So what's the latest in Europe? Here's the New York Times explaining their latest problems:

Now, another type of contagion is causing concern: the risk of problems spreading to big banks, especially in Italy and Spain....The banks own so many bonds issued by their home countries that they are being weakened as the value of those bonds falls, amid concerns that the cost of government borrowing could become too expensive for Italy and Spain to bear. Now there are signs that these concerns are, in turn, starting to make it harder and costlier for the banks to borrow money to finance their day-to-day operations, a troubling trend that, at the worst, could lead to liquidity problems.

Hmmm. Banks are having trouble funding themselves. Here's the Wall Street Journal:

In Italy, one of the country's biggest banks, UniCredit SpA, faced numerous questions from analysts about the bank's short-term loans and whether disruptions in the funding market pose a threat. Executives acknowledged the market turmoil was having an impact, but downplayed its severity. "Liquidity…is available in the market. It's very, very short [term], but available," one senior executive said.

"Very, very" short term funding is all that's available to UniCredit. When that happened to Lehman Brothers, it had about a week left to live. The overnight market can dry up — well, overnight if a bank's solvency comes into question. The Washington Post tries to put this all into perspective:

The deepening woes raised the prospect of a crisis that would be almost as calamitous for the global economy as the one just avoided in Washington.

No no no. Europe is facing the prospect of a crisis that could be much more calamitous than our little debt ceiling kerfuffle. It might not happen in a week, but it's sure starting to look like it might happen in a month or two. As usual, I hope I'm just being an underinformed worrywart, but one way or another, this shoe sure looks like it's going to drop in pretty short order. Buckle up.

For more details, the Journal article is the best of the bunch. However, the Post has the best quote about Italy's travails: "Berlusconi is more interested in his bunga-bunga parties than his bond market," said Louise Cooper, a markets analyst at BGC Partners in London. And the Times has the best overall advice: "I don't think anyone wants to be long European banks right now,” said Simon White, an analyst and partner at Variant Perception, a London-based research firm. Probably not.

Presidential Power

I apologize in advance for indulging in a wonky process post yet again today ("more boy talk," as Twitter follower Stella calls it), but I want to repeat a point that I haven't made for a while. It got kicked off by this tweet from Dave Roberts:

My answer: No, he just has the easiest job. McConnell's sole goal for the past two years has been obstruction, something that Senate rules make easy. And the debt ceiling deal was a dog's breakfast of ideas from various sources. McConnell took credit for its final form, but he could do that mainly because, unlike John Boehner, he didn't have to put up with a big tea party contingent and was able to compromise without fear of losing his job.

More broadly, though, is it true that Republicans are just more ruthless and better strategists than President Obama? Matt Yglesias, after noting that the House is refusing to adjourn in order to prevent Obama from making recess appointments (they'll hold a pro forma session every few days), goes there:

I find that my mood around this fluctuates. Mondays and Wednesdays I’m frustrated by lefties who seem to see the unprecedented Republican obstruction the President is dealing with as part of an 11-dimensional chess game through which Obama “really” wants his progressive initiatives to be frustrated at every [turn]. On Tuesdays and Thursdays I think this is the most damning critique of all. In the face of an opposition that’s been relentlessly innovative, the White House has been staggeringly uncreative. Rather than a game of tit-for-tat, the Republicans seem to be inside the administration’s decision loop, heading off their retaliatory options before the President has even exercised them.

Has the White House really been staggeringly uncreative compared to Republicans? We don't have to guess about this. We recently had a Republican president in office for eight years and we can see just what he did. Keep in mind that George Bush was a very partisan animal and was advised by Karl Rove, a man with a major-league reputation for political ruthlessness. So what did Bush do to whip Democrats in line when they opposed him? Let's roll the tape:

  • 2001 tax cuts: passed by reconciliation so no Democratic votes were needed.
  • No Child Left Behind: No arm twisting here. This was a bipartisan bill cosponsored by Ted Kennedy. Bush got Democratic votes by agreeing to give Kennedy a lot of what he wanted.
  • War resolution: No arm twisting here either. After 9/11 Democrats were gung ho to invade Afghanistan and kick some al-Qaeda butt.
  • PATRIOT Act: Ditto.
  • Sarbanes-Oxley: This was basically a Democratic bill. Not only was there no arm twisting, Bush signed it reluctantly.
  • McCain-Feingold: Ditto.
  • Iraq war resolution: No arm twisting again. Lots of Democrats favored this and so did the public.
  • Homeland Security Department: Let's see. Oh yeah, I remember: Bush got his way here by winning the 2002 election and regaining his majority in Congress.
  • 2003 tax cuts: Again, passed via reconciliation. No Democratic votes needed.
  • Medicare Part D: Lots of arm twisting here, but mainly by Tom DeLay against his fellow Republicans. Several Democrats voted for it in the Senate, but let's be honest about this: details aside, it got some Dem votes because it was a piece of liberal social welfare legislation of the kind that Dems have long favored.
  • Social Security privatization: This failed. Bush was unable to get support from his own party, let alone coerce any support from Democrats.
  • Immigration reform: Ditto, more or less.

