California has made a lot of noise about being the front line of resistance to President Trump, but mostly it's just blather. This week, however, it's finally getting very real:

President Trump will direct the Environmental Protection Agency on Wednesday to shelve aggressive vehicle fuel economy targets that are a pillar of climate action and anti-pollution efforts in California and nationwide, according to a senior administration official.

...Targeting them puts the White House on a path of direct and costly confrontation with California....Under the Clean Air Act, the state has the authority to impose emissions standards stronger than those set by the federal government, and a dozen other states have embraced the California rules, as the act allows. About 40% of the vehicles sold in America are subject to the rules California sets. Automakers have said repeatedly that it is untenable to manufacture separate fleets of vehicles to meet different standards.

The state had refrained from charting its own course on mileage goals as part of a compromise with auto companies and the EPA early in the Obama administration. That agreement will start to unravel Wednesday with Trump’s action, which will direct the EPA to re-open the rule-making for the mileage standards. If, as environmental and auto lobbyists anticipate, the administration ultimately decides to weaken the rules, California will almost certainly move to invoke its federal waiver.

There are other disputes on the horizon between California and the Trump administration, but this is the first big one. From the very beginning, California has had an exemption under the Clean Air Act to set its own standards, and these standards have often led the nation. The state is pretty jealous of this prerogative, and it will fight to prevent any change to the law that weakens it. However, unless the Trump administration succeeds in doing that, it's likely that California will adopt the current EPA standards and car companies will follow along even if Trump trashes the federal rules. It's either that or build two separate fleets of cars, one for California and its fellow green states, and one for everyone else.

David Frum is a conservative, but he grew up in Canada and lacks an American conservative's instinctive revulsion toward national health care. Today he writes that maybe American conservatives should put aside their revulsion too. After all, the debacle over the Republican health care plan suggests that the public is unwilling to see health coverage withdrawn from millions of people. Democrats seem to have finally won the battle over ensuring health coverage for all, and that means Republicans can't control costs by simply denying health care to anyone who can't afford it. They have to figure out other ways to bring down costs:

Republicans have had too many competing goals in health-care reform. They have wanted to lower costs (to free fiscal room for tax cuts and military spending), but also to avoid tangling with entrenched health-care interests....What that money has bought is a huge and costly health sector....“Patient-centered medicine” sought to transform the user of health-care services as the system’s decisive cost-controller. Confronted with the full cost of medicine, the patient would consume care more prudently—or forgo it altogether.

That hope is listing badly. When and if it finally sinks, Republicans may notice something else. The other advanced countries with universal coverage manage to buy significantly better outcomes at the expense of 11 or 12 percent of GDP instead of America’s 16 percent. That extra increment of GDP could pay for a lot of military spending and a lot of tax cuts. Once politics has eliminated coverage reduction as a means of forcing economy, other possibilities open before a center-right party—and indeed have opened for center-right parties across the rest of the English-speaking world. Perversely, the effort to keep government out of health care has empowered health care to consume more and more government dollars. Where government has been deployed more effectively than in the United States, health care has consumed less.

I dissent in part and agree in part. For starters, it's true that the United States has by far the biggest health care bill of any country in the world:

However, our costs are high because we pay more for everything: doctors, nurses, pharmaceuticals, hospital stays, etc. Politically, it's impossible to adopt a system that would suddenly cut everyone's pay by a third. If America were to adopt national health care, our per capita costs would almost certainly start out right where they are now: far higher than any other country in the world.

In the long run, however, Frum is right. It's ironic, but it turns out that central governments are a lot better at keeping a lid on health care costs than the private sector. The reason is taxes. National health care is paid for out of tax revenue, and the public pressure to keep taxes low is so strong that it universally translates into strong government pressure to keep health care costs low. By contrast, the private sector is so splintered that no corporation has the leverage to demand significantly lower costs. Besides, if health care costs go up, corporations can make up for it by keeping cash salaries low. This is part of the reason that median incomes have grown so slowly over the past 15 years. Corporations simply don't care enough about high health care costs to really do anything about it.

Over the course of a few decades, then, our costs would probably converge on the rest of the world if we adopted universal health care. Contra Frum, this wouldn't open any headroom for lower taxes or higher military spending—government spending would still go up even if overall health care spending slowed down—but it would make the country a better, safer, more efficient place. What's not to like?

