Quote of the Day: The Conservative Nanny State

From Conor Friedersdorf, writing about a new bill reported out of the House Judiciary Committee today:

Under language approved 19 to 10 by a House committee, the firm that sells you Internet access would be required to track all of your Internet activity and save it for 18 months, along with your name, the address where you live, your bank account numbers, your credit card numbers, and IP addresses you've been assigned.

And why do they want to do that? It's all about the children, of course. Click the link for more.

When is a Regulation Not a Regulation?

I got sucked into a regulatory vortex today. It's way down in some weeds that most of you don't care about, but let me tell you about it anyway. It's instructive.

I don't remember now where I first saw this, but apparently the conservative community is in an uproar over proposed new rules that would classify farm equipment as commercial vehicles, thus requiring farmers to get commercial drivers licenses, keep detailed logs, submit to periodic drug testing, etc. etc. It would be expensive and annoying and farmers don't like it. Just another example of the overbearing Obama administration regulating us to death.

So I got curious. What was this all about? First I went to the website of the Federal Motor Carrier Safety Administration and looked at their Request for Comment on this issue. And I got perplexed. FMCSA didn't really seem to be proposing anything at all. First, they're asking for comment on their longstanding policy about what counts as interstate commerce vs. intrastrate commerce. Second, they're asking for comment on their longstanding policy about whether a tenant farmer who pays rent in the form of a share of the crop should count as a commercial operator since he's hauling someone else's stuff when he delivers the landlord's share of the harvest. Third, they're asking for comment on what should count as an "implement of husbandry."

But here's what's weird: the first two items don't propose any new rules at all. They're solely asking for comment. The third item is a proposed new rule, but the wording suggests that FMCSA is trying to loosen regulations, not tighten them. And yet, a Google search came up with lots of people opposed to the "new rules" and precisely no one who seemed to be in favor. So what's up?

Finally I figured it out. After reading through a blog post about all this, followed by lots of outraged comments ("What else can you possibily find to TAX!!!" etc. etc.), I found an actual substantive explanation of what's going on from Adam Nielsen of the Illinois Farm Bureau. Here's how this all got started:

The issue facing us today surfaced in Illinois when State Police auditors conducting new entrant safety audits for Illinois Department of Transportation suddenly began treating farmers with “crop-share” leases as commercial “for-hire” truckers for the purposes of enforcing federal motor carrier safety rules....At the same time, state auditors began designating “implements of husbandry” as commercial vehicles resulting in a double whammy of enforcement never seen before in Illinois and forcing many farmers to be out of compliance.

So the problem was that state officials in Illinois had suddenly created a bunch of new rules. The Illinois Farm Bureau was unhappy, so they paid a call on the FMCSA:

At our first meeting at U.S. DOT in early March, FMCSA administrator Anne Ferro pledged to review the issue and get back to us quickly with answers. We were pleased when an immediate moratorium on new entrant audits in Illinois was imposed. At our meeting, Administrator Ferro also told us that she was motivated to begin building a ongoing dialogue with the agriculture industry and help her staff gain a better understanding of the movement of agricultural products and equipment. Our D.C. meeting was followed a few weeks later by a large meeting in Springfield with state and federal motor carrier regulators.

....The current Federal Register request for comments is NOT a rule making. It simply asks farm organizations, farmers, and the public for feedback on the agency’s current long standing interpretations.

So here's what seems to have happened. The FMCSA has long had rules that defined most grain haulage as interstate commerce and designated farmers hauling shared crops as commercial operators. This was never a big deal because they had never enforced those rules and neither had anyone else. But then Illinois decided to start enforcing the letter of the law and Illinois farmers were unhappy. So now FMCSA is asking whether these regulations ever made sense in the first place. Ditto for implements of husbandry, where they say that "a narrowly literal reading would mean applying the rules in circumstances where they would be impractical and produce no discernible safety benefits." So they want to make sure that the rules are more practical.

I might still be missing something here. Figuring out what's really going on just by reading rulemaking bureaucratese isn't easy. But it looks like the outrage over this is yet another example of Obama Derangement Syndrome in action. Far from trying to implement a barrage of regulations on our nation's farmers, FMCSA is apparently trying to stop state officials from implementing a barrage of regulations on our nation's farmers. But something tells me this doesn't matter. ODS is strong, and I imagine this is all going to be part of conservative lore for years. After all, everyone knows that liberals just love writing reams of pointless new regulations on hardworking small business owners. Right?

