From the Mailbag

My Virginia readership must have had a mind meld this morning. Here's Virginia friend #1:

Subj: Lord help us

Is it just me or does it seem like there is not one leader in the Democratic Party who has Obama's back? Every day is like watching eleven members of the Republican team beat the crap out of a one-man Obama "team." Why aren't our leading Democrats out there every day slugging it out on Obama's behalf?

The optics alone feed the growing idea that the Republicans are the much stronger Party and we really just ought to go ahead and put them in charge of everything in 2012. What the hell is going on?

And here's Virginia friend #2:

Subj: Any Democrats wanna speak out?

Anyone, anyone (other than the President), anyone? Republicans putting party before country, Republicans standing in the way of recovery, Republicans' same old tricks, no ideas on the right for economy, no need for quick action, say Republicans, as country falls back into recession? Anyone? Jesus, anything other than a grab bag of purely Republican quotes about how socialist the bill is?

Can someone say something? Do Democrats even support the bill?

http://firstread.msnbc.msn.com/_news/2011/09/13/7741748-obama-agenda-gop-balks-at-447b-bill

Or are we back to the Days of Pique I remember from pre-Lewinsky Clinton where Democrats would let the president hang in the breeze due to some slight disagreement with him?

Nobody's obliged to back up the president out of party loyalty if they have a genuine disagreement with him. But my Viriginia crew is right: Obama's jobs bill really ought to be something the party can rally behind. Even if you think it's too small, you can still support it. But the Democratic response has been pretty tepid. They must really be looking forward to a Rick Perry presidency or something.

Chart of the Day: Austerity Politics

So what happens if we tighten our belts and cut back on spending, as Republicans unanimously want us to do? A new IMF study estimates the effect of a cutback equal to 1% of GDP, which amounts to about $150 billion in the U.S. According to both the GOP leadership and its crew of presidential candidates, this would be peanuts, a mere down payment on serious budget cutting.

And maybe so. Unfortunately, as the chart below shows, a cutback of that size would lead to lower incomes and dramatically higher unemployment. But wait! There's more! The IMF study says the effect is twice as big as the one in Chart 2 when central banks can't cut interest rates. And guess what? The Fed already has interest rates at zero. They can't cut them any further.

In other words, the GOP's version of belt-tightening would probably jack up unemployment rates by nearly a full point. Welcome to Rick Perry's America. (Via Brad Plumer.)

Rick Perry Knows His Audience

Michael Shear in the New York Times this morning:

Presidential candidates have three options when they are presented with past positions or actions that become political liabilities once they are facing voters. They can back down and apologize. They can stand their ground, consequences be damned. Or they can find a way to do both, usually by recalibrating their positions and tweaking history.

Gov. Rick Perry of Texas did all three Monday night.

Technically, I suppose this is true. Perry has indeed admitted he made a mistake when he issued an executive order requiring young girls to get an HPV vaccine. He's admitted it over and over and over because the tea party crowd is on the warpath over this. Besides, he reversed gears on that years ago. There's really no downside to fessing up.

But that's an outlier. The thing that stands out about Perry's candidacy so far is that this is really the only issue he's reversed course on. Contra Shear, he didn't back down on Social Security last night at all. It's true that he didn't repeat his Ponzi scheme nonsense, but he didn't come anywhere near to disowning it. And Shear doesn't even touch on the most obnoxious example of Perry's (quite obvious) decision to never to back down from anything: his doubling down on the charge that printing more money would make Ben Bernanke "almost treasonous":

Blitzer: You stand by those remarks, Governor?

Perry: I said that if you are allowing the Federal Reserve to be used for political purposes that it would be almost treasonous. I think that is a very clear statement of fact.

Crowd: [Loud cheers, clapping.]

Put this together with Perry's loud insistence that he stands by every last word in his book, Fed Up!, and it's obvious that he's decided one thing: Republican voters might or might not agree with everything you say, but they'll crucify anyone who ever admits either a mistake or even a moment's doubt. They want the mindless self-confidence that comes from deep in the gut, and Perry's going to give it to them, come hell or high water. That's the takeaway from last night's debate.

Tonight's Freak Show

Sorry for the radio silence about tonight's debate, but I'm still in a state of shock. This was a full-on freak show. No blog description can do it justice, I'm afraid. It was just two continuous hours of stupid prepackaged zingers, chuckleheaded ignorance, and reactionary one-upsmanship for the benefit of the adoring tea party audience. Even Jon Huntsman decided that full-bore idiocy was his only chance to make an impression. Mitt Romney tried gallantly to stay just barely on the right side of sanity, but it's not clear that it helped him any. The CNN pundits seemed much more impressed with Rick Perry's virile "presence."

Jesus, what a depressing experience. Europe is about to implode, there's a pretty good chance that this could be enough to tip our economy back into recession too, and one of those clowns on the stage tonight might end up being president when it happens. Lord help us.