Tonight's exciting news: David Cay Johnston somehow got hold of the first page of Donald Trump's 2005 federal tax return. He released it on the Rachel Maddow show tonight:

Here are Trump's major sources of income:

  • Interest income: $9 million
  • Business income: $42 million
  • Capital gains: $32 million
  • Rental income: $67 million
  • Miscellaneous: $2 million
  • Total: $152 million

After a writeoff of $103 million, his adjusted gross income clocked in at $49 million. His taxable income came in at $31 million and his tax bill for this was $5 million. That's a tax rate of about 3 percent. Ka-ching!

Sadly for Trump, the Alternative Minimum Tax kicked in, which meant he had to pay $38 million in taxes. I guess it's no wonder that Trump doesn't think very highly of the Alternative Minimum Tax.

Without more pages from his tax return, there's a limit to what we can learn from this. Trump's income of $150 million fits fairly well with the estimates I've seen. But I will add one thing.

Trump's total investment income was $108 million, and Trump claims to be worth $5 billion or so, depending on what day you ask him. That means he earned a return on his assets of about 2 percent. In 2005! During the housing bubble! I'm no tax expert, and maybe he had hundreds of millions in capital gains that he didn't realize that year. Who needs more than $150 million in income, after all? It still seems pretty low, though, and if Trump really did earn a return of only 2 percent he is, by long odds, the most incompetent billionaire in the country.

Alternatively, of course, Trump is actually worth about $1-2 billion and he earned something like a 5-10 percent return. Take your pick.

It is Pi Day, and Megan McArdle laments the decline of pie. The problem, she says, is that pie crust is too labor-intensive for commercial bakeries to do right:

Unfortunately, good pie crust is also hard to do at home. It relies less on ruthless attention to the recipe than on technique....learn the feel...mess around with it a bunch yourself...humidity and temperature...amount of moisture in your fruit.

....You may think that I am myself making the case against pie. Far from it! Pie is not a dessert well suited to our modern era, but that is our loss, not pie’s. Its very difficulty and imperfections of form are part of its charm. They remind us that appearance is not everything, and that some of the most worthwhile things in life can only be attained through our own hard work.

Hmmm. Here is my Aunt Mary,1 circa 1910 or so, with a pie and a cake used in the wooing of her future husband:

Aunt Mary had a different take on pie crust: it's all in the shortening, and it better be lard. Crisco will never make a good pie crust, no matter how good your technique.

There's probably something to both of these points of view, and they arrive at the same place anyway: pie is not well suited to our modern era. We're too lazy to do it right and we've developed a phobia verging on hysteria of using animal fat in our food. This has ruined both pie and french fries, much to our collective loss. Plus there's a case to be made that all this vegetable oil is killing us.

But ignore all that. It's Pi Day! Thumb your nose at the naysayers and go have a piece of pie.

1Actually my great aunt, but who's counting?

Over at the Wall Street Journal today, Michael Bender has a rare profile of Steve Bannon, focusing on how he became a sworn foe of globalization. It's all because his father, Marty, lost his retirement savings when he sold his cherished AT&T stock at a loss during the 2008 financial crisis:

On Oct. 7, 2008, in the cramped TV room of his modest home here, Marty Bannon watched with alarm as plunging stock markets dragged down his shares of AT&T, the nest egg he built during a 50-year career at the company....As he toggled between TV stations, financial analysts warned of economic collapse and politicians in Washington seemed to mirror his own confusion. So he did the unthinkable. He sold.

Marty Bannon, now 95 years old, still regrets the decision and seethes over Washington’s response to the economic crisis....“That day, I found out how dumb the people were who I thought were smart,” he says. “They couldn’t control the situation, and it escalated during the day. I said, this thing is going so fast I’m going to be totally wiped out.”

Marty Bannon says he lost more than $100,000 because he sold the shares for less than he paid for them. It was a decision he made without consulting a broker or his family....[On] Oct. 6, financial analyst Jim Cramer told “Today” show viewers to pull money from the stock market if they needed any cash for the next five years. Steve Bannon says the warning spooked his father.

