Kevin Drum

Paul Ryan's Smoke and Mirrors

| Mon Feb. 1, 2010 6:56 PM EST

Rep. Paul Ryan recently introduced the Roadmap for America’s Future Act of 2010, a piece of legislation that claims to eliminate the long-term budget deficit. The CBO agrees, and Ezra Klein says it's "an object lesson in why so few politicians are willing to answer the question 'but how will you save all that money?'"

Well, sort of. I give Ryan credit for being more forthcoming than most supposed deficit hawks, but the truth is that for the most part he doesn't explain how he's going to save all that money. It's true that he's got a plan for Social Security private accounts, a plan for Medicare vouchers, and a plan for tax credits to replace the current tax deductibility of health insurance. It's good conservative boilerplate.

But it turns out that's all it is. Those things themselves don't really save any money. The real action comes from a collection of arbitrary spending limits, but these limits don't offer any clues about how we're going to meet them. There's a freeze on nonsecurity discretionary spending from 2010-2019 — but saying you're going to freeze spending is easy. The hard part is figuring out what to cut. There's also a limit to the growth of Medicare payments — but saying you're going to limit growth is easy. The hard part is figuring out how to limit growth and deciding what you're going to cut to meet your caps. Medicaid is treated the same way: Ryan's plan simply sets a limit on growth rates without saying how those limits will be met.

In fairness, there are a few specifics. The eligibility age for Medicare would rise gradually to about age 70. Social Security payments would be reduced. All the money in the stimulus bill that hasn't been spent yet would be eliminated.

But those are nits. For the vast bulk of the savings, Ryan simply declares that they'll happen. His bill would cap growth rates, and that's that. Whatever happens, happens — and he carefully avoids actually saying what would happen. That's not serious, and it doesn't deserve praise.

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A Grim Economic Forecast

| Mon Feb. 1, 2010 1:42 PM EST

Ryan Avent is listening to a budget briefing:

OMB head Peter Orszag is giving a press conference just now with Christina Romer, head of the Council of Economic Advisors, on the president's Fiscal Year 2011 budget. Ms Romer explained the economic assumptions underlining the budget forecasts....She then gave the unemployment forecast. At the end of 2010, the unemployment rate, according to the administration's forecast, will be 9.8%. At the end of 2011, the rate will be at 8.9%. And at the end of 2012, after the next presidential election, the unemployment rate will be 7.9%.

Good God. I suppose this isn't a big surprise anymore, but it's still painful to have your nose officially rubbed in it. In any kind of normal economy, 8% unemployment would be considered disastrously high, but Orszag and Romer say we're not even going to improve to disastrous levels for another three years. A $100 billion jobs bill, even assuming it passes, is going to do very little about this.

Our economy is going to stay fragile for a very long time. I sure hope our banking system can handle that. Our political system too.

Corn and Oil

| Mon Feb. 1, 2010 1:05 PM EST

Stuart Staniford surveys various liquid alternatives to oil and concludes that the only one that's truly sensitive to oil prices is biofuels. Today, that primarily means ethanol:

Biofuel production growth appears to be extremely oil price sensitive, and increased the fastest and reached the largest volume in response to the mid-to-late 2000s oil shock.  I have argued in the past that there are structural reasons for this: given the comparatively low capital requirements and small plant size of biofuel plants, they can respond much faster to episodes of high oil prices than can the other sources, all of which tend to involve larger, slower-to-build, more capital intensive plants.  This has important implications for food and land prices in future oil price shocks.  Food prices are likely to rise quickly and markedly in response to oil shocks, public policy permitting.

Italics mine. I don't have a lot to add to this at the moment, but it's a thought-provoking, chart-laden post. Worth taking a look at.

Money Meet Mouth

| Mon Feb. 1, 2010 12:39 PM EST

Minnesota Gov. Tim Pawlenty wants to run for president in 2012. That's been pretty obvious for the past year, ever since the once-earnest wonk took up the death panel meme, started jabbering about the tenth amendment, and began delivering stemwinding speeches to the tea party crowd. Today he writes in Politico about his outrage over the budget deficit. Bruce Bartlett is unimpressed:

Like all Republicans these days, Pawlenty wants to have it every possible way: complain about the deficit while ignoring everything his party did to create it (Medicare Part D, two unfunded wars, TARP, earmarks galore, tax cuts up the wazoo, irresponsible regulatory and monetary policies that created the recession that created the deficit, etc.), illogically insisting that tax cuts are a necessary part of deficit reduction, and never proposing any specific spending cuts.

