Kevin Drum

R.I.P. Healthcare Reform?

| Fri Jan. 29, 2010 2:43 AM EST

OK, let's take one more crack at figuring out the likely fate of healthcare reform.  According to the Washington Post, Harry Reid and Nancy Pelosi are still at loggerheads and "congressional Democrats remained in disarray Thursday about how to move forward, with at least some pointing at the White House as the cause of the legislative standstill gripping Capitol Hill." OK then. So what's the direction from the White House? Here's the New York Times:

With Mr. Obama’s health care overhaul stalled on Capitol Hill, Rahm Emanuel, the White House chief of staff, said in an interview that Democrats would try to act first on job creation, reducing the deficit and imposing tighter regulation on banks before returning to the health measure, the president’s top priority from last year.

....Mr. Emanuel, the chief of staff, said he hoped Congressional Democrats would take up the jobs bill next week. Then, in his view, Congress would move to the president’s plan to impose a fee on banks to help offset losses to the Troubled Asset Relief Program, the fund used to bail out banks and automakers.

Lawmakers would next deal with a financial regulatory overhaul, and then pick up where they left off on health care. “All these things start and lead to one place: J-O-B-S,” Mr. Emanuel said.

Given the normal pace of congressional action — including the usual Republican obstruction — this would mean no action on healthcare for at least a month or two. Maybe more like three or four. Or maybe never.

New pronouncements seem to come almost hourly on this stuff, so I'll wait for a few other folks to chime in before coming to any conclusions. But if healthcare is now domestic priority #4, it might as well be domestic priority #100. It might not quite be dead, but no matter what Obama said in his State of the Union address, the grim reaper is starting to hover uncomfortably close by.

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Financial Innovation Watch

| Thu Jan. 28, 2010 8:29 PM EST

I got distracted by a couple of other books last week, but yesterday I picked up A Splendid Exchange again and ran into a fascinating description of 17th century Dutch financial innovation that should sound eerily familiar to most of my readers. Working for the Dutch East India Company during the spice trading era, it turns out, was so hideously dangerous that they had a desperate and continuous need for raw recruits to man their ships:

This grisly recruitment effort was run by a specialized corps, composed mostly of women, the zielverkoopers (literally, "soul sellers"). Their marks were the young foreign men, mainly from Germany, who swarmed into Dutch cities seeking their fortune. In return for a cut of their signing advance and future pay from the Company, the women advertised room, board, and the sort of entertainments usually sought by unattached young men, during the weeks and months until they sailed for Asia.

....Holland being Holland, this Faustian transaction yielded a financial instrument, in this case the transportbrief — a marketable security entitling the zielverkooper to a cut of the recruit's wages, paid by the Company as they were earned. Other investors then bought these securities at a discount that reflected the high death rate of VOC1 personnel and assembled them into profitable, diversified pools of human capital. These magnates were called, naturally enough, zielkoopersbuyers of souls. When, in the eighteenth century, the mortality among VOC's soldiers and sailors soared because of lax Company procedures, many zielkoopers went bankrupt.

I imagine there were people in 17th century Amsterdam who objected to this practice. I also imagine there were 17th century equivalents of Angelo Mozilo making millions from it, 17th century equivalents of Alan Greenspan explaining how it made capital allocation more efficient, 17th century equivalents of CNBC shilling for it, 17th century equivalents of the Gaussian copula to convince everyone that pooling these securities made them safe, and 17th century equivalents of Phil Gramm to make sure nobody stopped it. The names may change, but the product remains the same.

1That is, Vereenigde Oost-Indische Compagnie, the Dutch phrase for United East Indian Company.

He's Back!

| Thu Jan. 28, 2010 7:19 PM EST

Ben Bernanke was confirmed for a second term as Fed chairman today by a vote of 70-30. Neil Irwin of the Washington Post answers the first question that popped into my mind:

Bernanke was confirmed by a narrower margin than any previous Fed chairman. The previous record for most "no" votes was Paul Volcker in 1983, when he was confirmed 84 to 16.

