Fun and Games on Capitol Hill

My Twitter feed was full of tweets this morning about a House vote on a budget proposal from the Republican Study Committee, but I didn't really understand what was going on and didn't tune in to C-SPAN to find out. But it turns out this was a pretty entertaining vote. The RSC budget is even more right-wing than Paul Ryan's framework, and this morning an amendment was proposed to adopt the RSC budget. Normally it would lose easily because a handful of Republicans would join the entire Democratic caucus in voting no. But Dems decided to vote "present" instead. Steve Benen picks up the story:

Most Republicans were inclined to support the truly insane RSC proposal, but with so many Dems voting "present," there was a very real chance that the RSC plan would actually pass — and it, not Paul Ryan's plan, would be the approved budget plan for the House.

And it nearly worked. Many Republicans who'd voted for the RSC plan had to scramble to switch their votes and avoid a huge embarrassment. Indeed, the result itself was still pretty embarrassing — there are 176 members of the Republican Study Committee, but only 119 Republicans voted for the RSC's plan.

For Congress watchers, this was quite a bit more drama than we're accustomed to seeing. David Kurtz noted that "chaos erupted" on the House floor, while The Hill said the final minutes of the vote "were characterized by shouting more typical of the British parliament than the U.S. Congress."

Isn't democracy wonderful?

Secrets of the Tax Prep Business

It's tax day, so you should go read Gary Rivlin's great piece in our current issue about the tax prep business and its laser-like focus on the desperate and the easily scammed:

"We recommend that you locate your office where the household income is $30,000 or less," the Instant Tax manual counsels. Each franchisee attends a week of training sessions where "unbelievable emphasis was put on poor minorities," according to former franchisee Habtom Ghebremichael, who recalls a trainer telling his group, "We cater to the 'hood." His archetypal customer, Ogbazion says, is an assistant manager at a fast-food restaurant earning $19,000 a year. "They've burned the banks," he says. "They've bounced too many checks. They've mismanaged their finances." Experience has taught him that a few amenities (a ficus tree, free coffee, TV in the reception area) go a long way in making customers feel welcome. "At the check-cashing place, they're talking to someone behind bulletproof glass," Ogbazion continues. "The welfare building—you can imagine what that's like. Here, we treat them well, and they want to come back."

The emphasis of the piece is on Refund Anticipation Loans, the high-cost loans that these places will give you as soon as they've finished your tax return and figured out how big your refund will be. To my surprise, though, that's not really where the money is. RALs are indeed lucrative, usually generating fees of over $100 on a risk-free loan of a couple thousand dollars. But this is just what gets the marks in the door. The real key to the inner city tax prep business is that they charge several hundred dollars to prepare a simple tax return that a legitimate accountant would likely do for no more than a hundred bucks — and that the IRS would do for free. All together, your average working poor schmoe probably pays upwards of $400 or more to get that instant refund.

Lately the low-end tax prep business has gotten a little tougher, as big banks have stopped providing credit lines and the IRS has stopped telling preparers which of their customers are likely to have their refunds garnished — something that actually makes RALs legitimately risky. Click here for the whole story.

Britain's Folly

Tea partiers and their Republican allies in the United States are convinced that the path to prosperity starts with budget cuts right now. That's what the Tory brain trust in Britain thought too when they swept to victory last year. So how's that working out?

Retail sales plunged 3.5 percent in March, the sharpest monthly downturn in Britain in 15 years. And a new report by the Center for Economic and Business Research, an independent research group based here, forecasts that real household income will fall by 2 percent this year. That would make Britain’s income squeeze the worst for two consecutive years since the 1930s.

All of which has challenged the view of Britain’s top economic official, George Osborne, that during a time of high deficits and economic weakness, the best approach is to aggressively attack the deficit first, through rapid-fire cuts aimed at the heart of Britain’s welfare state.

....“My view is that we are in serious danger of a double-dip recession,” said Richard Portes, an economist at the London Business School. “This is going to be a cautionary tale.”