The only specific thing Mr. Pawlenty is capable of proposing is a balanced budget amendment to the Constitution. It’s hard to know where to begin in explaining why this is such an irresponsible idea, but I will try.

And try he does. And succeeds! Until he gets to his final paragraph:

In conclusion, Tim Pawlenty is not ready for prime time. He may think he has found a clever way of appealing to the right wing tea party/Fox News crowd without having to propose any actual cuts in spending, but it isn’t going to work. It’s too transparently phony even for them.

I don't think anything is too transparently phony for this crowd. There's a famous old Onion headline that goes like this: "Report: 98 Percent Of U.S. Commuters Favor Public Transportation For Others." This is pretty much the sentiment that Pawlenty — and the rest of the Republican Party — are pandering to in the tea party movement: 98 percent of them favor spending cuts for others. Just don't cut their Medicare or their Social Security or take away their mortgage interest tax deduction or — in Minnesota — do anything to rein in farm subsidies. Unfortunately, Pawlenty can't think of anything sizeable to cut that would affect only "others" for a large enough definition of others. So he's stuck. Just like his entire party is stuck, never willing to put its money where its mouth is because they know perfectly well that would mean having to make some hard decisions.

But I'm sure he'll do fine with the tea partiers anyway. Just think of him as a slightly less robotic Mitt Romney without the Mormon baggage and you've got his number. There's no reason that shouldn't wear pretty well with these folks.

Suburbia's Discontents

| Mon Feb. 1, 2010 12:00 PM EST

The day after Obama's State of the Union address my sister called me. "Was there anything in it for me?" she asked.

This has become sort of a running joke between us. The answer is always "no." That's because when presidents announce plans, she pretty much never benefits from them. Child tax credits? She doesn't have kids. Education loans? She graduated from college 30 years ago. Healthcare reform? She's already covered. Small business loans? She's not a corporation. Mass transit funding? She commutes to work in her car. Cap-and-trade? That'll probably cost her money in higher energy bills. Etc.

I was reminded of this by a link from Atrios to a recent Joel Kotkin piece called "The War on Suburbia":

A year into the Obama administration, America’s dominant geography, suburbia, is now in open revolt against an urban-centric regime that many perceive threatens their way of life, values, and economic future....For the first time in memory, the suburbs are under a conscious and sustained attack from Washington. Little that the administration has pushed — from the Wall Street bailouts to the proposed “cap and trade” policies — offers much to predominately middle-income oriented suburbanites and instead appears to have worked to alienate them.

And then there are the policies that seem targeted against suburbs. In everything from land use and transportation to “green” energy policy, the Obama administration has been pushing an agenda that seeks to move Americans out of their preferred suburban locales and into the dense, transit-dependent locales they have eschewed for generations.

Atrios says, "This is completely idiotic for mostly obvious reasons, including the hundreds of billions devoted to propping up single family home prices. It isn't necessarily a wise policy, but it's hardly a war on the suburbs." I agree: Kotkin is overwrought. And yet, Atrios bangs the drum pretty regularly for the notion that if Obama wants the public to support his policies, then the public better get some goodies out of it. And for the most part, suburbanites might well be feeling that they aren't getting many goodies lately. "Hundreds of billions devoted to propping up single family home prices" is overwrought too, and in any case is generally invisible. The stimulus bill, for example, might have benefited my sister in some way, but there's really no way to know. It's just too diffuse.

In other words, I wouldn't dismiss this quite so breezily. Yes, Kotkin has an agenda. But there's a real tension between good policy and good politics. Cost controls are good policy on the healthcare front, but lousy politics. Mandates are good policy but lousy politics. In the stimulus bill, metering out tax cuts a few dollars per paycheck was good policy but lousy politics. Likewise, promoting high density residential patterns might be good policy, but for suburbanites anyway, it's lousy politics. You can ridicule it all you want, but suburbanites still have lots of votes, and they want some goodies too. That's politics.

Republicans and Jobs

| Mon Feb. 1, 2010 1:35 AM EST

Here's the latest from Washington DC:

President Obama wants Congress to quickly approve a jobs bill in the range of $100 billion, a top White House official said Sunday, reflecting the growing political anxiety among Democrats about stubbornly high unemployment in an election year.

....Democrats hope to win Republican support for the measure by including tax cuts for small businesses, a GOP favorite. The tax credit is designed to encourage businesses to hire workers....Senate Minority Leader Mitch McConnell (R-Ky.) said on "Late Edition" that as long as the legislation creates jobs, "we're willing to take a look at it."

I would like to go on record now with a prediction that this jobs bill will get zero Republican votes no matter what's in it. Anyone care to take the other side of that bet?