Bernanke has "more votes against him than any Fed chairman has ever had. And that's a signal," said Sen. Richard Shelby (R-Ala.), in an interview. "The Fed is controversial with the American people. Bailouts. Lack of supervision over [bank] holding companies."

I hope Shelby is right. But my guess is that this is mostly a manifestation of the fact that confirmations have become more contentious in recent years. Even during a bad recession I'll bet Bernanke would have been confirmed easily a few decades ago. After all, Sonia Sotomayor was no more liberal then Ruth Bader Ginsburg, but she was confirmed for the Supreme Court 68-31 compared to Ginsburg's 96-3.

Anyway, I certainly look forward to a chastened Ben Bernanke coming out strongly in favor of serious financial sector regulation. I'm not taking any bets on it, though.

More on the Healthcare Timeline

| Thu Jan. 28, 2010 6:40 PM EST

Are House and Senate Democrats really planning to debate healthcare for several more months?  A knowledgable observer emails to say that it's unlikely because any deal involving reconciliation needs to happen fairly quickly:

The current continuing resolution expires February 23 (or 24). Unless Congress wants to keep doing continuing resolutions (and thus funding Bush budget priorities and not Obama’s), they'll need to get to get the 2010 budget done (via reconciliation). I would suspect that Feb 23 is the key date, not some spring or summer timeline.

Hmmm. I'm just tossing this out for comment since I don't independently know what all the procedural hurdles are here. But if this is right, then the timeline for passing healthcare reform is actually fairly short unless the House is willing to pass the Senate bill based on assurances of doing something to modify it in the next budget year. That doesn't seem very likely, though.

Further comments welcome from any congressional process nerds out there.

Healthcare: One Step Forward, One Step Back

| Thu Jan. 28, 2010 5:41 PM EST

It may be irresponsible to blog this, but here's what Nick Baumann just tweeted:

Word on the Hill is that after leadership meeting, Baucus said #hcr by spring/summer, immediately regretted it. Hearsay tho.....

I'll refrain from going bananas until/unless this is confirmed. But Senate Dems can't seriously be thinking of spending another 3-6 months on healthcare reform, can they? [UPDATE: Probably not. More here.]

On the bright side, though, Nick also reports that Kent Conrad, who needs to be on board with any kind of reconciliation strategy since he chairs the Senate Budget Committee, is on board with a reconciliation strategy:

The Senate "was not designed to have everything require 60 votes," Conrad said. "It wasn't designed to prevent important action on the problems facing the country." If a supermajority is effectively necessary to pass any piece of legislation, he added, this "puts a great deal of pressure on going to more of a reconciliation process to deal with things."

Conrad argued that it's not possible to use reconciliation — which requires merely a straight majority vote — to win passage of an entire comprehensive health care bill, as some progressives have advocated. (There are assorted rules that prevent this.) But Conrad noted that he's open to using this legislative maneuver to make limited, though significant, changes to a measure the Senate has already passed — provided that certain procedural kinks could be ironed out....He said, "Frankly I think we have to reconsider the rules by which this body is governed," because the Senate "is in danger of becoming dysfunctional," and "there's going to be a building demand in the country to change the system."

Baby steps.

The End of Diplomacy?

| Thu Jan. 28, 2010 4:40 PM EST

Matt Yglesias points out that increasing partisanship in Congress makes it not just hard to pass domestic legislation, but nearly impossible to pass international treaties:

The dysfunctional nature of the United States Congress means that essentially all diplomatic intercourse with the American government is worthless. If you were at a G8 meeting talking regulation, why would you take the Obama administration’s positions seriously? Or at a Major Economies Forum meeting talking about climate change? Or at a UN Security Council meeting talking about multilateral nuclear disarmament?....If the people you’re negotiating with think that anything you oppose will face unanimous opposition from a minority with the power to block bills, while your own party isn’t even disciplined enough to provide the leadership with consistent backing on procedural issues, then what is there really to negotiate about?

It's a good point, but I think it's probably overstated. The problem with things like the filibuster and the Senate hold isn't so much that they exist, or that they're anti-majoritarian per se, but that they've become routine. That really does represent a qualitative change in the way Congress operates, and it's a change that no one, from the founders forward, ever really intended.

