Kevin Drum

Ad Update

| Mon Dec. 14, 2009 2:42 PM EST

In case you're interested, here's an update from the LA Times on efforts to turn down the volume on TV commercials.  As near as I can tell, it's the exact same story we all read six months ago.  Anna Eshoo's bill is still winding its way slowly through Congress; it's still wildly popular with ordinary people; it's still being opposed by Republicans; and the ad industry is still "working to address the problem," with progress expected any day now.  Just thought you'd like to know.

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Obama and the Bankers

| Mon Dec. 14, 2009 2:22 PM EST

Speaking of Obama and Wall Street, here's the latest.  After last night's attack on "fat cat bankers" on 60 Minutes, Obama held a White House meeting with top financial CEOs today that the Wall Street Journal said "was expected to clear the air between the president and the financial sector."  Good to hear!  The New York Times added this:

Mr. Obama, who has faced criticism from Democrats and Republicans alike for being too close to Wall Street, called Citigroup, Goldman Sachs and 10 other big banks to the gathering as anger over last year’s bank bailouts continued to percolate. The president will address the size of salaries and bonuses, an official said, as he seeks to impress upon bankers that they have a “special responsibility” to consumers.

“We have to get them off the sidelines and get them to play a more active role in our economic recovery,” Rahm Emanuel, the White House chief of staff, said on Sunday. “They play an essential role in helping the economy grow.”

Look: bankers are going to keep making lots of money as long as the financial sector makes a lot of money.  That's just the way the business world works, and all the jawboning in the world won't change that.  If Obama really wants bonuses to come down, he needs to propose regulations that will shrink the profitability of the financial industry.  If he does that, bonuses will come down naturally.  If he doesn't, they won't.  He'll get — at most — a bit of short-term posturing designed to relieve public pressure until everyone forgets the whole thing and bankers can go back to business as usual.

So: fewer meetings and more regulations, please.

Taibbi, Round 2

| Mon Dec. 14, 2009 1:44 PM EST

Matt Taibbi is a hard guy to defend.  He exaggerates, he misinterpets, and he uses bad language.  Sometimes he gets his facts wrong.  If I knew what was good for me, I'd just leave it at that and jump on the bandwagon that says his brand of journalism is beyond the pale.

But I'm an idiot, so I won't.  For example: Taibbi says that what unites Obama's economic team is that they're all proteges of Robert Rubin.  I've already said that I think this is a bad interpretation, but Taibbi's underlying point is still a good one: this is a very mainstream group that's overly sympathetic to Wall Street and unwilling to push for really substantial regulatory reform.  Ezra Klein defends them this way:

What unites not only Obama's economic team, but his whole White House, is not its emphasis on rich people. It's the emphasis on people accustomed to dealing with Congress....It's rather difficult to say what these people do and don't believe, as their whole world is finding 218 in the House and 60 in the Senate, and every word, action and policy brief is squarely aimed at that goal.

That leaves two questions worth asking about them: First, are they more or less liberal than the 218th most liberal congressman and the 60th most liberal senator? Second, are they good at their jobs? That is to say, are they good at bringing 218 congressmen and 60 senators into line behind reasonably good policy?

I'm just not sure this works.  It does matter what these people do and don't believe.  Speaking for myself, I'd really like to know whether we have a progressive administration that's hemmed in by Congress or if we have a mainstream administration that pretty much agrees with the 60th most liberal senator in the first place.  If it were the former, we'd at least be hearing leaks that they wanted to propose hard-hitting regulations but eventually decided not to on tactical grounds.  But we haven't.  The regs that came out of the White House earlier this year were mostly pretty soft, and there was very little sense that anyone in the West Wing had been arguing to open the negotiations with Congress from a more forceful starting position.

Now, I suppose one argument is: who cares?  "We don’t want to tilt at windmills," Obama said last June, and hell, maybe he's right.  But that takes things too far.  It suggests that Congress has all the power and Obama virtually none.  I agree that Taibbi should have emphasized Congress, and congressional Republicans in particular, more than he did, but surely it makes a difference if the president stakes out  a courageous position in the first place?  If he gets the public on his side, that's got to count for something.

