promise to reach across the aisle? To change the tone? To restore honor and dignity to the White House?

....Eight years later, we have another Republican nominee who's telling us the exact same thing: This time it will be different, it really will. This time he's going to put country before party, to change the tone, reach across the aisle, change the Republican Party, change the way Washington works.

We've seen this movie before, folks. But as everyone knows, the sequel is always worse than the original.

The fact that this approach seems effective to me is probably a bad sign. Still: this approach seems effective to me. Basically, you run an ad that uses lots of hot button imagery to plausibly pin the blame for some problem or another (economic meltdown, Jack Abramoff, Katrina, our inability to capture Osama bin Laden, etc.) on "the usual Republican approach" or some such, and then close with, "Now John McCain is running for president. He says he's a different kind of Republican. Do you believe him?" Add creepy music, grainy black-and-white images, or whatever else the current state of the art in attack ads calls for, and you're off to the races.

Eh. Probably wouldn't focus group well or something, I suppose, and besides, it might piss off too many moderate Republicans who might otherwise vote for Obama. Plus it's pretty ordinary stuff that wouldn't generate any media outrage. In the end, who knows? We all think we're marketing geniuses, don't we?

The Backfire Effect

| Mon Sep. 15, 2008 3:22 PM EDT

THE BACKFIRE EFFECT....What happens when you tell people that someone has made a false claim? Shankar Vedantam reports:

Political scientists Brendan Nyhan and Jason Reifler provided two groups of volunteers with the Bush administration's prewar claims that Iraq had weapons of mass destruction. One group was given a refutation -- the comprehensive 2004 Duelfer report that concluded that Iraq did not have weapons of mass destruction before the United States invaded in 2003. Thirty-four percent of conservatives told only about the Bush administration's claims thought Iraq had hidden or destroyed its weapons before the U.S. invasion, but 64 percent of conservatives who heard both claim and refutation thought that Iraq really did have the weapons. The refutation, in other words, made the misinformation worse.

A similar "backfire effect" also influenced conservatives told about Bush administration assertions that tax cuts increase federal revenue. One group was offered a refutation by prominent economists that included current and former Bush administration officials. About 35 percent of conservatives told about the Bush claim believed it; 67 percent of those provided with both assertion and refutation believed that tax cuts increase revenue.

Italics mine. Nyhan and Reifler found this "backfire" effect only among conservatives. Refutations had little effect on liberals, but it didn't cause them to actively believe the misleading information even more strongly.

Why? Reifler suggests it's because conservatives are more rigid than liberals. Maybe so. If I had to guess, though, I'd say it's because right-wing talkers have spent so many years deriding "so-called experts" that they now have negative credibility with many conservatives. The very fact that an expert says a conservative claim is wrong is taken as a good reason to believe the claim. This could probably be tested by doing a study of factual information outside the realm of politics and seeing if conservatives react the same way. If they do, maybe that's support for the generic rigidity theory. If not, it's support for the theory that conservatives simply distrust political elites.

For more, here is Reifler's online Q&A at the Washington Post this morning.

UPDATE: I should add that these weren't the only two questions Nyhan and Reifler asked. They also asked a question about stem cell research in which it was liberals who might be expected to resist the truth. They didn't find any backfire effect there either, though.

UPDATE: The full paper is here. Via email, Nyhan tells me that they tried to test my proposition that conservatives don't trust elite experts by varying the source of the refutations. Sometimes it was the New York Times, other times it was Fox News. "Surprisingly," he says, "it had little effect."

Lovely Sarah

| Mon Sep. 15, 2008 2:57 PM EDT

LOVELY SARAH....Tyler Cowen says lots of peculiar but interesting things. That's why I like reading him. Today he suggests that, Cleopatra-like, Sarah Palin has a lot of conservative men thinking with their gonads instead of their brains:

Andrew Sullivan is calling Sarah Palin "Rovian." Maybe, but her first order of business has been to fool the Republican establishment, not the American people....Which narrative do you find more plausible?:

"Lovely Sarah, she's saying and doing everything we want her to. What a quick learner. How pliable she is. Remember Descartes on tabula rasa?"

"Once John and I are elected, they'll need me more than I need them."

The people who are right now the happiest may end up the most concerned. For better or worse, they're about to lose control of their movement.

This is both peculiar and interesting. But is it right? My own guess is that McCain doesn't need her at all once the election is over. If he wins in November, Palin will be sent overseas to funerals and into the heartland for occasional speeches to the moral values crowd, and that's about it. She'll beaver away on a "special needs portfolio" or some such, while the big boys worry about which country to yell at next.

On the other hand, if John McCain loses, Palin might well be in line to be the GOP's next star. (Assuming she avoids some kind of career ending catastrophe on the trail, of course.) In other words, if she were really smart and devious, maybe she'd be slyly working to ensure McCain's defeat, not his victory. So maybe Tyler is right, but just has the wrong timeframe.