God knows I empathize with Marty Bannon. The 2008 financial crisis did indeed demonstrate how dumb a lot of supposedly smart people were. Still, something about this story doesn't add up. Here are two charts showing the price of AT&T stock:

There's no question that October 2008 was a tough month for stocks, including AT&T. Marty Bannon didn't quite sell at the bottom, but he came close. AT&T closed at around $26 on October 7.

But that's about the same price it sold at between 2002 and 2006. And it's more than it sold for during Marty Bannon's 50-year career at AT&T. If he accumulated AT&T stock from around 1945 to 1995, he would have ended up with shares in a bunch of local operating companies after the company was dismembered in 1984, and his split/breakup/spinoff-adjusted cost basis would have been—well, beats me. But by 2008 it couldn't have been more than a few dollars. Unless he bought practically his entire nest egg during the 2007-08 boom or the dotcom bubble of the late 90s, there's really no way that he posted a net loss when he sold, let alone a $100,000 loss.

I realize this sounds like a pedantic response to a retiree's loss during the financial crisis, and I wouldn't bother with it if it weren't being offered as an explanation for the political views of one of the most powerful men in America. But the fact remains: AT&T stock fell during 2008, but only to where it had been in 2006. Anyone who bought AT&T stock during the aughts would have broken even selling at the bottom of the crisis, and anyone who bought their stock during the second half of the 20th century would have made a big profit.

Beyond that, it sounds like Marty Bannon was a victim of Jim Cramer, not the US government or even Wall Street. And what does globalization have to do with any of this anyway? Blame for the financial crisis lies with the mortgage industry, the derivatives hotshots on Wall Street, and the Bush administration for lousy oversight. But that's about it.

So what's going on here? This is a tear-jerking story from Steve Bannon, but it doesn't explain why he suddenly became a sworn foe of globalization, immigration, trade deficits, and Islam. What's the real story?

Lunchtime Photo

My new camera has achieved the unthinkable: it's produced an image of Marian that she's allowed me to post on the blog. Using burst mode, I took 86 photos in about 60 seconds, which produced a grand total of two pictures she was happy with. I made the final choice, which is a little stagey, but still lovely. And check out that very nice bokeh in the background!

Ben Dreyfuss points me to something unexpected today. Christopher Ruddy is the CEO of NewsMax, which ranks right up with Drudge and Breitbart News in the ultra-right-wing website firmament. He's also a longtime pal of Donald Trump.

Hearing this, you probably figure that Ruddy opposes Obamacare, and you're right. But not quite for the reason you might think. Ruddy hates the private health insurance industry, which he calls a "racket," and his big problem with Obamacare isn't so much that it provides universal coverage, but that it does so by selling that coverage through private insurers. So Ruddy has an idea. He thinks Trump should ditch the Republican health care bill; pass a few minor tweaks that allow him to declare victory; and then pass his own plan:

  • Reject the phony private health insurance market as the panacea. Look to an upgraded Medicaid system to become the country's blanket insurer for the uninsured.
  • Tie Medicaid funding to states with the requirement each pass legislation to allow for a truly nationwide healthcare market.

In other words, Medicaid For All. It's not Medicare For All, but it's pretty interesting coming from a stone conservative.

Now, Ruddy also wants some other stuff. That "truly nationwide" health care market is, I assume, code for allowing insurers to sell across state lines.1 He also wants "modest" tort reform and expansion of HSAs.

But those are minor things that could be negotiated. The interesting thing here is Ruddy's belief that hatred of insurance companies is what really drives Trump supporters. Needless to say, plenty of liberals hate insurance companies too. I don't especially share this hatred, but private health insurance companies are inefficient, confusing, and administratively costly. I'd be happy to see them go away.

That makes this an interesting proposal. I doubt that liberals (or the medical industry) would support it unless Medicaid were bolstered in some way, but it certainly has the virtues of being (a) really simple and (b) truly universal if done right.2 I wonder if something like this has any chance of passage?3

1This is a conservative hobbyhorse that I continue not to understand. What's conservative about this, anyway?

2That is, free for anyone up to a fairly generous level, and with universal buy-in at reasonable cost for anyone else.

3It's worth pointing out that it does have one fatal flaw: it would cost a lot of money. That's the one thing conservatives are dead set against.