Some Gutsy Talk on Social Security

Just last week Rick Perry called Social Security a Ponzi scheme and a "monstrous lie." This week he revises and extends those remarks in USA Today:

Our elected leaders must have the strength to speak frankly about entitlement reform if we are to right our nation's financial course and get the USA working again. For too long, politicians have been afraid to speak honestly about Social Security. We must have the guts to talk about its financial condition if we are to fix Social Security and make it financially viable for generations to come.

Now, I'm pretty sure the Washington Post would have given Perry a little more room on their op-ed page if he'd truly wanted to speak frankly and gutsily about how to fix Social Security, as opposed to merely saying that we ought to speak frankly about it and then calling it a day. But for some reason, Team Perry decided that USA Today, with its vast hotel-bound audience and 300-word limit, was a better bet.

Which is too bad, because of course, we should speak frankly about the financial condition of Social Security. So here's some gutsy talk for y'all: Social Security has a small long-term funding shortfall. It can be fixed easily. The CBO recently estimated that Social Security has a long-term cumulative deficit of 0.6% of GDP, and the table below lists 30 options for fixing this. All you have to do is pick some combination of options that adds up to 0.6% and you're done. It's so easy that even Rick Perry can do it.

Personally, I'd wait and begin phasing in changes starting in about 20 years or so, which would require picking a basket of options that adds up to something like 1.2% or so. But that's just little old coastal left-winger me. Either way, though, whether you make the changes now or later, it's all pretty simple. And that, my friends, is some gutsy talk.

Taxes and Growth

I'm embarrassed. I just turned in a piece about conservative economic myths, and a few hours later Paul Waldman reminds me that in the section about how tax cuts always supercharge the economy, I completely forgot to mention this:

Republicans are remarkably consistent in how they talk about the economy, no matter what actually occurs. For example: In 1993 they said, loudly and clearly, that if Bill Clinton's budget with its top-rate income tax increase passed, the result would be a "job-killing recession." It did pass, and 23 million jobs were created over the next eight years. In 2001, they said, loudly and clearly, that if we passed George W. Bush's tax cuts rolling back those increases and cutting other taxes further, the economy would explode with job-creating growth. Over the following eight years, only 3 million jobs were created. The relative success of Clinton and Bush didn't change the arguments they make about taxes one iota.

To my mind, Democrats don't shove this in their faces nearly often enough. They could win almost any debate with their opponents by saying, "We had two tests of my Republican friend's economic theories in the last two decades. They were called the Clinton administration and the Bush administration. And they both proved him wrong."

Roger that. Within reason, high taxes don’t hinder growth and low taxes don’t stimulate it. We hardly need a pile of sophisticated Greek-letter econometrics papers to tell us this. Just a slightly better memory than I apparently have.

Anyway, keep this in mind now that Obama has said that he wants to pay for his jobs plan with higher taxes on the rich. We'll hear all the usual wailing from the right about this, but it's based on nothing. If going back to Clinton-era taxes dooms us to Clinton-era growth, sign me up.

Race and the Tea Party

What motivates people to become tea partiers? Conservative ideology, of course. But how about age, gender, income, church attendance, and party ID? Not so much, according to a study by Emory political scientist Alan Abramowitz:

In order to compare the effects of the independent variables, I calculated the change in the probability of supporting the Tea Party associated with an increase of one standard deviation above the mean on each independent variable with all other independent variables set at their means. For example, an increase of one standard deviation above the mean on the ideology scale is estimated to produce an increase of almost 19 percentage points in Tea Party support.

The results in Table 5 show that ideological conservatism was by far the strongest predictor of Tea Party support. In addition to conservatism, however, both racial resentment and dislike for Barack Obama had significant effects on support for the Tea Party. These two variables had much stronger effects than party identification.

Table 5 is below. Conservative ideology and racial resentment swamp every other factor. Maybe that doesn't matter. Maybe it's counterproductive to even mention racial resentment these days. Maybe it's unfair to lots of tea partiers who care only about taxes and big government. But unless there's a problem with Abramowitz's data, it's there. Pretending that it's not doesn't make it go away.

The Last Refuge of a Scoundrel

Jamie Dimon, CEO of JPMorgan Chase, says that new capital adequacy rules are "anti-American":

The Basel III capital rules are designed to make the financial system safer by making banks build up risk-absorbent “core tier one” capital to at least 7 per cent of risk-weighted assets. The biggest, including JPMorgan, have to reach 9.5 per cent.

“I’m very close to thinking the United States shouldn’t be in Basel any more. I would not have agreed to rules that are blatantly anti-American,” he said. “Our regulators should go there and say: ‘If it’s not in the interests of the United States, we’re not doing it’.”

