Kevin Drum

Jeffrey Immelt? Seriously?

| Fri Jan. 21, 2011 3:36 PM EST

I'm trying to figure out if I should care about this:

President Obama announced Friday that he is forming a new economic advisory council and hailed the business leader he has appointed to head it, General Electric chief executive Jeffrey Immelt, as an innovator who can advance its core mission of promoting job creation and competitiveness.

On the one hand, Immelt is already on the existing version of this board, and it doesn't seem to be a very influential position anyway. So if Obama wants to suck up to the business community by appointing Immelt chairman, there's no real harm done.

On the other hand, seriously? The head of General Electric? A company that long ago became as much shadow bank as industrial manufacturer? A company that was right at the center of the 2008 financial meltdown? A company that was part of the TARP bailout? Mike Konczal points us to Raj Date's paper last year about the potential impact of the Senate financial reform bill:

Considering the “Killer G’s” — Goldman Sachs, GMAC, and GE Capital — can be especially instructive. Their business models are quite different from each other, but they share crucial common features: each was a shadow bank that ex-ploited a regulatory loophole to avoid bank holding company supervision; each took on substantial credit or liquidity risk during the bubble; each faced the possibility of catastrophic capital or liquidity shortfalls; and each was deemed too big to fail and rescued by taxpayers.

....GE Capital is the most instructive example in this category. The firm, a major subsidiary of the giant industrial conglomerate General Electric, is one of the largest U.S. shadow banks, and had more than $620 billion in assets at the end of 2007. Because of GE’s high-quality credit rating, GE Capital was able to satisfy most of its immense borrowing needs, during the bubble, in the capital markets. As the crisis developed, and capital market conditions tightened, GE leaned heavily on both Fed and FDIC emergency liquidity programs.

[Etc.]

Substantively, the Immelt appointment probably doesn't matter much. But symbolically? It's hard to imagine a much worse choice. Was Joseph Cassano not available or something?

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Abortion and Race

| Fri Jan. 21, 2011 2:56 PM EST

Peter Kirsanow is upset that the U.S. Commission on Civil Rights refuses to discuss an explosive topic:

Black Abortions: The Forbidden Topic

....Nearly one out of every two black pregnancies ends in abortion. Blacks account for more than forty percent of all abortions in America, a rate that dwarfs that of any other race. Does anyone doubt that if such disparities existed on other serious issues, advocacy groups would be clamoring for hearings? Why the silence? Are some lives less valuable than others?

I don't know if that statistic is correct. For now, I'll take his word for it. Nor did I know that the Civil Rights Commission is forbidden by law from addressing abortion — though I can certainly imagine why it might be.

But exactly which advocacy groups does Kirsanow think should be clamoring for hearings? Feminist groups? They think abortion is OK, so there's no reason for them to be concerned if one group has a higher abortion rate than others. Civil rights groups? Only if they think high abortion rates are somehow unfair to blacks. Conservative groups who don't think anyone should be allowed to get an abortion? Bingo.

Meh. If you don't like abortion, fine. We'll all be arguing about this until we go to our graves. But trying to race bait the issue? That's pathetic.

And while we're on the subject, if you want to know which states make it easier and which states make it harder for women of all races to get abortions, check out our interactive map here.

Smoke and Mirrors

| Fri Jan. 21, 2011 1:54 PM EST

What's the deal here? Yesterday Greg Mankiw observed that increasing spending by $1 billion and increasing taxes by $3 billion might technically reduce the deficit, but it's all just a bunch of fakery. It's really only the tax increase that does any deficit reducing. Today Charles Krauthammer takes up the same banner:

I've got a great idea for deficit reduction. It will yield a savings of $230 billion over the next 10 years: We increase spending by $540 billion while we increase taxes by $770 billion....This is a hell of a way to do deficit reduction: a radical increase in spending, topped by an even more radical increase in taxes.

Did conservatives meet on Wednesday and decide that this should be their latest brilliant talking point for use on Fox and Friends? Look: the CBO says that healthcare reform will reduce the deficit because the money it raises added to the money it saves is greater than the amount of new money it spends. You can argue with this — though it would be nice if conservatives would do it honestly instead of endlessly recycling the same clumsy lies — but that's what the CBO says. The bill reduces the deficit.

And, yes, it also raises spending. Is this really a surprise? We've spent the past two years yelling at each other about this, after all. Of course it raises spending. That's the whole point. We're covering more people and expanding access to healthcare. If you don't like the idea of more people having access to healthcare, that's fine. Just say so. But if you do like the idea, it's not going to be free no matter how much smoke and mirrors you use to confuse things. No free lunches, guys.

Now, I'll concede one point to our conservative friends. Liberals have recently taken to suggesting that anyone who voted against healthcare reform is obviously a hypocrite about deficit reduction, since they voted against a bill that reduces the deficit. This is nonsense. PPACA, at best, reduces the deficit only slightly, and there are plenty of reasons for conservatives to dislike it even if it does, in the end, reduce the deficit a bit by raising taxes to cover its costs. If Mankiw and Krauthammer want to complain about that, I'll back 'em up.