What the Markets are Really Worried About

When European leaders announced their latest deal to save Greece a couple of weeks ago, I was pretty unimpressed: "It demonstrates yet again," I said, "that European leaders simply aren't willing or able to deal with the eurozone's problems, and probably won't be until something genuinely catastrophic happens." But after I wrote that I read a few summaries of the deal that made it sound a little better than I had thought, so I calmed down a bit. Within a few days, though, Italian and Spanish interest rates started gapping out, suggesting that financial markets considered the plan almost completely worthless. And apparently they still do:

Spanish and Italian politicians rushed to formulate a fresh response to the debt crisis engulfing their two countries as their borrowing costs hit new euro-era highs on Tuesday....The flurry of activity came against the backdrop of another big sell-off in markets. Yields on benchmark 10-year Spanish and Italian bonds peaked at 6.45 per cent and 6.25 per cent, respectively. The premiums Madrid and Rome pay to borrow over Germany also reached new euro-era highs of 404 and 384 basis points.

....Analysts said it was difficult to see what could stop Spanish and Italian rates continuing to climb, particularly in light summer trading. “What can be announced to really break that? It is difficult to see,” said Laurent Fransolet, head of European fixed income research at Barclays Capital.

It's easy to say that Italy's problems are, objectively, not that bad. Sure, their total debt is high, but their current budget is under control and their debt has a pretty long average maturity. But that hardly matters. Not only are they in trouble, but they're in a vicious circle. Because they're in trouble their rates are going up, and as their rates go up they'll be in ever greater trouble. Rinse and repeat. Ditto for Spain. And both countries are far too large for financial markets to be bought off with anything less than a truly gargantuan intervention: Spain is four times the size of Greece and Italy is five times its size.

But what are the odds of a gargantuan intervention? Not very good. It's no wonder that stock markets around the world have been dropping for a week, and continued to drop even after the U.S. debt ceiling deal was announced. For reasons both good and bad, the markets were never all that worried about the debt ceiling. But they are worried about the eurozone, whose problems are far, far more complex and intractable than ours. Our problems, after all, are at least conceptually not too hard to address: cut discretionary spending a bit and let the Bush tax cuts expire in the medium term, and get serious about healthcare expenditures in the long term. And despite what tea party Republicans would like you to believe, we have plenty of taxing headroom to address healthcare funding in the future if we need it.

Nothing so easy is available to Europe. They need to commit to monster bailouts in the short term, something that's politically nearly impossible. And they need to either break up the eurozone or commit to much closer fiscal union in the medium term, something that's equally inconceivable. And yet, it's either that or disaster. No wonder the markets are worried.

Why the Public is OK With Spending Cuts

Greg Sargent points out today that most of the public is on the side of Republicans when it comes to the budget cuts in the debt ceiling deal:

Sixty five percent approve of deal’s spending cuts. But it gets worse. Of the 30 percent who disapprove, 13 percent think the cuts haven’t gotten far enough, and only 15 percent think the cuts go too far. One sixth of Americans agree with the liberal argument about the deal.

Well, hell, I'm not sure I blame them. The debt ceiling deal doesn't specify where the cuts are going to come from, it just sets a cap on discretionary spending over the next decade. And although the cap does make cuts compared to our current spending levels — which have ballooned partly because of George Bush's first-term spending spree and partly because of the Great Recession — compared to 2000 spending levels, it's hardly draconian. Using the numbers in the text of the law for spending levels, and making some reasonable assumptions about future inflation (2% per year) and future population growth (1% growth per year), my back-of-the-envelope calculation puts real per-capita discretionary spending at the following very rough levels:

  • 2000: $2,350 per year
  • 2021: $2,650 per year

(These are in 2005 dollars because that's what BEA uses.) Given our fragile economy, I think it's crazy to be talking about any spending cuts in the next couple of years. Looking farther out, though, it's hard to get too outraged over discretionary caps that still leave spending at a substantially higher level than we had in 2000. Maybe that's why the public is OK with all this.

