From Mitt Romney, explaining step 3 of his 59-step plan to get to get America back to work:

You know, of course, Greta, who has been most hurt by the Obama economy. And it's people in middle incomes. And so what I want to do is lower taxes for middle-income Americans. And so I will remove, for middle-income Americans, people earning under $200,000 a year, any tax on interest, dividends or capital gains.  Let people save their money and use their money as they feel best with education, with their future, planning for retirement. Look, we've got to reduce the burden on middle-income Americans. They're just — they're just struggling right now.

I'm not sure which is more breathtaking: Romney's suggestion that someone earning $200,000 is "middle income," or his implication that actual middle-income Americans have more than a minuscule amount of investment income in the first place.

For the record, in 2004 the Tax Policy Center estimated that a median earner would save a whopping $70 if taxes on interest, dividends, and capital gains were eliminated completely. That's right: $70. Seven zero.

Of course, Romney has paired up this proposal with another one to eliminate the estate tax completely, which would save median earners zero dollars but save the super rich millions. The cynicism here is almost off the charts.

The New York Times has apparently confirmed a Fox News report that President Obama plans to withdraw almost completely from Iraq at year's end:

Defense Secretary Leon E. Panetta is supporting a plan that would keep 3,000 to 4,000 American troops in Iraq after a deadline for their withdrawal at year’s end, but only to continue training security forces there, a senior military official said on Tuesday. The recommendation would [...] involve significantly fewer forces than proposals presented at the Pentagon in recent weeks by the senior American commander in Iraq, Gen. Lloyd J. Austin III, to keep as many as 14,000 to 18,000 troops there.

The proposal for a smaller force — if approved by the White House and the Iraqi government, which is not yet certain — reflected the shifting political realities in both countries.

....In Iraq, a lingering American military presence is hugely contentious, even though some political leaders, especially among the Kurds and Sunnis, would like some American troops to stay as a buffer against what they fear will be Shiite political dominance, coupled in turn with the rising influence of neighboring Iran....But despite the reluctance of several administration officials to publicly get out ahead of a formal recommendation and a presidential decision on such a delicate issue, as a practical matter Mr. Panetta has almost run out of time for the military to plan the logistics of a withdrawal by year’s end.

Every leak has a reason. So here's my guess: this leak is designed to put pressure on Iraqi prime minister Nouri al-Maliki. The Pentagon needs time to plan its troop withdrawals, and for quite some time they've been saying that four or five months is the bare minimum they require. But the Iraqis have been hemming and hawing all year, refusing to say they want any troops to stay but also refusing to say they want them all to go.

So now it's put-up-or-shut-up time. The message here is simple: we're starting the machinery to withdraw nearly all our troops unless you tell us ASAP that you want us to stay. In another month or two it's going to be too late to change direction, so make up your minds now.

Perhaps this will concentrate some minds in Baghdad. But if it doesn't, we'll finally be out of Iraq — except for the contractors, CIA staff, embassy guards, and 3,000 or so trainers, of course. But other than that, we'll be out.

Last week I defended Republican governors from charges of hypocrisy for accepting federal funding even though they may have opposed the law that enabled the funding in the first place. Whether you oppose a program or not, once it's passed into law and your state's taxpayers are helping pay for it, you have both a right and an obligation to take advantage of it. Steve Benen comments:

But my concern isn't just the hypocrisy of Republicans decrying spending bills and then trying to direct that spending to their states and districts. My beef has more to do with their ideology: these same Republicans insist public investments can't create jobs and are bad for the economy, and then also say public investments can create jobs and are good for the economy.

And that's a problem, not of hypocrisy necessarily, but of an incoherent approach to governing.

This is quite a different kettle of fish, and it is indeed a problem of hypocrisy. If you oppose a program, that's fine. Maybe you just think it's a poor use of taxpayer dollars. But Steve is right: at any particular point in time, federal programs either create jobs or they don't. If you insist that they don't, you can't turn around and brag about all the jobs you brought to your state via federal roadbuilding projects. You can argue that you're just getting back the money your state sent to Washington in the first place, but you can't pretend that you suddenly believe that federal spending creates jobs after all just because the money is being spent in your own backyard.

Mitt Romney's shiny new jobs plan is about as boring and boilerplate as you'd expect a conservative jobs plan to be. (Nickel version: lower taxes on the rich, less regulation of big business, punitive labor laws, etc. In other words, the usual.) But Matt Yglesias points out that Romney also engages in some good old-school China bashing, promising the following executive order on his first day in office:

Directs the Department of the Treasury to list China as a currency manipulator in its biannual report and directs the Department of Commerce to assess countervailing duties on Chinese imports if China does not quickly move to float its currency.

