Kevin Drum

More Smoke and Mirrors from the GOP

| Thu Jun. 4, 2009 12:40 PM PDT

Today House Republican leaders proposed a bold new plan to save $375 billion over the next five years.  So what did they come up with?

Well, according to this document, $317 billion comes from every budget coward's favorite gimmick: an across-the-board spending cap that (a) they know perfectly well will never happen and (b) allows them to avoid mentioning any actual specific cuts.  Another $45 billion comes from devoting returned TARP funds to deficit reduction — something that's going to happen over the next five years anyway.  That leaves $13 billion in actual targeted cuts.  For the arithmetic challenged among you, that's $2.6 billion per year out of a budget of about $3.5 trillion.

That's a reduction of 0.07%.

Every little bit helps, I guess, but for a bunch of fiscal watchdogs they seem curiously unable to find very much in the way of actual wasteful programs that they're willing to stand up and take some lumps for opposing.  Instead it's just the usual smoke and mirrors.  How tedious.

UPDATE: Actually, looking at this more carefully, something doesn't add up.  The GOP brain trust claims to save $317 billion from the cap, $45 billion from TARP, and about $25 billion in targeted cuts.  But that comes to $387 billion, not $375 billion.  So I guess they can't add either.

Still, if the targeted numbers are correct, they're proposing cuts of 0.14%, not 0.07%. I'll leave it up to you to decide if you're impressed by their budget slashing bona fides.

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Geithner Plan is Dead

| Thu Jun. 4, 2009 11:32 AM PDT

The New York Times reports that Tim Geithner's plan to buy up toxic assets from the banking system is dead.  Basically, even at the subsidized prices the program would have offered them, banks weren't willing to sell because it would have forced them to recognize big losses, and recognizing big losses would have been bad.  Ezra Klein comments:

There are two ways of understanding what happened here. The first is that banks couldn't sell their assets at current prices because doing so would have rendered them effectively insolvent. In this scenario, PPIP fails to fulfill its intended function: Saving the banks. The toxic assets survive and the banking system remains hollow and unhealthy.

The second is that banks no longer need to rush their troubled assets off their books because they're increasingly able to raise private capital, operate in a restored financial market, and wait out the last vestiges of the storm. They can, in this world, let the value of the assets rise naturally, and sell them off later. In this scenario, PPIP is no longer necessary.

I'll take door #1.  It's at least arguable that the banks were justified in not wanting to sell toxic securities at the fire sale prices on offer from vulture funds and others.  But Geithner's plan would have offered them considerably more than that — and they're still unwilling to sell.  That means they're completely dedicated to the proposition that all their mortgage-backed junk is worth exactly what they say it's worth.

Maybe this will work out in the end.  But history suggests that we'd all be better off if banks were forced to honestly account for their losses, take their lumps, and then move on.  Instead, Geithner's stress tests have persuaded everyone that things are fine and losses on these securities aren't as bad as everyone thinks.  Maybe so.  But if Geithner and the banks are wrong, doing it this way is likely to drag the pain out over years, producing a long period of sluggish semi-recovery and slow, fragile growth.

That's basically my fear at this point.  I sure hope Geithner knows what he's doing.

Lowry on Obama

| Thu Jun. 4, 2009 11:00 AM PDT

Most of the conservative reaction to Obama's speech seems to be the usual robotic stuff — moral equivalence! shameful! naive! — but props to Rich Lowry for his reasonably measured response:

I have to go back and read it carefully, so I reserve the right to extend and revise my remarks. But on the whole I thought it was pretty good and I basically agree with Max Boot's take here. Yes, there were many things about which to cavil, there were missed opportunities, and he betrayed the disturbing weakness of his policy in certain key areas, Iran foremost among them. But the speech was an act of diplomacy and as such, it inevitably was going to skate over some inconvenient truths and tilt its presentation in a way to try to make it more persuasive to its target audience. Fundamentally, Obama's goal was to tell the Muslim world, "We respect and value you, your religion and your civilization, and only ask that you don't hate us and murder us in return." Bush tried to deliver the same message over and over again. The difference with Obama is that people might actually be willing to listen.

I guess the question is whether he sticks to his guns here, or whether the wingosphere reeducation squads eventually force him to "extend and revise" his remarks and admit that the speech was, in fact, a betrayal of everything good and decent.  Stay tuned!

