Merry Christmas Eve

'Twas the night before Christmas, when all through the house
Not a creature was stirring, not even a cat.

That's how it goes around this house, anyway. And not just on the night before Christmas, either. Enjoy your sugar plums, everyone.

As longtime readers with good memories will remember, Peter Wallison of AEI has spent several years pushing the preposterous idea that Fannie Mae and Freddie Mac were responsible for the subprime bubble. (See here and here for background.) After Wallison's latest jeremiad, Joe Nocera has finally decided he can't take it anymore:

So this is how the Big Lie works.

You begin with a hypothesis that has a certain surface plausibility. You find an ally whose background suggests that he’s an “expert”; out of thin air, he devises “data.” You write articles in sympathetic publications, repeating the data endlessly; in time, some of these publications make your cause their own. Like-minded congressmen pick up your mantra and invite you to testify at hearings.

....Thus has Peter Wallison, a resident scholar at the American Enterprise Institute, and a former member of the Financial Crisis Inquiry Commission, almost single-handedly created the myth that Fannie Mae and Freddie Mac caused the financial crisis....Allies? Start with Congressional Republicans, who have vowed to eliminate Fannie and Freddie — because, after all, they caused the crisis! Throw in The Wall Street Journal’s editorial page, which, on Wednesday, published one of Wallison’s many articles repeating the Big Lie. It was followed on Thursday by an editorial in The Journal making essentially the same point. Repetition is all-important to spreading a Big Lie.

What's most remarkable about this is how brazen it is. As Nocera notes, Wallison's latest piece is about the charges the SEC brought last week against six former Fannie and Freddie executives. That's a plausible hook for Wallison's hobbyhorse, but even a casual reading of the case shows that the SEC isn't claiming that government mandates for affordable housing drove Fannie and Freddie headlong into the subprime market. Just the opposite: Starting around 2002, Wall Street banks started their subprime binge and Fannie and Freddie began to lose market share. A few years later, when Fannie and Freddie joined the subprime orgy, they were doing it to compete with their private sector rivals, not because Congress or anyone else was forcing them to.

How brazen is this? Just look at the chart on the right. In 2002, Wall Street banks start the subprime bubble. That same year, Fannie and Freddie see their market share start to plummet. It's not until 2005, at the tail end of the bubble, that Fannie and Freddie get back into the game.

This is butt simple stuff. All you have to do is look at one simple chart to see exactly what happened. And yet, conservatives don't care. As Paul Krugman says, this "isn’t just a case where different people look at the same facts but reach different conclusions. Instead, we’re looking at a situation in which one side of the debate just isn’t interested in the truth, in which alleged scholarship is actually just propaganda."

Fannie and Freddie were bad actors in a lot of ways, and that makes them an easy target for conservatives who are desperate to absolve the private sector of any blame for the financial crisis. But when it comes to assigning blame for the housing bubble, the evidence against them is laughably thin. Like it or not, this was Wall Street's fault.

Peter Nicholas of the LA Times writes that President Obama won the payroll tax battle because he followed a shiny new strategy for dealing with Congress:

President Obama's success in getting congressional Republicans to renew a payroll tax cut flowed from a strategy the White House has employed since the summer: Bypass Congress and marshal the political power of middle-class voters fed up with Washington gridlock.

....The revised approach is rooted in lessons learned from a debacle over the summer. Obama spent weeks holed up in meetings with congressional leaders, trying to resolve a stalemate over raising the debt ceiling. In the end, Congress complied, but at a severe cost to the nation's credit rating and Obama's public standing. Obama could not persuade Republicans to ease deficits through a mix of tax hikes and spending cuts and was perceived as having surrendered to their demands.

...."If the short-term tactical approach was to distance himself from Congress and put him on the side of jobs for the middle class, you'd have to say that that tactical effort has stopped the bleeding and probably shored him up with his base, which was ready to jump ship after the debt ceiling fiasco," said William Galston, a senior fellow at the Brookings Institution.