Contrary to his reputation, Bush mostly succeeded by pressing a moderate, and sometimes even liberal, agenda. Tax cuts aside, which he passed solely primarily with Republican support, the only real ruthlessness he showed toward Democrats on behalf of a conservative priority was the campaign hardball he played to add a union-busting provision to the Homeland Security bill. That was about it for presidential toughness. Ironically, the biggest show of ruthlessness during the Bush years was in the appointment of judges, but the ruthlessness there was wielded by Orrin Hatch, who made it easier to confirm conservative judges by peremptorily changing the blue slip rule in a remarkably cynical display of naked power politics. Democrats responded by filibustering a bunch of judges, which was also pretty unprecedented, and the whole thing eventually got resolved by a group of centrist senators called the Gang of 12. In this case, both sides displayed some ruthlessness, but not President Bush. He was just about the only person not really involved.

I'm not trying to make it sound like presidents are powerless. They can set agendas, they have control of executive orders, they have a pretty free hand in foreign policy, they can sway public opinion, they can lead their own party, and they can bargain with the other party.1 But Richard Neustadt taught us a long time ago that, especially on domestic issues, presidential power is distinctly limited. There's just not that much in the way of ruthless arm-twisting that they can do these days, and while Obama may not be as creative on this score as he ought to be, neither was Bush. That's more a reflection of political reality than it is of the character of either one of them.

1On the specific issue of the debt ceiling, the obvious thing Obama could have done differently was to insist that it be included as part of the lame duck deal last year. But for all the grief he's gotten over this, it's worth keeping in mind that Obama got a helluva lot out of that deal. In the end, he got a food safety bill, passage of the START treaty, a stimulus package, repeal of Don't Ask Don't Tell, and a 9/11 first responders bill. Maybe it would have been worth risking all that over inclusion of a debt ceiling increase, but that's hardly an open-and-shut case.

What's more, Obama also won passage during his first two years of a stimulus bill, a landmark healthcare bill that Democrats had been trying to pass for the better part of a century, a financial reform bill, and much needed reform of student loans. And more: a firm end to the Bush torture regime, the Lily Ledbetter Fair Pay Act, a hate crimes bill, a successful rescue of the American car industry, and resuscitation of the NLRB. Oh, and he killed Osama bin Laden too.

Sure, we all could have wished for more. Everyone has different hot buttons, and I particularly wish that financial reform had been stronger and that Obama had somehow managed to get cap-and-trade across the finish line. I'm also unhappy with the extension of the Afghanistan war and Obama's Bush-like policies regarding national security and civil liberties. Still and all, in two years Obama has done more to enact a liberal agenda than George Bush did for the conservative agenda in eight. That's not bad, folks. All things considered, I'd say Obama is the most effective politician of the Obama era. And the Bush era too.

This is hardly the biggest deal in the world, but it caught my eye so I'm passing it along. It's a "Taxpayer's Statement" mailed to me by my congressman, John Bayard Taylor Campbell III, chairman of the Budget and Spending Task Force of the Republican Study Committee. Take a look at the highlighted lines:

Miscellaneous taxes sure are up! Or wait — the statement calls them "miscellaneous receipts." Hmmm. Let's look at the footnote:

This includes taxes from a variety of places including gaming activity fees, Dept. of Interior fees, Puerto Rico, and other sources.

"Other sources" may sound like it's part of "taxes from a variety of places," but it turns out it's a completely independent clause. The vast bulk of that number, about $75 billion, is profit from the Federal Reserve's investments that have been returned to the Treasury. But even if you read the footnote you wouldn't know that. It just looks like the gummint is sucking up ever more of your money.

In the great game of misleading people about taxes, this is a misdemeanor at most. Maybe a parking ticket. Still, Campbell sure has gone to some lengths to make sure that taxes look high (and growing) and profit from the evil Fed is kept safely out of sight.

Ryan Avent reviews some ancient history today. As we all know, the 2009 stimulus package was smaller than it should have been given what we knew at the time. But it was way smaller than it should have been if we'd only known what was really going on. The House passed an $800 billion stimulus bill on January 26th:

Two days after that, Americans received grim news about the economy: in the fourth quarter of 2008, GDP contracted at a 3.8% annual pace—the worst quarterly performance since the deep recession of 1982....Unfortunately, the situation was far more dire than anyone in the administration or in Congress supposed.

Output in the third and fourth quarters fell by 3.7% and 8.9%, respectively, not at 0.5% and 3.8% as believed at the time. Employment was also falling much faster than estimated. Some 820,000 jobs were lost in January, rather than the 598,000 then reported. In the three months prior to the passage of stimulus, the economy cut loose 2.2m workers, not 1.8m. In January, total employment was already 1m workers below the level shown in the official data.

So what would Obama have proposed if he'd known that GDP had just contracted by 8.9% instead of 3.8%? Beats me. But even as cautious as he is and as mainstream as his advisors were, surely a recession that was more than twice as bad as they thought would have produced a stimulus that was something on the order of twice as big. I've never thought that the difference between, say, an $800 billion stimulus and a $1 trillion stimulus was a very big deal, but the difference between an $800 billion stimulus and a $1.6 trillion stimulus sure would have been.