But they should also be willing to concede the more important point: Democrats were basically pretty honest about funding PPACA. It's not, and was never intended to be, a deficit reduction bill. It's a healthcare reform bill. But it's a healthcare reform bill that largely pays for itself, and, by the standards of Washington politics, does it remarkably honestly. Hell, it could have passed months earlier and with a lot more goodies if Democrats hadn't been so obsessed with making sure it was properly funded. PPACA is, in fact, the most honestly funded major bill in at least the last decade, and probably in the last two decades. Does anyone care to seriously debate that?

And one more thing: there's a silver lining here. Mankiw and Krauthammer are, tacitly, conceding that tax increases reduce the deficit. Progress!

Congressional Gameplaying

| Fri Jan. 21, 2011 12:50 PM EST

Yesterday I suggested that maybe Senate Dems should go ahead and put up a big public fight over repeal of healthcare reform. Sure, they could spend their time trying to pass bills to nationalize the coal mines or set up reeducation centers for tea party members, but they'd just get filibustered anyway, so why bother? Why not spend the next month forcing Republicans to take embarrassing votes on amendments to put the Medicare donut hole back in place, or to let insurers turn down people with preexisting conditions instead?

Well, Ezra Klein had a good question about that: "As a general point, I think 'making people take semi-embarrassing votes' is vastly overrated in American politics. Can anyone think of a campaign that even partly turned on one of these gambits?" Jonathan Bernstein agrees. But Barry Pump dives into the literature and says that while it's hard to tie a specific election result to a specific roll call vote, maybe that doesn't matter:

Finally, and I think this is the most important factor, both Mayhew and Arnold argue that members of Congress believe that voters are retrospective, so whether they are or not is besides the point. They structure voting situations because they think campaigns and elections may turn on certain roll calls....Now, is that position overrated? Well, some research suggests so. But another response could be, for the reason above, who cares if it’s overrated? When the legend becomes fact, print the legend.

Pump also points to Bart Stupak as a possible example of someone who was undone by a roll call vote, and I suspect you could come up with some other examples in swing districts too. But whether this strategy works or not, Brian Beutler reports that apparently Senate Democrats are looking at it pretty favorably:

A top Democratic aide tells me that leadership staffers are considering ways to make Republicans take tough votes on popular elements of the bill, as Republicans figure out if and how they'll force a vote on full repeal.

Nothing's been finalized, including precisely how they'd go about it. But the point would be to turn a global health care repeal push into something more piecemeal — should seniors pay back their $250 doughnut hole check? Should children with pre-existing conditions be stripped of insurance?

"Senior staff are giving serious consideration to the strategy of forcing Republicans to take tough votes on extremely popular elements of the health care law, including the doughnut hole provision, as well as pre-existing conditions," the aide said.

Well, why not? Maybe it'll work, maybe it won't. Probably it won't, especially so long before an election. But Republicans have made it clear that they don't plan to do any serious legislating until they're finished holding timewasting symbolic votes in a desperate effort to assuage their tea party base, so why not give it a try? At the very least, maybe it will send a message to the GOP leadership that two can play at dumb legislative games.

Repealing Healthcare

| Fri Jan. 21, 2011 12:27 PM EST

Who wrote this?

With this week’s vote to repeal President Obama’s health care reform, House Republicans struck a blow for freedom.

They struck a blow for the freedom of hospitals to avoid financial penalties, no matter how many Medicare patients develop infections under their care. They struck a blow for the freedom of hospitals to avoid consequences, no matter how many Medicare patients are readmitted soon after treatment. And they struck a blow for the freedom of health care providers to receive unending annual increases in their Medicare reimbursements, even if they fail to improve their productivity by even a fraction of what’s occurring in other industries.

Take that, Big Government.

Coming from me or Jon Chait, this wouldn't be worth a second glance. But it's from longtime center-left political columnist Ronald Brownstein, who doesn't normally engage in quite such obvious snark. It's a sign that healthcare reform really is here to stay and mainstream Washington is already tiring of Republican game playing about repeal. It's also, I think, a sign that if Republicans really do try to shut down the government come March, they're not going to have much of anyone besides Fox News on their side.

Good News From Goldman Sachs

| Fri Jan. 21, 2011 7:00 AM EST

Here's some good news from the Wall Street Journal:

Goldman Sachs Group Inc.'s profit slide of 52% in the fourth quarter showed the securities giant's size and swagger aren't enough for it to escape the tightening squeeze of a regulatory overhaul and jittery clients and investors.

....Hedge funds are weaning themselves from some of the leverage used to make big bets, and U.S. companies are holding more than $2 trillion in stagnant cash. As a result, demand for the vast inventory of stocks, bonds and other investments that Goldman buys and sells on behalf of customers, generating commissions and other fees for the firm, fell in the latest quarter. Trading-related revenue shrank 31% to $3.64 billion from $5.25 billion in 2009's fourth quarter.