In a new study, three NBER researchers looked at the results of misconduct in the financial industry. Their conclusions were stark:

We document large and pervasive differences in the treatment of male and female advisers. Female financial advisers face more severe consequences at both the firm and industry level for engaging in misconduct relative to male advisers. While male advisers are more than two times as likely to engage in misconduct, female advisers are 20% more likely to be fired for engaging in misconduct. Female advisers are also 30% less likely to find new employment and face longer unemployment spells as a result of misconduct.

Firms may find it optimal to punish women more severely if female advisers engage in more costly misconduct or if female employees are less costly to replace. The empirical evidence suggests the exact opposite. Male advisers tend to engage in more costly misconduct and male advisers are twice as likely to be repeat offenders.

Here's a remarkable chart from their paper about how often financial advisors get fired and stay fired:

It's not just that women don't survive as long as men even though they appear to be equally productive. Women with no misconduct don't survive as long as men with misconduct on their record. And that's despite the fact that men engage in far more misconduct than women and are far more likely to be repeat offenders:

Finance is still a testosterone-fueled industry. Maybe it would be a safer one if we changed that.

Paul Ryan and President Trump have been insisting for months that Obamacare is collapsing, failing, imploding, spiraling quickly into death. This is ridiculous, of course. It's covering more than 20 million people at a lower cost than originally projected, and by any fair appraisal it's been hugely successful.

But that's not to say it has no problems. The Obamacare insurance pool is skewed toward the old and sick, and this has made it hard for insurers to turn a profit. Several smallish insurers have already left the market, and there are hundreds of counties in the US with only one insurer left on the exchanges. This is probably not fatal—CBO says the Obamacare market is stable—and it's a problem that could be addressed fairly easily and inexpensively. Still, it does put the Obamacare market in modestly perilous shape.

But what happens next? Even if the godawful Republican repeal effort fails, there's every reason to think that Congress will try again. What's more, it's clear that they'll do everything they can to undermine Obamacare along the way. In a few months, insurance companies have to decide whether they want to participate in the exchange market in 2018, and I wonder what they'll decide? The uncertainty is sky high now, and that means they have little incentive to continue. Remember, most insurers swallowed big losses early on in hopes of building a stable, profitable market later. But what's the point of absorbing losses if it looks like—at best—years and years of chaos ahead?

It may be that 2018 is safe. The exchanges are pretty close to profitable now, and it's probably worth it for most insurers to stay on board for at least another year to see what happens. Still, I wonder. Merely by upending everything and making it clear just how dedicated they are to cutting taxes on the rich and cutting health coverage for the poor, have Republicans already managed to effectively repeal Obamacare without passing a single page of legislation?

Hear me out. Today Breitbart News published an audio recording of Paul Ryan disowning Donald Trump during the campaign:

In the Oct. 10, 2016 call, from right after the Access Hollywood tape of Trump was leaked in the weeks leading up to the election, Ryan does not specify that he will never defend Trump on just the Access Hollywood tape—he says clearly he is done with Trump altogether.

"I am not going to defend Donald Trump—not now, not in the future," Ryan says in the audio, obtained by Breitbart News and published here for the first time ever.

This isn't really big news. We pretty much knew this was what Ryan said back when he said it. But apparently Breitbart has been holding onto this recording until the time came when they could get the maximum mileage from giving Ryan's remarks another news cycle. That turned out to be today, right after the Congressional Budget Office had released a devastating report on Ryan's health care bill.

Then, a few hours later, someone in the White House leaked an internal analysis that says Ryan's bill is even worse than the CBO says it is—quite a feat, given that the CBO trashed the bill pretty comprehensively.

We know that Breitbart and Steve Bannon have long loathed Paul Ryan. So…maybe this was all orchestrated by Bannon? Wait for the CBO wrecking crew to come through, and then release both an embarrassing audiotape of Ryan and an embarrassing White House analysis that confirms just how bad Ryan's bill is.

Was Trump in on this—waiting until just the right moment to take his revenge on Ryan for insufficient loyalty during the campaign? Or is this Bannon acting on his own? Or just a coincidence? I'm not sure. But one way or another, it sure seems like a coordinated effort to doom Ryan's bill and wreck his reputation with his own caucus.