There's hardly a presidential candidate in the past 20 years who hasn't promised to "get tough" with China. It's a real crowd pleaser. But what makes Romney's brand of China bashing doubly ironic is that for the first time in a while, it's not clear that China's currency is really all that undervalued anymore. The Economist, after adjusting its famous Big Mac index for the cost of labor, concludes that the yuan is actually trading at pretty much its fair value.

Now, the Big Mac index is hardly the last word on this subject, and there are some good reasons for thinking the yuan remains undervalued. Michael Pettis has a discussion of some of the underlying issues here. Still, the yuan has been rising over the past few years, and is probably undervalued less today than it's been in a decade. Whatever the truth is, though, I promise you this: if Mitt Romney becomes president, the very first promise he'll break is his promise to designate China as a currency manipulator. Like every other presidential wannabe, he'll quickly discover that once you're actually in the Oval Office, there's a stiff price to be paid if you actually want to follow up on your crowd-pleasing China bashing. He won't be willing to pay that price any more than any other president has been.

Over the weekend I linked to John Lanchester's piece in the London Review of Books about the general shape of the Eurozone crisis. Here's a key passage:

On 16 August, Nicolas Sarkozy and Angela Merkel had an emergency meeting to decide what to do about the Eurozone crisis. After it....they precisely and explicitly ruled out the only two things which would have helped: the creation of ‘eurobonds’, i.e. debts backed by the full economic weight of all the countries inside the eurozone; and the extension of the €440 billion European Financial Stability Facility. It’s easy to see why they did this, and their reasons are entirely to do with the domestic unpopularity of giving more aid to the indebted and severely struggling ‘Club Med’ countries of Southern Europe. Unfortunately, Merkel and Sarkozy’s inaction is a recipe for certain disaster. Everybody and his cat knows that the eurobond is the only way out of the crisis for the eurozone in the medium term.

I think this deserves a bit of clarification. If everybody knows that eurobonds are the answer, why is everyone opposed to them? As dangerous as it is to offer an analogy on the internet, let's try one.

Say you have a Visa card. If you buy something expensive and go into debt, you're responsible for paying it off. If you can't pay it off, you have to declare bankruptcy, and maybe your home goes into foreclosure. This is bad for the neighborhood, and it's especially bad if it happens to a bunch of people at once. Lots of foreclosed houses is bad for property values.

So you have a bright idea. Instead of individuals each paying off their own Visa bills, they'll get pooled. At the end of each month the entire neighborhood will pay off everyone's Visa bill. No bankruptcies! No foreclosures! Hooray!

But the downside is obvious: nobody has any incentive to spend wisely. If I want to, I can go out and buy a Rolls Royce and put it on my Visa card. At the end of the month, the cost of my Rolls gets divvied up and everyone in the neighborhood pays a share. I get a new Rolls Royce and my net cost is only a thousand dollars or so. That's obviously pretty cool for me.

But it's just as obviously unacceptable to everyone else. If we want the entire neighborhood to pay off our collective debt, then the neighborhood needs to have some say in how much each of us is allowed to spend. A neighborhood council of some kind will have to determine just how much we're each allowed to charge to our Visa cards. So if I want to pay cash for my Rolls Royce, fine. But if I want to put it on my Visa card, I'll need permission first from the council. Because our debts are pooled, the neighborhood council now has plenary powers to insert itself deeply into my household spending. If they don't like my spending habits, they can force me to stop.

This is, roughly, what a eurobond does. Instead of each country issuing bonds for its own debt, the entire continent issues bonds for everyone's debt. And that's pretty unpopular with everyone. Poor countries don't like it much because it gives the rich countries the power to tell them how much they're allowed to spend. And who wants a bunch of penny-pinching Germans telling you how much you can spend? But the rich countries don't like it much either. They're basically afraid that politics being what it is, they're going to get outvoted and end up holding the bag for spendthrifts over and over. And who wants to be responsible forever for their Greek brother-in-law's profligate ways?

So that's the problem. A big one-time bailout right now is bad enough. But "fiscal union" means that everyone is collectively responsible for every country's debt forever — and everyone has a say in every country's spending forever. Maybe that's where things will end up eventually, but no one likes it. It's only going to happen if it's absolutely the last resort.

Which it might be.

Via Brad DeLong, this chart shows how much housing was "overbuilt" during the aughts compared to how much it's been underbuilt since the collapse of the housing bubble. As you can see, on net, we're now way, way underbuilt, which means we should be all set for a renaissance of housing construction. Assuming anyone still has the money to buy a house, that is.

Of course, there's another way to look at this: why did home prices rise so furiously even though we were building lots of homes? That's odd, no? Simple supply and demand suggests that when the supply of something goes way up, its price should go down. But it didn't — and it's not because the fundamental demand for housing suddenly skyrocketed. It was because Wall Street could make a lot of money from a housing bubble, so they invented the financial artistry to get one. Thanks, guys!