Coleman Ready to Bow Out?

| Thu Jun. 4, 2009 9:36 AM PDT

Roll Call reports that Norm Coleman might throw in the towel if the Minnesota Supreme Court rules that Al Franken won last year's senate race:

Senate Republican leaders appear willing to go to the mat for former Sen. Norm Coleman (R-Minn.), but it’s unclear whether Coleman wants to go to the mat for himself.

....Sources close to Coleman say the former Senator would likely give up his legal battle and accept defeat if the Minnesota Supreme Court decides in Franken’s favor. That’s because Coleman anticipates that Gov. Tim Pawlenty (R) would ultimately sign Franken’s certification papers.

OK, this is pretty iffy.  The only backup is "sources close to Coleman," and those sources only say it's "likely" that he'd give up the fight, and even then it's only if Pawlenty signs the certification papers.  So who knows?

Coleman's appeal is based on the contention that different counties used different standards for counting ballots, and as it happens, I'm tolerably sympathetic to this argument.  I'd like to see states do a better job of ensuring equal treatment for ballots in a variety of respects.  But my opinions don't matter.  What matters is past precedent and accepted practice, and on that score Minnesota actually seems to have handled the recount quite admirably.  Legally, Coleman really doesn't have a leg to stand on, so maybe he and Pawlenty will do the right thing after all. We'll know in a few weeks.

Obama in Cairo

| Thu Jun. 4, 2009 8:50 AM PDT

I didn't watch Obama's big speech in Cairo, but I've read the transcript.  It's first rate: long, detailed, honest, evenhanded, and temperate.  If I have a complaint, it's that it struck me, both literally and figuratively, as maybe a little bit too by-the-numbers.  But I think part of that is a reaction to the high bar Obama has set for himself: his oratory is so good that it's easy to get a little jaded by yet another great performance.

I imagine that this part will end up getting a lot of attention:

Palestinians must abandon violence. Resistance through violence and killing is wrong and does not succeed. For centuries, black people in America suffered the lash of the whip as slaves and the humiliation of segregation. But it was not violence that won full and equal rights. It was a peaceful and determined insistence upon the ideals at the center of America's founding. This same story can be told by people from South Africa to South Asia; from Eastern Europe to Indonesia. It's a story with a simple truth: that violence is a dead end. It is a sign of neither courage nor power to shoot rockets at sleeping children, or to blow up old women on a bus. That is not how moral authority is claimed; that is how it is surrendered.

Now is the time for Palestinians to focus on what they can build. The Palestinian Authority must develop its capacity to govern, with institutions that serve the needs of its people. Hamas does have support among some Palestinians, but they also have responsibilities. To play a role in fulfilling Palestinian aspirations, and to unify the Palestinian people, Hamas must put an end to violence, recognize past agreements, and recognize Israel's right to exist.

At the same time, Israelis must acknowledge that just as Israel's right to exist cannot be denied, neither can Palestine's. The United States does not accept the legitimacy of continued Israeli settlements. This construction violates previous agreements and undermines efforts to achieve peace. It is time for these settlements to stop.

In some sense, there's nothing new here: most of it is longstanding American policy, and Obama's stand on West Bank settlements was made clear last week.  Still: it might light a fire under both sides.

Nick Baumann calls Obama's speech "Nine Hard Truths," and there's something to that.  It offered something to everyone, but it also offered challenges to everyone.  Marc Lynch has a few initial thoughts here, but warns us to hold off a bit on trying to gauge Arab reaction: "A cautionary note, though — English-language Egyptian blogs are likely to be a particularly poor initial 'focus group' for  judging the response.  But listening to the response and engaging in the debate which emerges will be key, for American officials and for the American public.  Because Obama's address sought to reframe the conversation, we won't know whether it succeeds until we see how the subsequent political debate unfolds."

The full text of the speech is below the fold.

Healthcare and Bankruptcy

| Wed Jun. 3, 2009 11:03 PM PDT

On the campaign trail, Barack Obama frequently cited research showing that medical expenses were a contributing factor in 55% of all personal bankruptcies.  A new study says he was wrong. It was actually more than that:

The study found that medical bills, plus related problems such as lost wages for the ill and their caregivers, contributed to 62% of all bankruptcies filed in 2007....Medical insurance isn't much help, either. About 78% of bankruptcy filers burdened by healthcare expenses were insured, according to the survey, to be published in the August issue of the American Journal of Medicine.

....Most people who filed medical-related bankruptcies "were solidly middle class before financial disaster hit," the study says. Two-thirds were homeowners, and most had gone to college.

The study does not suggest that medical expenses were the sole cause for these bankruptcies, but it does identify them as a contributing factor. The increase in such filings occurred despite a 2005 law aimed at making it more difficult for individuals to seek court protection from creditors.