But for better or worse, formalizing international treaties has always been hard, and it's hard by design. So this doesn't represent any real change in how the government works. Foreign countries have always known that they're at the mercy of a very difficult ratification process if they want to conclude a formal treaty with the U.S., and it's not clear to me that minority obstruction on treaties is worse now than it's been in the past.1

What's more, it's not always as bad as it sounds. Executive agreements have become much more popular in recent years, and these can be passed with 60 votes. In that sense, passing treaties has actually become easier. Beyond that, in some cases the president can simply agree to push for harmonizing rules without a treaty in place at all. Sometimes this can be done via executive order and sometimes via riders to budget bills that are passed via reconciliation. It's not always necessary to get Congress to sign on to everything.

But an honest to God treaty? Yeah, that requires a two-thirds vote in the Senate. But it always has, and treaties have been failing for a long time because of it. Just ask Woodrow Wilson's ghost.

1Data to the contrary welcome, of course

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Bank Bashing is a Hit!

| Thu Jan. 28, 2010 3:15 PM EST

I'm never quite sure how seriously to take this stuff, but left-leaning pollster Democracy Corps did some dial testing of Obama's speech last night with "50 independent and weak partisan voters in Nevada":

This difficult audience for Obama was a heavily Republican-leaning group (46 percent Republican, 20 percent Democratic) that split their votes in 2008 (52 percent Obama, 46 percent McCain) but had moved away from him over the past year, with majorities expressing disapproval with his job performance and unfavorable views of him on a personal level.

So how did Obama do with this crowd? Apparently his strongest suit was bank bashing and standing up to special interests:

These voters were especially pleased to see him express his anger about the behavior of banks that received bailouts, and they accepted the president’s explanation that the banking bailouts were an unpleasant but necessary action for the government to take.  These swing voters also focused on Obama’s call to end tax breaks for companies that outsource jobs overseas and his pledge to double exports.  They viewed these two issues as closely linked, emphasizing the fact that we need to start “making stuff” in America again if we are going to have any chance of increasing our exports.

I expect a bull market in bank bashing rhetoric this year. Unfortunately, I'm less sure about the market for serious banking reform.

Don't Ask, Just Fight

| Thu Jan. 28, 2010 2:23 PM EST

Barack Obama last night:

This year, I will work with Congress and our military to finally repeal the law that denies gay Americans the right to serve the country they love because of who they are.

This was short, but it was also one of the most unequivocal things Obama said last night. And the Secretary of Defense applauded when he said it. But it's still going to be a fight to get Don't Ask Don't Tell repealed. Here's John McCain right out of the gate:

This successful policy has been in effect for over 15 years, and it is well understood and predominantly supported by our military at all levels. We have the best trained, best equipped, and most professional force in the history of our country, and the men and women in uniform are performing heroically in two wars. At a time when our armed forces are fighting and sacrificing on the battlefield, now is not the time to abandon the policy.

Shameful. But make no mistake: even after 15 years to get used to the idea, even with public opinion strongly in favor, even with the military itself slowly getting accustomed to the inevitable, this is going to be a pitched battle. And as with healthcare reform, although Obama's support will be important, it won't be decisive. What's really going to matter is whether 218 representatives and 51 senators are willing to support it. (That's assuming it gets tacked onto the defense appropriation bill, which is passed under reconciliation rules.)

Right now this seems like a very winnable fight, but that's because the pushback hasn't really started yet. But once Fox gets going, and op-eds get written, and the locker room tittering takes off, and FreedomWorks starts running TV ads, and Focus on the Family blankets their mailing list with dire fundraising letters, and disgruntled military brass start leaking — well, that's a whole different ballgame. I hope I'm wrong, but I don't think it's going to be easy. Congressional Democrats are going to need some spine to stick to their guns on this, and that's always a thin reed to count on.

Trade Talk

| Thu Jan. 28, 2010 1:50 PM EST

Dan Drezner was pretty unimpressed with the tiny part of last night's State of the Union speech devoted to foreign economic policy. He deconstructs it here:

1)  "We will double our exports over the next five years..."  Well, the President said this would happen, so it must be so!!  I would humbly request that the president also decree that the pull of gravity be cut in half.  The government has an equal chance of making that happen. 