But he never really even tried, and I think that's largely due not to political considerations, but due to the fact that his team didn't really want to stake out a more audacious position.  Neither did Obama.  He reappointed Ben Bernanke with barely a second thought, after all, which certainly suggests that he's basically OK with Bernanke's general view of the economic world.  And while it's true that in one sense there's nothing new here — Obama was pretty obviously a fairly mainstream guy all throughout the election — he's also the guy that promised at every opportunity to change the way Washington works.  He's the guy who met with bankers and made sure we all knew that he told them he was "the only thing between you and the pitchforks."  He's the guy who tells 60 Minutes that he didn't run for office "to be helping out a bunch of fat cat bankers on Wall Street."  He may be mainstream, but he's certainly doing his best to sound otherwise.

So sure: Congress is a problem.  But so is the White House.  So is the Fed.  So is the SEC.  And that's the whole point.  They're all problems.  Taibbi chose to illustrate this colorfully, and sometimes that color gets in the way of a coherent narrative.  But dammit, at least he's telling the story, and there are damn few others who are even trying to tell it in popular, long-form venues.  As soon as they do, maybe we can all toss Taibbi on the ash heap and take turns raining down curses on him.  Until then, he's what we've got.

History is Rhyming

| Mon Dec. 14, 2009 12:52 PM EST

The LA Times reports today that the Obama administration wants to expand the war in Afghanistan to include drone attacks on Pakistani cities the size of San Francisco:

The prospect of Predator aircraft strikes in Quetta, a sprawling city, signals a new U.S. resolve to decapitate the Taliban. But it also risks rupturing Washington's relationship with Islamabad.

The concern has created tension among Obama administration officials over whether unmanned aircraft strikes in a city of 850,000 are a realistic option. Proponents, including some military leaders, argue that attacking the Taliban in Quetta — or at least threatening to do so — is crucial to the success of the revised war strategy President Obama unveiled last week.

"If we don't do this — at least have a real discussion of it — Pakistan might not think we are serious," said a senior U.S. official involved in war planning. "What the Pakistanis have to do is tell the Taliban that there is too much pressure from the U.S.; we can't allow you to have sanctuary inside Pakistan anymore."

Boy, those comparisons of Afghanistan to Vietnam just get more facile and ridiculous every day, don't they?

Chart of the Day: The Killing Fields

| Mon Dec. 14, 2009 12:22 PM EST

Via Ezra Klein, here's an estimate from the Institute of Medicine of how many people die each year because they lack health insurance.  The number goes up every year as the population increases and the percentage of people covered by health insurance decreases, so it's probably up to around 25,000 this year.  Seems like we ought to do something about this, doesn't it?

Harry and Joe

| Mon Dec. 14, 2009 1:17 AM EST

Harry Reid, October 27th:

"Joe Lieberman is the least of Harry Reid's problems. I don't have anyone that I've worked harder with, have more respect for, in the Senate than Joe Lieberman. As you know, he's my friend....Sen. Lieberman will let us get on the bill, and he'll be involved in the amendment process."

November 2nd:

Reid’s staff has told anxious liberals that Lieberman has given the Democratic leader assurances that he will not wreck the reform bill because of Reid’s decision to include the public option, according to two sources briefed on the issue.

December 8th:

Sen. Joe Lieberman (I-CT) [...] just gave his Democratic colleagues some breathing room. Lieberman said he's open to both the Medicare buy-in idea, and a separate proposal to extend the private system that insures federal employees to individuals and small businesses.

Today:

Senator Joseph Lieberman (I-Conn.) informed Senate Majority Leader Harry Reid (D-Nev.) in a face-to-face meeting on Sunday that he will vote against a health care bill that includes a public option or a provision that would expand Medicare, a Democratic Senate aide tells the Huffington Post.

I wonder how Reid's lifelong friendship with Lieberman is faring tonight?

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Quote of the Day: Financial Engineering

| Sun Dec. 13, 2009 6:52 PM EST

From Paul Volcker, during a Q&A at the Future of Finance Initiative:

A few years ago I happened to be at a conference of business people, not financial people [...] and I found myself sitting next to one of the inventors of financial engineering. I didn't know him, but I knew who he was and that he had won a Nobel Prize, and I nudged him and asked what all the financial engineering does for the economy and what it does for productivity.

Much to my surprise, he leaned over and whispered in my ear that it does nothing — and this was from a leader in the world of financial engineering. I asked him what it did do, and he said that it moves around the rents in the financial system — and besides, it's a lot of intellectual fun.

