Kevin Drum

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.

Advertise on MotherJones.com

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?

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.

Advertise on MotherJones.com

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.

Selling Healthcare

| Sat Jan. 30, 2010 1:19 PM EST

Yesterday I took Jon Stewart to task for claiming that instead of proposing a big, comprehensive healthcare reform plan, Obama and congressional Dems should have been content instead with just a few straightforward ideas that could have passed easily ("That's it. Four simple things. Done."). A bunch of you thought Stewart was right and I was missing the point. This comment from JS12 was typical:

Having watched Stewart in context earlier today, I have to disagree. The point he was trying to make was that Obama had not done enough to put his health care message out in a manner straightforward and simple enough for the general public to comprehend exactly how it will help them. It was not my impression that Stewart was pondering why Obama did not simplify and dumb down health care reform itself, only its rhetorical presentation to the public.

Actually, my sense is just the opposite: Stewart was suggesting that healthcare reform could have been radically simplified. A popular meme making the rounds these days is that Obama overreached on healthcare reform and should instead have just proposed a few popular, small-bore fixes that could have gotten through Congress easily. Stewart seemed to be buying into that notion.

But that's a nitpick. Let's say JS12 is right: Stewart was talking solely about messaging, not policy. Unfortunately, that might be even worse. Too many liberals have become addicted to the cult that says messaging is everything, that progressive plans could be implemented if only we learned to talk about them better. And we should learn to talk about things better. But when we start mainlining this Kool-Aid wholesale, we just end up kidding ourselves. It gives us a sugar rush when we're frustrated, but it's not a real solution.

There's no question that Obama could have sold healthcare reform better. But here's the thing: if you actually want to solve real healthcare problems, the policy itself has to be complex. There's just no way around that.

"But the explanation doesn't have to be complex," you say. No, it doesn't. And in fact, if you take a look at the way Obama talks about healthcare reform, it's mostly pretty straightforward and easy to understand. But guess what? The opposition gets to talk about it too. And if the underlying policy is complex — which it has to be — then they get to talk about that. And they do.

So they're going to pick the bill apart. They're going to complain that it's thousands of pages long. They're going to pull out the least popular bits — like mandates and cost controls — and flog them as hard as they can. They're going to tell scare stories about death panels and Medicare cutbacks. They're going to carp endlessly about the horsetrading that's inevitable with any complicated piece of legislation. They're going to stall and delay. They're going to do everything they can to highlight the bill's complexity, nurture doubts about individual provisions, and gin up outrage over the legislative process. The Drudge/Fox/Rush axis is going to beat this drum 24/7. And this is all legitimate because no matter how Democrats try to sell it, the underlying bill really is complicated. Like it or not, Republicans get to take advantage of that.

So: can the bill itself be radically simplifed? No, not if you want to actually solve serious problems. Can the narrative about the bill be radically simplified? Sure, a bit, but nowhere near as much as you think. Because the opposition gets a vote too.

So what were the real problems with healthcare reform? The biggest underlying one is something that we talked about a lot last year but have largely since forgotten: the first, most fundamental choice Obama made was to leave employer health insurance largely untouched. "If you have insurance now and you like it, you can keep it." That was almost certainly necessary, but it also insured that two-thirds of the country would see virtually no benefit from the bill. So we started from inside a big hole.

What else? Well, Democrats chose to be responsible. Unlike Republicans, Obama and congressional Democrats insisted that the bill be paid for. This hurt them badly because (a) nobody likes taxes, (b) there's always a bit of smoke and mirrors involved in this kind of thing, and (c) they ended up getting no credit for this from the punditocracy. Obama also insisted on including serious attempts at cost control. That's also unpopular. The better bet would have been to pass all the benefits and skip both the taxes and the cost controls. That would certainly have been simpler and more popular. But it would also have been wildly irresponsible. I don't know about you, but it's not why I voted for the guy.

Finally — and in my mind, this was the worst mistake — Democrats didn't control the process. A bill like this is always going to get less popular the longer it's in the public eye, but Dems dawdled forever, thinking they could negotiate with Republicans to get a bipartisan agreement. Obama encouraged this effort, and it was disastrous. It gave Republicans months and months of time to build up opposition and complain that they weren't being taken seriously, and it predictably went nowhere. If Democrats had kept a tighter control of things, conference negotiations would have taken place in September at the latest and a final bill would have been passed in October.1 Dems screwed the pooch badly on this, and Obama did too. That's what killed healthcare reform, not the lack of a killer PowerPoint presentation.

1And Obama could have made his pivot to jobs and financial reform and bank bashing months earlier. The delay on healthcare hurt a whole lot of liberal initiatives on a whole lot of different levels.