2)  "we will continue to shape a Doha trade agreement that opens global markets..."  The key word there is "shape."  I have every confidence the administration will do this, because they make this pledge in every communique they ever issue.  It's a tradition now, like playing "Hail to the Chief."  Play the music, pledge to work on Doha, and then go about your business.  

3)  "we will strengthen our trade relations in Asia and with key partners like South Korea, Panama, and Colombia."  You mean, by ratifying the three trade agreements that have already been signed and negotiated?  Oh, you don't mean that?  Well, never mind, then.

Even though last night's SOTU was obviously going to be heavily focused on domestic issues, I too was surprised by the almost perfunctory attention paid to foreign policy. But I can't say that I was surprised by the perfunctory attention paid to foreign economic policy. Dan says, "I would have liked to have seen a more robust effort to link foreign policy priorities to domestic priorities — because the two are more linked than is commonly acknowledged" — and I suppose that's true. But honestly, there's only so far the professor-in-chief can go. Obama was doing a lot of explaining already last night, and trying to explain to a weary audience why they should care about exchange rates and current account deficits just wasn't in the cards.

But I'll go further: Dan should have been pretty happy with the speech. Obama might not have done much to advance that cause of trade liberalization, but in the middle of a deep recession and following an election whose message was "Americans are hurting," there was no chance of any non-suicidal president doing that. In fact, a bit of populist protectionism would have been the obvious crowd pleaser. The fact that Obama supported trade agreements even briefly, even just rhetorically, was actually a pretty big win for free traders like Dan.

On the other hand, I too was....fascinated....by Obama's out-of-the-blue pledge to double U.S. exports over the next five years. Where did that come from? And how does he plan to do it? According to Obama, the answer is a "National Export Initiative that will help farmers and small businesses increase their exports, and reform export controls consistent with national security." That line about reforming export controls received perhaps the most tepid round of applause ever in a State of the Union address, I think, as a few people tentatively started to clap and then almost instantly stopped — probably because they realized they had no idea what that meant. Me neither. Streamlining export controls is certainly a good idea, but as far as I know there's nobody who thinks this is something that's seriously dampening U.S. sales abroad.

Of course, there is a time-tested way to double U.S. exports: adopt an assertive policy of weakening the dollar. That might do it, as long as the rest of the world decided not to retaliate. But it's also vanishingly unlikely, so I really don't know what Obama has in mind. I guess we'll just have to wait and see.

An Afghan Awakening?

| Thu Jan. 28, 2010 1:17 PM EST

Dexter Filkins reports the beginnings of an effort to replicate the success of the Iraq's Sunni Awakening in Afghanistan:

The leaders of one of the largest Pashtun tribes in a Taliban stronghold said Wednesday that they had agreed to support the American-backed government, battle insurgents and burn down the home of any Afghan who harbored Taliban guerrillas.

....In exchange for their support, American commanders agreed to channel $1 million in development projects directly to the tribal leaders and bypass the local Afghan government, which is widely seen as corrupt....The pact appears to be the first in which an entire Pashtun tribe has declared war on Taliban insurgents.

But Filkins also warns that things could fall apart pretty easily:

But the agreement, though promising, is fragile at best. Afghan loyalties are historically fluid, and in the past the government has been unable to prevent Taliban retaliation. The agreement may also be hard to replicate, since it arose from a specific local dispute and economic tensions with the Taliban.

While the Shinwaris are now united against the Taliban, if payments from the Americans falter or animosities flare with the Afghan government, the tribe could switch back just as quickly.

Moreover, it is not clear that the elders, whatever their intentions, will be able to command the loyalties of their own members. After 30 years of incessant warfare, many of the traditional societal networks in this country have been weakened or destroyed.

The main reason the Sunni Awakening succeeded was because al-Qaeda in Iraq had become so oppressive that Sunni tribal leaders were finally willing to accept any means of fighting back against them, even if that involved American help. The Taliban hasn't yet gotten to that point throughout Afghanistan, only in a few specific areas, which makes a broader Afghan version of this strategy pretty difficult to implement. But at least this is a start.