....Goldman faces a much longer-lasting threat from regulations spawned by last summer's Dodd-Frank law. While many of the new rules haven't been issued, Goldman already has pruned its proprietary-trading operations and other businesses likely to be reined in by regulators.

It's not snark to call this good news. It is premature, however. What would really be good news is if Dodd-Frank were responsible for Goldman's lower earnings, since the best way of knowing whether Dodd-Frank is working is to look at Wall Street profits. A safer Wall Street, almost by definition, is a less profitable Wall Street, so lower profits are the first sign that financial reform is working.

But we can't say that yet. "Jittery clients" might turn non-jittery as soon as the economy starts to recover, after all, and hedge funds, which aren't heavily affected by Dodd-Frank, might start ramping up their leverage again. Still, it's at least slightly heartening that maybe — just maybe — the changes Goldman has made in anticipation of Dodd-Frank will be relatively permanent. If that turns out to be the case, and Goldman does less prop trading, fewer highly-leveraged derivatives deals, and maintains higher capital ratios, then Dodd-Frank will be at least a minor success. If Goldman and other banks quickly figure out ways to evade the new rules and go back to business as usual, it will be a failure. In the end, profits will be the metric that tells the story.

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Quiz of the Day

| Thu Jan. 20, 2011 8:17 PM EST

Suppose you are going to be transported fifty years into the future. What country would you like to be transported to? Don't worry: you'll be magically equipped with the language and cultural skills you need to continue living a nice middle class existence no matter where you end up. But it's your choice: Italy, China, Brazil, Denmark, Egypt, the United States, you name it. Where do you think you'd most likely be best off? Why?

How Should Dems Manage the Healthcare Repeal Circus?

| Thu Jan. 20, 2011 2:02 PM EST

It's a slow day, so let's do some political strategizing. Here's what the LA Times has to say about yesterday's vote in the House to repeal healthcare reform:

The Senate showdown may not begin for several weeks, but promises to be substantially messier and more drawn-out than the debate just completed in the House....In the Senate, Republicans will have to use contentious procedural maneuvers to pressure Democrats to vote on a repeal measure. Democrats retain a 53-47 edge in the Senate, counting two independents who caucus with them, and Democratic leaders firmly oppose repeal.

"The Democratic leadership in the Senate doesn't want to vote on this bill. But I assure you, we will," Senate Minority Leader Mitch McConnell (R-Ky.) said in a statement Wednesday after the House vote.

Here's my take: Democrats are nuts to take this attitude. They should bring the House bill up for a vote quickly, let Republicans speechify about it for a bit, and then vote it down, 53-47. End of story, time to move on.

But wait! With Republicans in control of the House, it's not like the Senate can really get much done anyway. So what's the harm in wasting a bit of time and making this a knock-down-drag-out fight? After all, the House leadership got a nice, clean repeal vote by bringing up the bill under a closed rule and allowing no potentially embarrassing amendments and virtually no debate. In the Senate, by contrast, Democrats control things, and they can bring up all the amendments they want. So maybe they should play along, hold hearings, and force Republicans to vote on, say, an amendment to the repeal bill that would keep the preexisting condition ban in place. And another one that would keep the donut hole fix in place. Etc. etc.

Is that better? Who would benefit more from a bunch of dueling amendments? And since Republicans seem to be dedicated to full and complete repeal, full stop, would they offer any amendments anyway? Comments?

Leave Google Alo-o-o-o-o-ne

| Thu Jan. 20, 2011 1:18 PM EST

John J. Miller at The Corner today:

Google is honoring the 50th anniversary of JFK’s inauguration. Let’s see what (if anything) it does on February 6, which is Ronald Reagan’s 100th birthday.

Just shoot me now. Can we please please please stop the relentless Google bashing every time they choose to commemorate something with one of their logo doodles? It's gotten way beyond tiresome.

Moral Dilemma of the Day

| Thu Jan. 20, 2011 12:45 PM EST

Keith Humphreys poses a real-life question:

Here is my colleague’s not-as-simple-as-all-that dilemma. He has pilot data showing that a cheap, generic drug has a potentially life saving medical application. He now has a grant from the NIH (i.e., not industry) to study it in a major trial. A for-profit company has a copycat version of the generic drug that is virtually the same but is still on patent and is thus highly expensive. The question is whether he should study the generic version or the proprietary one.

If the experiment proves that the generic version of the drug is effective, he will get a very nice paper in a medical journal. And that will be the end of it. We have a million studies showing that clinical practice is minimally influenced by journal articles alone. In contrast, if he studies the proprietary drug, a profit making company will send out their armies of marketers to physicians and get many of them to use it, making a great deal of money for themselves in the process...but this will also save lives, because aggressive marketing and promotion such as the industry does has been proven to affect clinical practice dramatically.

Italics mine. So what should he do?