BEA has a long track record of not doing a good job on GDP figures when the economy is turning sharply. It's too late to cry over spilt milk now, but if there's a way to get better at this it might help us out next time.

From Mitch McConnell, crowing over the debt ceiling fight:

I think some of our members may have thought the default issue was a hostage you might take a chance at shooting. Most of us didn't think that. What we did learn is this — it's a hostage that's worth ransoming. And it focuses the Congress on something that must be done.

Fine. I have no problem with talk like this. And on the bright side, this means that the pearl clutchers at Fox News will stop hyperventilating about Democrats who called Republicans hostage takers. Right?

Mitch McConnell, the Republican leader in the Senate, has made it clear that he considers hostage taking over the debt ceiling to be the new normal. From now on, Republicans are going to use the threat of default as a routine legislative maneuver. Michael Shear thinks Democrats should reciprocate and do the same when a Republican is president, but Jon Chait isn't sure this will work:

As a practical matter, I doubt this. In order to hold the debt ceiling hostage, you need, at the very least, extremely high levels of party discipline (in the House and the Senate, lest the upper chamber openly break ranks and isolate your hostage-taking wing.) You also probably need a propaganda apparatus that can create its own empirical reality in which the experts who warn that failing to lift the debt ceiling would create dire consequences are all wrong. I don't think the Democratic Party has either of these.

I'd add one more thing to this: what, exactly, would Democrats be holding out for if they did this? Republicans have an ideal topic: in return for raising the debt ceiling, we need to work on reducing the national debt. To a lot of voters, regardless of whether they approve, this at least makes sense. It seems natural, not artificial.

But what would Democrats do? Hold up the debt ceiling unless Republicans agree to bring the troops home from Yemen (or wherever our troops are a few years from now)? Hold up the debt ceiling unless Republicans agree to pass an immigration bill? Hold up the debt ceiling unless Republicans agree to reduce carbon emissions? None of these things seem even remotely tied to the idea of debt, which makes them far more obviously artificial than what Republicans did. And that means less public support and less media support.

That's a drag, but it's reality. Partisan tactics don't always work in mirror image form. We need to have our own outrageous tactics, not necessarily the same outrageous tactics as Republicans.

(Though Jon does offer an interesting twist: next time, maybe Dems should hold up the debt ceiling until Republicans agree to abolish the debt ceiling entirely. I don't know if that would work either, but it's an idea.)

Yesterday I suggested that if we really had to have a Supercommittee tasked with closing the long-term deficit further, it ought to be focused on healthcare since that's where our long-term deficit problem lies. But I left it to healthcare experts to figure out just what the committee should do.

The first thing to keep in mind, of course, is that when it comes to Medicare about half of our future increases are due to an aging population. Unless you're a big Soylent Green fan there's just nothing we can do about that, so we should face reality and accept the need for a gradual increase in Medicare taxes (or some other funding source) to handle that.

But we can also save money by making Medicare more efficient. PPACA does some of this already, but what more could we do? Austin Frakt is an expert, and he has some ideas:

  • More competitive bidding.
  • Prescription drug formularies to reduce pharmaceutical costs to VA levels.
  • Support comparative effectiveness research.
  • Based on that research, insist on paying for only the cheapest effective treatments.
  • Get tougher on setting rates for all healthcare providers, as the most efficient systems in other countries do.
  • Etc.

There's more at the link. If you want to get a handle on what we could do if we were really serious about cutting Medicare costs without sacrificing quality of care, it's a good place to start.

I opened up my LA Times this morning and here's what I read (the headline is from the print edition)

Stocks Sink As Market Fears Mount
Investors are spooked by the prospect of even modest bederal budget cuts in an anemic recovery

Two years after the last recession ended, Wall Street is showing rising fear that the U.S. economy could be headed for a new downturn....Despite some relief that Washington could forge an eleventh-hour compromise on the debt ceiling, analysts said the prospect of even modest federal budget cuts in an anemic economy was spooking markets.

"Investors are looking past the budget situation and realizing this is an austerity plan," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. "We have an economy that's struggling to stay afloat and we don't have the ammunition to keep prodding it forward."

Oh really? Now you tell us?

There are really only two options here. (1) The Times is wrong. (2) The Times is right and America has the stupidest goddamn investors on the planet. For months they sat around cheering on the tea partiers and declaring solemnly that the federal budget was just like a household budget and we needed "real action" on the debt in order to build confidence in the economy. Then, suddenly, when they got it, they realized that what they really wanted wasn't dumb slogans but actual policies that would help spur the recovery. And that means looser monetary policy and fiscal stimulus.

So which is it? Has Wall Street really been sitting idly by during the whole debt ceiling debacle and has only now realized what it really means? Can they really be so steeped in the Fox News fantasyland that it never occurred to them until now that cutting federal spending during an economic downturn wasn't really a great idea? Seriously?

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.

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?