I hope no one in the White House really believes this. Obama's new strategy might have had a modest effect, but the real reason he won this battle is pretty simple: his bargaining position was way better. During the budget showdown and the debt ceiling showdown, Republicans had the upper hand because (a) deficit reduction was popular with the public and (b) they could credibly threaten to shut down the government. During this showdown, they had a weak position because (a) lower taxes are popular with the public and (b) their only credible threat was to refuse to pass the payroll tax extension, something that wouldn't really cause the president much harm. It's pretty easy to hold out against that.

Forget "strategy." This showdown turned out differently because the fundamentals of the situation were different. This time, Obama held all the cards. Just about any strategy at all would have produced a better result than this year's other showdowns.

This is what Christmas is like in Southern California. It's about 70 degrees and the cats are frolicking in the backyard. Inkblot is up on his favorite fence, entranced by the sight of birds he'll never catch. Domino is down in the garden, rolling around on a spot that used to have a catnip plant and perhaps still retains a bit of feline allure.

Need more cats? BuzzFeed has 'em: The 30 Most Important Cats of 2011. It's obviously missing a couple of pretty important cats, but I guess even superstars have to make way once in a while.

Still looking for some last-minute gift ideas? Here's a couple of thoughts. Click here and you'll get a list of MoJo's favorite books of the year. There's bound to be something there for that hard-to-shop-for loved one on your list. Or click here and give someone a gift subscription to Mother Jones. It's only $9.95 for six issues. At that price, nobody needs to be a grinch this year.

Ha ha. I was just kidding in the last post. It got cut off because, um, my cat knocked over a power line and my neighborhood lost electricity for a bit. But we're all good now! And I'd just like to say that Barack Obama is the kindest, bravest, warmest, most wonderful president a country could ever hope to have.

Anyway. As we all know, President Obama's most dangerous enemy is Ron Paul, and it's now my duty to tear him down so that his siren call of freedom will never reach the American people. So here you go: a fundraising letter "written" by Ron Paul in, I guess, 1991 or so. Question: what the hell is he talking about here? He's scared, he says, by the government's announcement of "New Money," which could wipe you out and leave your family destitute.

Answer: as near as I can tell, he's babbling about the introduction in 1991 of new currency designed to be harder to counterfeit. It made his skin crawl! The bills were tinted pink and blue! And they were being printed in — a nondescript building that has security measures and three-color printing presses!

There's also some stuff about new federal rules requiring you to report cash transactions over $10,000, and I can at least understand a guy like Ron Paul having nightmares about that.

But new currency designed to be hard to counterfeit? That's a totalitarian nightmare? You know, even a stopped clock is right twice a day, and the fact that Ron Paul has a few good ideas doesn't mean he's not a lunatic kook. He is. He's a lunatic kook who's learned to speak in complete sentences1 and whose kookiness occasionally overlaps with the pet ideas of both left and right.

But he's still a kook.

1In fairness, a lot of kooks have learned this trick recently.

UPDATE: More here. Much more.

I know that you've all been holding your breath over the unfolding scandal known as Bo-gate, so here's the latest:

Scott Miscovich, who lives down the street from the Obama vacation rental home on Kailuana Place told the Star-Advertiser Sunday, "My wife saw Michelle and the kids passing by and we've seen Bo (the Obamas' dog) walking."

A White House spokesman told the Star-Advertiser that Bo did not travel to Hawaii with the first lady and daughters Malia and Sasha.

This afternoon, Miscovich released the following statement: "It is now clear my wife saw another black dog walking our neighborhood. We would like to apologize to Bo and the Obama family for any inconvenience this may have caused them. We would also like to wish them a peaceful and Merry Christmas."

So apparently the White House is doubling down on its coverup. They say Bo didn't go to Hawaii. They say Bo didn't fly back to Virginia the next day in order to stage a photo op with President Obama. They say Bo doesn't have his own private 747 to ferry him around the country. And they obviously used their well-honed Chicago thug tactics to force Scott Miscovich to recant. It's just like Darkness at Noon.