It's funny, but for all the talk that this subject has received, I've really heard no one seriously contest this point.1  The inventors of modern financial engineering, far from defending their handiwork, instead seem to be intent on keeping their heads down and hoping that, in the end, Congress loses the desire to do anything serious to stop them.  It's probably a pretty good strategy.

1Of course, I might have missed something.  Has anyone made a serious, thorough defense of modern financial engineering anywhere?

Taibbi vs. Obama

| Sat Dec. 12, 2009 10:23 PM EST

Matt Taibbi's long polemic about Barack Obama's economic team in the current issue of Rolling Stone has attracted its share of both support and derision in the blogosphere over the past couple of days.  Big surprise, eh?  Digby rounds up some of the reaction here.

Well, after reading the piece this afternoon you can basically count me among the supporters.  Is it over the top?  Of course it is.  Are there some matters of interpretation that I think Taibbi gets a bit wrong?  Sure.  For example: the conceit of the piece is that Obama chose to build his economic team around people who were acolytes of Bob Rubin, and this strikes me as misguided.  Basically, Obama chose to build his economic team around mainstream Democratic economists with previous government experience, and virtually all of these guys have ties to each other and therefore to Rubin.  That's every bit as bad — maybe worse, in fact — but it changes the problem from one of personal influence to one of systemic influence.  There's a real difference there.  What else?  Taibbi spends a lot of time on Rubin pal Michael Froman, who led Obama's search for an economic team during the transition, and this leads him to say that Tim Geithner was "hired to head the U.S. Treasury" by Froman.  But that's kind of silly.  At the cabinet level, Obama didn't need Froman's advice.  He chose Geithner all on his own.  Taibbi also commits one of my pet peeves, suggesting that the bailout may eventually cost taxpayers $23 trillion.  That's ridiculous.  He also fails to emphasize enough that virtually all of the bailout money was directed by the Fed and virtually all of it predates Obama's presidency.

But look: this is all just nitpicky bullshit.  Taibbi's piece is basically about how the finance industry owns Congress and the Obama administration, and that's basically true.  In fact, I have a piece coming out in a week or so in the print magazine that makes pretty much the same point.  My approach is different, and my language is all PG-rated, but my conclusions are pretty much the same.  The finance industry, through both standard lobbying and what Simon Johnson calls "intellectual capture," has, over the decades since Reagan was elected, convinced nearly everyone that what's good for Wall Street is good for America, and that what's bad for Wall Street would be catastrophic for America.  Everything else follows from that.

So, sure, I think Taibbi overstates Rubin's influence and thereby understates the real systemic problem here, but hey — it's his article, not mine.  Generally speaking, he gets his facts right and he gets the big picture right: Obama's team is nearly as dedicated to the economic status quo as Republicans are.  Ditto for many — though not all — Democrats in Congress.  It's worth reading.

POSTSCRIPT: One more thing.  Here's the final paragraph of Taibbi's piece:

What's most troubling is that we don't know if Obama has changed, or if the influence of Wall Street is simply a fundamental and ineradicable element of our electoral system. What we do know is that Barack Obama pulled a bait-and-switch on us. If it were any other politician, we wouldn't be surprised. Maybe it's our fault, for thinking he was different.

I don't think Obama has changed, or that he pulled a bait-and-switch.  In fact, I'd say his moderate, mainstream centrist approach to the economy was pretty clear during the campaign.  I vote instead for the influence of Wall Street being a "fundamental and ineradicable element of our electoral system."

Taibbi vs. Obama

Sat Dec. 12, 2009 9:43 PM EST

Matt Taibbi's long polemic about Barack Obama's economic team in the current issue of Rolling Stone has attracted its share of both support and derision in the blogosphere over the past couple of days.  Big surprise, eh?  Digby rounds up some of the reaction here.