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Money on the Street

| Sun Jan. 31, 2010 1:14 PM EST

As the punchline to a nerdy joke about the efficient market hypothesis, Daniel Gross tells a story about noticing something that looked like money lying on the ground at Davos:

And so I bent down and picked up the paper. On one side, the grim visage of Queen Elizabeth. On the other, Charles Darwin. It was a 10 pound note, worth about $16.25. Just lying on the floor, unmolested by Nobel Prize-winning economists, CEOs of Fortune 500 companies, and financial journalists.

In 1967, when I was nine years old, I found a five-pound note lying on a railway platform in England. At the time, the exchange rate to dollars was 4:1, so it was worth $20. Adjusted for four decades of inflation, that comes to $128. This compares very favorably with the dimes I occasionally found at home in the coin return slots of pay phones.

It's also (by a long way) the largest sum of money I've ever found lying on the street. How about you?

UPDATE: Sorry, I must have had a historical blackout. As Anonymous says in comments, the pound in 1967 converted at $2.80. So that's $14 at the time, and $90 today. Still the largest sum I've ever picked up off the street, though.

Healthcare Behind the Scenes

| Sun Jan. 31, 2010 12:49 PM EST

Here's the latest from the LA Times on the forecast for passing healthcare reform:

President Obama's campaign to overhaul the nation's healthcare system is officially on the back burner as Democrats turn to the task of stimulating job growth, but behind the scenes party leaders have nearly settled on a strategy to salvage the massive legislation.

....House Speaker Nancy Pelosi (D-San Francisco) and Senate Majority Leader Harry Reid (D-Nev.) particularly want to give members time to recover from the shock of Republican Scott Brown's victory in the Massachusetts Senate race two weeks ago. The election cost Democrats their filibuster-proof Senate majority.

But in the coming weeks, Pelosi and Reid hope to rally House Democrats behind the healthcare bill passed by the Senate while simultaneously trying persuade Senate Democrats to approve a series of changes to the legislation using budget procedures that bar filibusters.

....Despite the hurdles, there is a growing consensus that a modified Senate bill may offer the best hope for enacting a healthcare overhaul. "The more they think about it, the more they can appreciate that it may be a viable . . . vehicle for getting healthcare reform done," said Rep. Gerald E. Connolly (D-Va.), president of the Democratic freshman class in the House.

I guess I should stop even pretending to know what's going on. A "growing consensus" about passing the Senate bill and then modifying it sounds crazy to me. How obvious does it have to be that this is the only possible route forward before everyone in the Democratic caucus figures it out? And is giving House members time to "recover from the shock" of Scott Brown's victory really likely to stiffen their spines?

I don't know. Maybe this is the only way to go. And the Times does say that behind the scenes party leaders "are meeting almost daily to plot legislative moves while gently persuading skittish rank-and-file lawmakers to back a sweeping bill." That's good to hear, at least. But honestly, I don't know if reading this piece makes me more hopeful or less. Click the link and decide for yourself.

Healthcare Reform's Final Minutes

| Sat Jan. 30, 2010 6:21 PM EST

From the "agony of defeat" file:

Sen. Tom Harkin, the chairman of the Senate Health Committee, said negotiators from the White House, Senate and House reached a final deal on healthcare reform days before Scott Brown’s victory in Massachusetts.

....Harkin said “we had an agreement, with the House, the White House and the Senate. We sent it to [the Congressional Budget Office] to get scored and then Tuesday happened and we didn’t get it back.” He said negotiators had an agreement in hand on Friday, Jan. 15. Harkin made clear that negotiators had reached a final deal on the entire bill, not just the excise plans, which had been reported the previous day, Jan. 14.

The bad news: this means that if Democrats had taken this stuff even slightly more seriously, healthcare reform would already be a done deal. Idiots. The good news: if negotiations really were complete, it should mean that creating a reconciliation deal to accompany passage of the existing Senate bill ought to be fairly easy. A few parts would probably have to be jettisoned since they wouldn't be allowed under reconciliation rules, but that's life. The vast bulk of the compromise would stay in place and just needs to be turned into legislative language.

Why this isn't happening is a mystery.

Quote of the Day: Lost

| Sat Jan. 30, 2010 5:42 PM EST

From Carlton Cuse, co-creator of Lost, explaining why they're going to leave a few things still mysterious when the show ends this season:

To sort of demystify that by trying to literally explain everything down to the last little sort of midi-chlorian of it all would be a mistake in our view.

It all sounded like a cop-out until he put it that way. Now I totally approve!

Plus, of course, this approach keeps the door open for Lost specials in years to come. It's always best to leave that option on the table.