This is not over. Oh no. It's not even close. Maybe the Obamas can get Scott Miscovich to back down, but they'll never get to me. This blog will bring you the truth about Bo until their jackbooted thugs drag me away from my computer kicking and screa

Earlier this morning I wrote that even with estimated benefits of $90 billion per year, the EPA may be selling short its new rules limiting emissions of mercury and other airborne toxins. (Most of that $90 billion estimate is due to reductions in particulate matter, not mercury.) After all, mercury is a dangerous neurotoxin, and the cost of cognitive and social defects, negative autoimmune effects, genetic effects, and heart attacks goes beyond just the EPA's estimate of lost earnings due to lower IQs.

All true. But Matt Yglesias says that even I'm underestimating the benefits of the new rules:

The EPA's official analysis of the impact of mercury on kids' brains is limited to the impact on wages of children born to families that catch freshwater fish for their own consumption. The impact they find is, not surprisingly, pretty small since most families don't each much self-caught freshwater fish. But the entire analysis simply skips the impact of mercury toxins ingested through commercial fishing which, obviously, is the vast majority of the fish that people eat.

They did it this way because it's extremely difficult to trace oceanic mercury to specific power plants and because the rule (easily) passes cost-benefit scrutiny for separate reasons so there was no need for the EPA to produce a guesstimate about it. But a 2005 study that attempted to quantify this estimated $8.7 billion per year in lost wages wages due to mercury-related IQ loss. There is huge potential low-hanging fruit here to build an entire better next generation of Americans, but this entire subject was completely excluded from the EPA's analysis which is overwhelmingly focused on the respiratory impact of particulate inhalation. That's a big deal. It means less asthma, thousands fewer premature deaths from older people, etc. But the main channel through which mercury does neurological damage to infants and fetuses is basically neglected for technical reasons.

So there you go. President Obama's early Christmas present was even better than you thought. Ho ho ho.

Does the recently extended payroll tax cut harm the solvency of the Social Security trust fund? Answer: no it doesn't. The shortfall is made up with payments from the general fund, so the trust fund suffers no loss of income at all.

But wait! There's another, subtler argument about why it's a bad idea to reduce the payroll tax. Here is conservative Michael Walsh:

Democrats have undermined their own arguments about the true nature of the Social Security program (turns out it really is a tax-based welfare program, not a dedicated, contribution-based retirement program), and [] Republicans either ought to take them up on it, or flip the thing one more time and pose as the principled champions of Keeping Social Security Solvent.

The complaint here is that Social Security is generally sold as a program that's funded solely by money that you've paid into the system during your working life, which means you have an ironclad claim to Social Security benefits when you retire. As FDR put it: "We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program."

Walsh's objection is one that several liberals have also made about the payroll tax holiday. Echoing FDR, they say that if Social Security is funded out of ordinary tax revenues, then the historical "legal, moral, and political right" to Social Security benefits is broken. Social Security is just another social welfare program.

I don't buy this for two reasons. First, I just don't believe that a small, temporary cut in the payroll tax has any effect on how people view Social Security. But second, I doubt that even a permanent switch to general fund support would have any serious effect on the program. In 1935, when Social Security was brand new, FDR might have had a point. But today? With Social Security as firmly a part of the American political system as anything this side of the Army or the Treasury? I don't think so. I just don't believe that the funding source matters any longer. Social Security is safe because millions of the elderly count on it and more millions of the non-elderly expect it to be there when they retire. It's safe because it's an enormously popular program, not because payroll taxes mean that you "deserve" your benefits when you retire. It's safe because any politician who tries to cut it finds himself very quickly on the business end of a million postcards from AARP members.

So the payroll tax holiday doesn't bother me. Anyone who's "paid taxes all my life" is going to feel that they deserve their Social Security, and it won't matter a bit what taxes they've paid all their life. Hell, most people don't even know what taxes they pay, and "FICA" might as well refer to a newly found gene for why men won't ask for directions as it does to a funding stream for Social Security. So cutting the payroll tax is fine. Technically it doesn't make any difference, and morally I very much doubt that it changes anyone's view of what they deserve when they turn 65. This is just not something to worry about.

President Barack Obama and First Lady Michelle Obama pretend to sing with an a cappella group in the Diplomatic Reception Room of the White House during a holiday reception.