Brad Friedman has obtained an audio recording of a seminar held by the  Koch brothers earlier this year near Vail, Colorado, and today we've got a piece about the seminar up on our site. Here's how it starts:

"We have Saddam Hussein," declared billionaire industrialist Charles Koch, apparently referring to President Barack Obama as he welcomed hundreds of wealthy guests to the latest of the secret fundraising and strategy seminars he and his brother host twice a year. The 2012 elections, he warned, will be "the mother of all wars."

This has prompted a lot of people to insist that Koch compared Obama to Saddam Hussein. And maybe he did. But here's the whole passage:

But we've been talking about — we have Saddam Hussein, this is the Mother of All Wars we've got in the next 18 months. For the life or death of this country. So, I'm not going to do this to put any pressure on anyone here, mind you. This is not pressure. But if this makes your heart feel glad and you want to be more forthcoming, then so be it.

Can I offer an alternative explanation? Obviously Koch was a little muddled here and never finished his thought, so it's hard to say exactly what he meant. But Saddam Hussein famously called the first Gulf War "the mother of all battles," and it's quite possible that Koch intended something like, "Saddam Hussein called the Gulf War the mother of all wars, and for us, this is the mother of all wars we've got in the next 18 months."

I don't know this for sure, any more than anyone else knows what that stray fragment meant. Koch obviously had some kind of quip in mind, but never managed to actually deliver it. But suggesting that he meant to compare Obama to Saddam Hussein is a stretch. At the very least, there's at least one other quite plausible interpretation.

From Bruce Bartlett, commenting on the unwillingness of Democrats to stick up for their principles:

If Democrats are going to accept Republican premises, they shouldn’t be surprised if a majority of people eventually conclude that Republicans ought to be in charge of government policy.

Yep. Years ago, it was conservative Republicans who pointed out that if the choice was between a Democrat and a Democrat-lite, voters would most likely just vote for the real deal. They learned a lesson from that, and it's one that Democrats now need to learn. If you concede up front that deficits are our biggest problem, that tax increases are bad for the economy, that we can't afford any further stimulus, and that regulations are job killers, that's not going to win you many votes. After all, if this kind of thing appeals to you, why vote for a Democrat who only kinda sorta believes it? You might as well vote for the real deal instead.

Remember those polls showing that Democrats and independents support political compromise far more than Republicans? And remember that Pew poll a couple of weeks ago showing that this was starting to change? Compared to four months ago, centrist-leaning voters were upwards of ten points more likely to think Obama should challenge the GOP more often. If this keeps up for a little while longer, the political landscape would look a lot different than it does now.

Well, my friends, the future is here. In California, Democrats and independents are fed up. According to a new LA Times poll, a full 60% agree that "I want Obama to stand up to Republicans more and fight for my priorities." If California is once again a bellwether for the nation, this is good news. Unfortunately, if California is once again a bellwether for the nation, it means the rest of the nation may soon be like California. This should give us all pause for thought.

Ezra Klein rounds up a series of quotes from 2001 showing that Republicans loved the idea of fiscal stimulus back when a fellow Republican was wrestling with a recession. But now they hate the idea:

So what happened?

Some say the explanation for all this is obvious: Republicans want the economy to fail because that is how they will defeat President Obama. After all, didn’t Sen. Mitch McConnell say, “The single most important thing we want to achieve is for President Obama to be a one-term president”? How much clearer can it be?

I don’t believe this sort of behavior is quite that cynical.

Well, I think it's exactly that cynical. But not because Republicans want the economy to fail. Self-interest probably motivates them to believe they're doing the right thing when they oppose measures that might help the economy and therefore help President Obama's reelection, but that's about it. They don't literally want the economy to tank.

But the obvious thing Ezra doesn't mention is that all of those 2001 mash notes to stimulus were based on the prospect of getting an even bigger tax cut for the wealthy than they had counted on. Republicans don't really care about stimulus one way or the other. They care about upper-income tax cuts, and back in 2001, portraying them as a stimulus measure was a handy way of getting them passed. If Obama were to offer up the same deal — big, permanent cuts in the top marginal rates — they'd be happy to become Keynesians for a day if that was the price of admission.

Cynical? Sure. But this is all pretty much common knowledge. Republicans like tax cuts for the rich, and they'll adopt whatever argument comes to hand to get them. If we're in a recession, tax cuts are a short-term stimulus measure. If the economy is doing well, tax cuts are a long-term productivity enhancement. If estate taxes are at issue, they're trying to save family farms. If it's capital gains, cuts are a vital tool for energizing our manufacturing base. Any port in a storm.