The rest of the article makes clear that there's still a big difference between British conservatives and their American counterparts. Right or wrong, the British variety are actually serious about the deficit: they've slashed spending but they've also raised taxes and kept high marginal rates for top earners. American conservatives, of course, have no such seriousness: they just want to use the deficit as an excuse to cut social programs that they've hated for decades.

Either way, though, it's not likely to work. Britain is probably going to be paying the price for this folly for many years to come.

Where Your Money Goes

According to the White House, here's where your money went if you paid $10,000 in income tax last year. Click here if you want to get a receipt for the actual amount you paid. Fun!

It's Fundraising Day!

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NATO's Canary in the Coal Mine

Fred Kaplan isn't feeling too much sympathy for all the European leaders complaining that NATO isn't doing enough to assist the rebels in Libya:

Ultimately, the Europeans are sleeping in the beds they made. They've been talking about an independent defense force for a couple decades....Yet they haven't invested the money needed to support their strategic ambitions, knowing they can always fall back on the Americans in a pinch. I don't think this is why Obama is limiting the U.S. mission in Libya, but one effect is that it sends a message: No, you can't, not anymore, not for everything.

Like Fred, I don't think this is why Obama is limiting U.S. involvement either. But it's a useful side effect. Europe has been tap dancing for a long time over whether or not they're really committed to NATO as an actual war fighting alliance, and Libya might force them to finally make up their minds.

The Power of Shamelessness

Everyone is mocking Republican Majority Leader Eric Cantor for this tweet:

Don't get me wrong: in a purely substantive sense, the mockery is well deserved. But in a political sense, it's not. Cantor's tweet is almost comically shameless, but it's also one of the reasons that Republicans continue to get credit for their economic policies even though their economic policies are routinely disastrous. It's because they're willing to be shameless and they don't really care if anyone calls them on it.

Paul Ryan's plan to shrink the federal government and gut Medicare is called....."The Path to Prosperity." Of course it is. Every Republican plan is called something like that. It's shameless! The Reagan boom? All due to lower marginal tax rates, just like they predicted. The Clinton boom years? A delayed reaction to the Reagan era. Healthy corporate earnings in the aughts? All due to Republican reductions in capital gains taxes. Privatizing Social Security? It's all about encouraging capital formation and growing the economy. Fighting bank regulation? They just want to reduce regulatory uncertainty and allow the economy to boom. Etc. etc. And there are always plenty of think tank analyses to back this stuff up with hard numbers.

It seems laughable, but it's not. If you say that your policies are responsible for economic growth enough times, people will believe it. Nobody really understands this stuff, after all. And the more confidently and shamelessly you say it, the more believers you'll have. So why shouldn't Cantor claim that Republicans are responsible for all the job growth since January? Liberal bloggers will mock, but that's nothing to be afraid of. Not as long as the steady stream of shamelessness keeps convincing people that Republican policies are putting us back on the right economic track. And it does.

Durbin to Dimon: Stop Whining

JP Morgan Chase CEO Jamie Dimon recently described Sen. Dick Durbin's amendment regulating debit card interchange fees as "counterproductive," "price fixing at its worst," and "downright idiotic." Felix Salmon directs us to Durbin's acid reply, which is well worth reading in full. But I want to highlight one of the more boring passages from Durbin's letter, which gets at the core reason for regulating these fees:

A strong bipartisan majority supported my amendment, which said that if Visa and MasterCard are going to fix fee rates on behalf of banks [...], those rates must be reasonable and proportional to the cost of processing the transaction. It is important to make clear that if Chase wants to set and charge its own fees in a competitive market environment, the amendment does not regulate those fees. The only regulated fees are those fees that banks let card networks fix on their behalf.

This is the guts of the case for regulating swipe fees: Visa and MasterCard are an effective monopoly, and they're able to set fees with virtually no competitive pressure. What's worse, their member banks collude to insure that fees stay high. After all, as long as everyone gets charged the same rate, it's in their interest to make sure that swipe fees are as high as possible. As Durbin points out, this leads to almost comically corrupt behavior, like banks actively encouraging their customers to use signature debit rather than PIN debit, even though signature debit is more fraud prone. Why? Because the interchange fees are higher:

Durbin's amendment is unquestionably second best policy. The first best policy would be genuine competition between banks that issue debit cards along with the freedom for merchants to pass along interchange fees to customers if they want to. That would very quickly set a market rate for interchange fees, one that would almost certainly be far lower than current rates.