Christmas is only a couple of days away, and this week the Obama administration delivered a last-minute Christmas present to all of us, one that's been 20 years in the making. On Wednesday, following a tortured history, the EPA finally released new standards that sharply reduce the emissions of mercury and other airborne toxins from power plants. David Roberts is jubilant: 

This one is a Big Deal. It's worth lifting our heads out of the news cycle and taking a moment to appreciate that history is being made. Finally controlling mercury and toxics will be an advance on par with getting lead out of gasoline. It will save save tens of thousands of lives every year and prevent birth defects, learning disabilities, and respiratory diseases. It will make America a more decent, just, and humane place to live.

The new standards for airborne toxins are expensive: they'll cost upwards of $10 billion annually and will require dozens of old coal-fired power plants to shut down. The power industry, aided and abetted by the conservative press, has spent years retailing horror stories about blackouts all along the Eastern seaboard as the new rules take effect, but this is, unsurprisingly, little more than the usual doom-mongering. Brad Plumer provides the reality:

[An AP] survey found that the coal plants set to be mothballed are mostly ancient — the average age was 51 — and largely run without modern-day pollution controls, as many of them were grandfathered in under the Clean Air Act. What’s more, many of these plants were slated for retirement in the coming years regardless of what the EPA did, thanks to state air-quality rules, rising coal prices, and the influx of cheap natural gas. “In the AP’s survey,” she writes, “not a single plant operator said the EPA rules were solely to blame for a closure, although some said it left them with no other choice.”

Crucially, none of the operators contacted by the AP seemed to think that huge swaths of America were on the verge of losing power, as Jon Huntsman claimed. An official from the North American Reliability Corporation put it this way: “We know there will be some challenges. But we don’t think the lights are going to turn off because of this issue.” This jibes with an Edison Electric Institute study, as well as a Department of Energy study (which focused on worst-case scenarios), a study from M.J. Bradley & Associates, and the EPA’s own modeling (PDF). Utilities will manage to keep the power running, in part by switching to natural gas, as plenty of gas plants currently operate well below capacity.

So that's the downside: $10 billion annually in costs and a difficult but manageable shutdown of obsolete power plants. And the upsides are enormous. Here's the EPA's estimate:

The total health and economic benefits of this standard are estimated to be as much as $90 billion annually....Combined, the two rules are estimated to prevent up to 46,000 premature deaths, 540,000 asthma attacks among children, 24,500 emergency room visits and hospital admissions. The two programs are an investment in public health that will provide a total of up to $380 billion in return to American families in the form of longer, healthier lives and reduced health care costs.

Much of this is due to reductions in particulate matter, not mercury, which suggests that, if anything, the EPA may be underestimating the benefits of the new rules. As Michael Livermore points out, mercury is a dangerous neurotoxin for small children, and the EPA's analysis of that danger is limited to quantifying lost future earnings due to lower IQs. But even a grinch wouldn't pretend that the cost of this kind of neurological damage is limited to lower wages. "There are," says Livermore, "also risks of cognitive and social defects, negative autoimmune effects, genetic effects, and heart attacks that are not quantified."

Those of us on the left have had plenty of opportunity to be disappointed with politics in general and with President Obama in particular over the past year. But although I think Dave Roberts exaggerates a bit comparing this rule to getting rid of lead in gasoline, he's right that it's a huge positive step for our country's health, and one that's long, long overdue. Merry Christmas, everyone.

Over at New York, Noreen Malone provides us with "A Brief History of Teenage First Daughters." Why not teenage first sons? Well, oddly enough, there haven't been enough in recent years to bother with. Here's a list of all the teenagers to inhabit the White House in the postwar era:

  • Malia Obama (Sasha will join the ranks if Dad gets reelected)
  • Barbara and Jenna Bush (barely!)
  • Chelsea Clinton
  • Amy Carter
  • Susan and Steven Ford
  • Luci and Lynda Bird Johnson

Weird. Steven Ford is the only male child on the list. You have to go back to FDR to find a couple more. I blame humorless feminists for this indefensibly one-sided state of affairs.