(The follow-on cuts, which are supposed to come from the Supercommittee in November, would reduce these numbers further. At that point you might start to see real per-capita cuts. But we'll have to wait and see how that all works out.)

Gambling on Armageddon: Final Results

The Senate just approved the debt ceiling deal and President Obama will sign it later today. That means it's time to declare a winner from last month's pool. The three items you had to guess were:

  • When will an agreement be reached?
  • How much will the debt ceiling be increased?
  • Will there be any revenue increases in the deal? How much?

My guesses were August 7, $1.7 trillion, and $200 billion. Not too bad! The correct answer is slightly variable, but assuming that (a) Congress fails to approve a balanced budget amendment and (b) Obama asks for the maximum increase he's allowed to, the deal raises the debt ceiling by $2.1 trillion. So the winning combination is August 2, $2.1 trillion, and zero.

So who won? Here are the closest guesses:

  • shooter242: August 2, $1 trillion, zero.
  • Model62: August 2, $2 trillion, a little bit via COLA adjustments to tax brackets
  • cld: August 2, "a lot," zero.
  • Austin_Will: August 1, $1.5 trillion, zero.

In the original post, I defined "a lot" as "the full $2 trillion or so," so I think that makes cld the winner. Congratulations! And good work from the runners up too. Your non-prizes will not be mailed out to you shortly.

The Coming Non-Fight Over the Gas Tax

I've been assuming that the next big fight in Washington will be over the 2012 budget, but apparently all the Beltway gossip is now focused on something else: a vote to reauthorize the federal gasoline tax next month. Doug Mataconis mulls this over:

You can already see how this issue could play itself out a month from now. As it is the issue of increased energy prices is an easy one to demagouge with simplistic slogans (“Drill Baby Drill”) and even more simplistic ideas (anyone remember when Hillary Clinton and John McCain came up with the idiotic idea of a Federal Gas Tax Holiday during the 2008 campaign?). It’s not at all hard to see the argument over the the gas tax being boiled down to the slogan Barack Obama wants to increase the price of gas.

....There are, in fact, some remarkable similarities between the just concluded debt ceiling showdown and the showdown that could result over increasing the gas tax. Like increasing the debt ceiling, the renewal of the Federal Gasoline Tax has been a fairly non-controversial action in the past. Ronald Reagan did it in 1982, George H.W. Bush did it in 1990, Bill Clinton did it in 1993, and George W. Bush and a Republican Congress did it in 2005. Additionally, attempts to roll back the tax in the past have generally failed.

I know it's dangerous to assume that something won't happen just because it makes no sense, but.....I don't think this fight will happen. This isn't because the anti-tax jihadists will suddenly have an outbreak of common sense, but because a gas tax fight won't fly with the public. It's easy to demagogue "taxes," since lots of people are convinced that "taxes" are merely ladled out to favored interest groups, wasteful boondoggles, foreign aid, and the layabout poor. But gasoline taxes are different: they're used to build highways. And everyone likes highways.

Generally speaking, people don't object to taxes if they see tangible results from them. And highways are about as tangible as you can get. The Republican leadership is smart enough to pick fights that have a certain amount of surface appeal, and this one doesn't, not even to the hardcore tea party crowd. They'll find something else to fight about.

Gaming Out the Supercommittee

With the debt ceiling deal all but assured of passage, Suzy Khimm moves on to the next big question: who's going to be on the Supercommittee that's tasked with cutting an additional $1.5 trillion from the deficit by November?

Republicans, for their part, are unlikely to appoint anyone who’s publicly supported including revenue as part of a debt deal, namely in the form of tax increases....“No one from the Senate Gang of Six, who proposed tax increases, need apply,” the Wall Street Journal opined. “The GOP choices should start with Arizona Senator Jon Kyl and House Budget Chairman Paul Ryan, adding four others who will follow their lead.”

On the Democratic side, fiscal hawks and centrists will probably back Senate Finance Committee Chairman Max Baucus, who reportedly pushed for cutbacks to Medicaid, food stamps and other entitlements....Liberals will want to see the likes of Sen. Tom Harkin and Sen. Sherrod Brown on the committee. “Unfortunately, I don’t think the leadership will allow this,” says Dean Baker, an economist at the Center for Economic Policy Research. “I worry that the Dems will be the usual suspects, starting with the Gang of Six crew.”