Well, after reading the piece this afternoon you can basically count me among the supporters.  Is it over the top?  Of course it is.  Are there some matters of interpretation that I think Taibbi gets a bit wrong?  Sure.  For example: the conceit of the piece is that Obama chose to build his economic team around people who were acolytes of Bob Rubin, and this strikes me as misguided.  Basically, Obama chose to build his economic team around mainstream Democratic economists with previous government experience, and virtually all of these guys have ties to each other and therefore to Rubin.  That's every bit as bad — maybe worse, in fact — but it changes the problem from one of personal influence to one of systemic influence.  There's a real difference there.  What else?  Taibbi spends a lot of time on Rubin pal Michael Froman, who led Obama's search for an economic team during the transition, and this leads him to say that Tim Geithner was "hired to head the U.S. Treasury" by Froman.  But that's kind of silly.  At the cabinet level, Obama didn't need Froman's advice.  He chose Geithner all on his own.  Taibbi also commits one of my pet peeves, suggesting that the bailout may eventually cost taxpayers $23 trillion.  That's ridiculous.  He also fails to emphasize enough that virtually all of the bailout money was directed by the Fed and virtually all of it predates Obama's presidency.

But look: this is all just nitpicky bull****.  Taibbi's piece is basically about how the finance industry owns Congress and the Obama administration, and that's basically true.  In fact, I have a piece coming out in a week or so in the print magazine that makes pretty much the same point.  My approach is different, and my language is all PG-rated, but my conclusions are pretty much the same.  The finance industry, through both standard lobbying and what Simon Johnson calls "intellectual capture," has, over the decades since Reagan was elected, convinced nearly everyone that what's good for Wall Street is good for America, and that what's bad for Wall Street would be catastrophic for America.  Everything else follows from that.

So, sure, I think Taibbi overstates Rubin's influence and thereby understates the real systemic problem here, but hey — it's his article, not mine.  Generally speaking, he gets his facts right and he gets the big picture right: Obama's team is nearly as dedicated to the economic status quo as Republicans are.  Ditto for many — though not all — Democrats in Congress.  It's worth reading.

POSTSCRIPT: One more thing.  Here's the final paragraph of Taibbi's piece:

What's most troubling is that we don't know if Obama has changed, or if the influence of Wall Street is simply a fundamental and ineradicable element of our electoral system. What we do know is that Barack Obama pulled a bait-and-switch on us. If it were any other politician, we wouldn't be surprised. Maybe it's our fault, for thinking he was different.

I don't think Obama has changed, or that he pulled a bait-and-switch.  In fact, I'd say his moderate, mainstream centrist approach to the economy was pretty clear during the campaign.  I vote instead for the influence of Wall Street being a "fundamental and ineradicable element of our electoral system."

Chart of the Day: Healthcare Spending

| Sat Dec. 12, 2009 3:43 PM EST

Yesterday the Office of the Actuary for Medicare released its estimate of national healthcare costs if the Senate healthcare plan is adopted.  Unsurprisingly, it shows that total spending will rise: the bill, after all, would cover about 30 million more people, so you'd expect spending to go up at first.

But there's more to the story — although you won't learn this by listening to Fox News.  The bill also reduces the growth in expenditures over time, and this means that within a few years we're covering a lot of additional people for no net increase in spending.  Jon Cohn explains:

The underlying trend is in the right direction. As more time passes, it's more likely we'll save money. Why do I say that? It has to do with two competing trends that explain how the Medicare Actuary arrives at its bottom line [i.e., more people being covered drives spending up, but increased efficiencies drive spending down –ed.]

....According to the projection, under reform the government will reduce its spending on Medicare significantly. Establishing a commission on the cost of Medicare will reduce it further, although not by much in the early years. And a tax on the most expensive health insurance plans will curb spending in the private sector.

Over time, the cumulative effect of these changes will grow, so that the gap between what we'd spend on health care without reform and what we'd spend with it will shrink. In 2019, the last year of the projection, the difference — that is, the amount of extra money our society devotes to health care — is a measly $23 billion out of more than $4.5 trillion total.

....But the actual price may be even lower, at least as time goes forward. The Medicare Actuary does not project beyond the 2019 window. But it's reasonable to assume that if the trend holds until 2019, it will hold for a few years beyond, to the point where medical care spending really would come down.

The Medicare Actuary might not go beyond 2019, and Jon might not go beyond 2019, but I'm happy to.  The chart above starts in 2014, when the spending provisions of the bill kick in, and then extends the trend line out to 2026.  It's based on nothing but a simple extrapolation, but it shows graphically what Jon and the Medicare Actuary talk about in words: a decade after the reforms kick in, we'd be providing healthcare to at least 30 million more people and spending no more than we would if we did nothing.  Unless you're a Republican, that's a pretty good deal.