But banks aren't willing to do that. They know perfectly well that it's Visa and MasterCard that are engaging in price fixing, not Durbin. Their monopoly position allows them to extract enormous rents from merchants and consumers, and they don't want to give that up. Monopolists never do. Thus the need for Durbin's amendment.

Saving Grandma

Should Medicare be a requirement? Or should seniors be allowed the option of foregoing medical coverage and just taking cash instead? Ezra Klein lays out the obvious objection:

As a society, we are not willing to let people die painfully in the street, even if they have previously made decisions that would lead to that outcome. In reality, what terrifies all of us is what happens after someone takes the cash and then gets sick.

Let’s run through the cash-grant world: At age 65, grandma decides to purchase no health-care plan, as she figures she’ll just get one when she gets sick, or maybe just get one next year, or perhaps she just doesn’t want to spend money extending decrepitude. But then she has a stroke and gets rushed to the hospital. Someone is paying for that emergency care. It might be the hospital. It might be the taxpayers. But it’s someone....[Or] perhaps you just build in a requirement that grandma has to at least purchase a catastrophic care plan. The problem with catastrophic care plans, of course, is that they often don’t cover the care you need. That’s why they’re cheaper. So the question is what happens when grandma needs more than the catastrophic care plan will provide — and when you’re dealing with seniors, that’s a “when,” not an “if.”

This is all true, but I think there's something else at work here that no one really likes to admit: not all medical care is emergency care. So if grandma gets sick and can't afford her non-emergency treatment — drugs, chemotherapy, hospice care, hip replacement, you name it — who's going to pay? "Someone," says Ezra, and he's right. And most likely that someone is her kids. Which is to say, you.

I think this is sort of the dirty little secret of universal care for seniors. Obviously we all pay Medicare taxes because we think we'll benefit from receiving Medicare ourselves in our old age. But there's also this: We would all rather pay a modest annual amount to cover everyone over 65 than be on the hook for an eventual decision to either (a) let grandma die of cancer or (b) bankrupt ourselves paying for grandma's proton therapy. This is, after all, about the most wrenching kind of decision you can imagine, and today the average worker pays less than $2,000 each year to avoid ever having to make it. That's a pretty good deal. But it's only a good deal if it genuinely relieves you of the prospect of having to decide whether to save grandma's life. If she's allowed to opt out, that prospect becomes very real all over again and the deal suddenly looks very crappy indeed. For that reason, grandma doesn't get a choice.

There are other reasons that it's a bad idea to let grandma opt out of Medicare too. But this one is probably both the most important and the least likely to be talked about.

Why Does Obama Want a Debt Ceiling Fight?

In the past, both Democrats and Republicans have used fights over the debt ceiling to embarrass the opposition party whenever it happened to be in power. Yawn. But they've never threatened to vote against raising the ceiling in order to extort goodies of one kind or another from the president. Obama, however, has indicated he's open to just this kind of extortion, and Republicans are eager to take him up on it. Jon Chait:

I don't really blame the Republicans for this, either. If Obama is going to begin by saying he'd like a straight vote on the debt ceiling but is willing to make policy concessions, what do you expect the Republicans to do? Keep in mind, the assumption that the Congressional minority can use the debt ceiling as a hostage to win substantive policy the president opposes is entirely novel. Obama has introduced this new development.

Jon calls this Obama's "insane hostage bargaining strategy," but I think we should at least admit the possibility that Obama is neither stupid nor insane. Sticking firmly to a negotiating position is hardly rocket science, after all, and all analogies to poker playing aside, it's hardly plausible that Obama doesn't get this. So surely the most likely explanation for his position is that he wants Republicans to make demands on him.

I don't know exactly why he wants this. Maybe he's itching for a fight. Maybe he thinks it will make Republicans look bad. Maybe he wants to cut spending but would rather give the appearance of having been forced into it. I don't know. But he's pretty obviously inviting Republicans to do this, not just stumbling into it accidentally. The only question is why.