Unfortunately, this is my take too. Republicans will appoint nothing but tax hardliners (which shouldn't be too hard, since that's at least 80% of their caucus) while Democrats will appoint at least one or two centrist types. That's all it will take to get a majority in favor of yet another cuts-only plan. Whether this can pass in the Senate is unclear, but it might not matter. The entire debt ceiling agreement may have been negotiated under the presumption that no follow-on deal would be reached and the automatic trigger cuts were highly likely to go into effect. The Supercommittee might just be window dressing.

But maybe not. So given the reality that the Supercommittee exists, what would be my dream deal? Pretty simple: it would be an agreement to focus 100% of the plan on healthcare, split between benefit cuts and tax increases. Politically, this is a pipe dream, of course. And substantively, it runs into the fact that PPACA already made a lot of cuts in Medicare and we don't yet know how they're going to work out, which makes further cuts sort of dicey. That may not make additional reforms impossible, but it does make it especially important to choose the details thoughtfully. A slow phase-in of higher payroll taxes might be OK, for example, along with a little bit of means testing. Ditto for some reductions in provider payments, cuts in Medicare Advantage, and negotiating authority for prescription drugs. (Then again, these things might not be OK. I'd defer to smarter people than me over the details.)

But one way or another, if we're going to insist on obsessing over the long-term deficit, then we might as well obsess over the part of the federal government that's actually responsible for the long-term deficit. And that's all in healthcare.

The Ever Shrinking Tea Party

According to a recent poll, only 22% of Americans consider themselves tea party members or supporters, half the number of last November. And of that 22%, two-thirds supported a debt ceiling compromise and more than half thought it should include tax increases as well as spending cuts:

In a nationwide CBS News poll in mid-July, 66 percent of Tea Party supporters said that Republicans in Congress should compromise on some of their positions to come to an agreement with Democrats on the debt-ceiling increase. By contrast, 31 percent said Republicans should stick to their positions even if it meant not coming to an agreement....When Tea Party supporters were asked if the debt-ceiling agreement should include only tax increases, only spending cuts, or a combination of both, the majority — 53 percent — said that it should include a combination. Forty-five percent preferred only spending cuts.

So who was driving the absolutist view in Congress over the past few months? If it was the no-compromise wing of the tea party, that's less than 10% of the country. So riddle me this: how did we manage to let 10% of the country bring us to the brink of disaster? It is a remarkable thing.

Pentagon Not a Debt Ceiling Loser After All

I've been reading all day that the Pentagon is the big loser from today's debt ceiling deal, and I just sort of vaguely accepted that as true. They're getting socked with a pretty big chunk of the initial $1 trillion in cuts, after all. But McClatchy's Nancy Youssef sets the record straight:

Rather than cutting $400 billion in defense spending through 2023, as President Barack Obama had proposed in April, the current debt proposal trims $350 billion through 2024, effectively giving the Pentagon $50 billion more than it had been expecting over the next decade.

...."This is a good deal for defense when you probe under the numbers," said Lawrence Korb, a defense expert at the Center for American Progress, a left-leaning research center. "It's better than what the Defense Department was expecting."

Now, if the follow-on deal includes lots of additional defense cuts, then the Pentagon might actually come out of this with some serious scars. But for now, apparently they're doing OK.

From Scott Sumner, after reading a poll showing that there are virtually no economic forecasters anywhere in the world willing to concede that monetary policy is currently too tight:

If the public of the developing world actually understood the role of economists in this crisis, we’d all be lynched. They think we failed to predict it. But since monetary policy generally reflects the establishment view of the economics profession, it would be more accurate to say we caused the Great Recession.

Sumner has an idiosyncratic view of monetary policy, but that hardly matters. Even conventional economic models suggest that monetary policy is too tight right now. But we're doing nothing about it thanks to a groundless belief among policy elites that inflation in the future is more dangerous than sky-high unemployment right now. (And in the case of Europe, more dangerous than even the possible collapse of several eurozone countries.) And so, here the rest of us sit.