He objected to both the additional buffer of 2.5 per cent and the way capital is calculated. Mortgage-servicing rights, a US market feature which takes cashflow from homeowners paying mortgages, are strictly limited in counting towards tier one capital. Mr Dimon also criticised global liquidity rules, arguing that regulations that viewed covered bonds – a European market feature – as highly liquid but discounted government-backed mortgage-backed securities in the US were unfair and that other details hit investment banking activity core to US banks hardest.

Dimon is getting a lot of grief over this, and rightfully so. Still, I think the right lens to look at this isn't really Dimon-centric, tempting though that is. The truth is that all international financial negotiations, and Basel negotiations most famously, are always endlessly bogged down by parochial minutiae. Every country has a slightly different economy that depends on slightly different things. For example, here's a Wall Street Journal report on the Basel negotiations a year ago:

The French are demanding changes that would allow their three largest banks — Societe Generale SA, Credit Agricole SA and BNP Paribas SA — to continue owning insurance subsidiaries without facing steep penalties. The Germans and French want banks' minority investments in other institutions to count toward capital standards. The Japanese have raised concerns about no longer counting deferred tax assets as capital. U.S. officials want banks, such as Bank of America Corp. and J.P. Morgan Chase & Co., to continue to be allowed to count mortgage-securitization rights as capital.

This stuff goes on endlessly because every country has a banking sector that specializes in certain things and not in others, and a business sector that relies on financing in one form but not another. When the dust settles, every country usually loses out on a few of its sacred cows. In our case, it was treatment of mortgage-backed securities. German banks got their way on covered bonds but are still upset over treatment of silent participations. French banks that rode out the financial crisis without problems are unhappy about getting stuck with the same rules as banks that didn't. And of course, European banks in general are less well capitalized than American banks and are likely to have more problems with Basel's core capital standards than ours.

It's possible that the U.S., on net, didn't do as well as some other countries, but I doubt it. More likely, U.S. negotiators, for obvious reasons, wanted tough capital standards, wanted tough liquidity standards, wanted to rein in the use of mortgage-backed securities, and simply didn't consider any of them an America-vs.-the-world issue. But then again, neither does Jamie Dimon. He considers it a JPMorgan-vs.-other-banks kind of issue — as well he should. His newfound sense of financial patriotism should be taken with a large shaker of salt.

The Most Anti-Environment Congress in History

Here's a handy tool from the redoubtable Henry Waxman: a searchable database of Republican votes to dismantle environmental protections in the current session of Congress. Just in its first six months! And it doesn't even count the growing popularity of calls from GOP presidential candidates to simply eliminate the EPA lock, stock, and barrel. (Excuse me: the "job-killing EPA." Precise terminology is important here.)

Anyway, it's handy stuff if you want to know with precision just how deeply Republicans are committed to undermining the environment in the service of their corporate interests. You can search by agency, by topic, or by legislation. The full database is here. Have fun.

Republicans and Their Demons

What's the smart play for Republicans regarding Obama's jobs package? I think it's pretty simple: stay calm, pass one or two items so that you don't look mindlessly obstructive on an issue that's important to voters, and call it a day. The effect this has on the economy won't be big enough to materially affect the election, so why not?

The big question, of course, is whether Republicans are still capable of playing smart politics these days. Matt Yglesias points us to a Politico story suggesting that many conservatives are already griping about passing even a few small parts of Obama's jobs bill:

"Obama is on the ropes; why do we appear ready to hand him a win?" said one senior House Republican aide who requested anonymity to discuss the matter freely. "I just don't want to co-own the economy by having to tout that we passed a jobs bill that won't work or at least won't do enough."

…"To assume that we're naturally for these things because we've been for them does not mean we will be for them if they cause debt, if they [have] tax increases and if they take money from the free-enterprise sector, which creates jobs," said Texas Rep. Pete Sessions, who heads up the House Republican campaign arm.

These two quotes encapsulate the problems facing the GOP: on the one hand, their all-but-complete addiction to mindless obstructionism as a legislative strategy these days, and on the other, a tea party wing that's fanatically contemptuous of any ideological deviation. These are very different things: One is a scorched-earth tactical approach to politics and the other is a scorched-earth political faction with no taste for ideological compromise. Either of them alone might be enough to keep the GOP from acting in its own best interests, and both of them together may present a barrier that's simply insurmountable. Their voices were fairly muted in the immediate aftermath of Obama's speech, but they'll gain strength and vitriol as actual legislation starts to become more concrete.

So the question is, can the GOP's political pros keep these parts of their electoral id reined in long enough to act in their own rational self-interest? Or have obstructionism and tea partyism simply become too deeply ingrained in their governing strategy and political coalition to be turned off even briefly when it makes sense? The debt ceiling battle was inconclusive on this front: Republicans did manage to find a compromise eventually, but the obstructionist/tea party sentiments in the party sure kept them from finding one for a very long time. With a little bit less at stake this time, and with the supercommittee sellout already on the books, there just might not be any taste for further restraint. We'll see.