Among bankruptcy filers, those without insurance reported average medical expenses of $26,971.  Those with private insurance reported average medical bills of $17,749.

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Will the Uighurs Be Released?

| Wed Jun. 3, 2009 2:42 PM PDT

Here's a peculiar story from Bloomberg:

Some of the 17 Chinese Uighur Muslims being held at Guantanamo Bay, Cuba, will likely be released in the U.S. in an effort to convince other countries to accept prisoners from the detention facility, according to current and former American officials.

Why peculiar?  Because there's not even a smidgen of backup for this claim in the rest of the story, which runs to over a thousand words.  There's one speculative quote from a Bush-era legal advisor and that's it.  Nothing from current American officials at all.  All in all, the story gives no reason to believe that the Obama administration is any closer to releasing any of the Uighurs into the U.S. than it was a month ago.

Still, I'd like it to be true.  So here's hoping there's more to this piece than meets the eye.

Twitter v. Real Life

| Wed Jun. 3, 2009 10:38 AM PDT

According to some new research out of the Harvard Business School, 10% of Twitter users account for 90% of all tweets, and the median number of tweets per day is 0.01.  That makes me above average!  Barely.  I think my last tweet was sometime in April.

What's more, in news that should surprise no one, men who tweet generally pay more attention to other men.  Even though women outnumber men on Twitter, and even though men and women tweet at about the same rate, men still have more followers.  Why?  Gender solidarity, apparently:

Although men and women follow a similar number of Twitter users, men have 15% more followers than women. Men also have more reciprocated relationships, in which two users follow each other....Even more interesting is who follows whom. We found that an average man is almost twice more likely to follow another man than a woman. Similarly, an average woman is 25% more likely to follow a man than a woman. Finally, an average man is 40% more likely to be followed by another man than by a woman.

However, it turns out that the researchers are suprised by this because apparently it's unusual: "On a typical online social network, most of the activity is focused around women — men follow content produced by women they do and do not know, and women follow content produced by women they know."  Maybe so, though I suspect this might have to do with a massive bias toward teenagers in most social networks.  Certainly these results seem to match similar patterns in Usenet, chat groups, the blogosphere, and real life.  Frankly, I would have been surprised if men hadn't turned out to be pigs.

(Via Tyler Cowen.)

Rule of Thumb of the Day

| Wed Jun. 3, 2009 10:08 AM PDT

Via Alex Tabarrok, a pair of researchers asked people how big the economy would be if it grew 5% a year for 25 years:

Only around 10–15% of the participants gave estimations between 50% less and 100% more than the true value...furthermore, the majority of the false estimations were systematically below the true value ...which was underestimated by 88.9–92.1% of the participants.

Of course, this is actually a fairly tough calculation even if you're mathematically inclined and understand the whole compound interest thing.  I guessed vaguely that 5% growth would produce a doubling in about 12 years, so the economy would quadruple in 25 years.  Wrong!  Turns out that doubling takes 14 years, so the answer isn't 300%, it's 238%.  But Alex made this worth my time by teaching me a new rule of thumb I hadn't heard of before:

A good way of approximating is to use the rule of 70.  If x is the growth rate then the doubling time is approximately 70/x.  Thus, with a growth rate of 5% we expect a doubling (100% increase) in 14 years and a quadrupling in 28 years so a bit more than a tripling in 25 years (200% increase) is a good guess.

I love good rules of thumb, and this one makes me slightly more knowledgable than I was five minutes ago.  Thanks, blogosphere!

Obama and the Muslim World

| Wed Jun. 3, 2009 9:30 AM PDT

From Barack Obama, explaining the value of diplomacy and talk:

“What I do believe is that if we are engaged in speaking directly to the Arab street, and they are persuaded that we are operating in a straightforward manner, then, at the margins, both they and their leadership are more inclined and able to work with us....And if there are a bunch of 22- and 25-year-old men and women in Cairo or in Lahore who listen to a speech by me or other Americans and say: ‘I don’t agree with everything they are saying, but they seem to know who I am or they seem to want to promote economic development or tolerance or inclusiveness,’ then they are maybe a little less likely to be tempted by a terrorist recruiter.”

This is exactly the right formulation, and gives the lie to the endless cavalcade of right-wingers who like to pretend that Obama is some kind of foreign policy naif who's convinced he can persuade the world's terrorists and despots into laying down their arms by the power of sweet talk alone.  As he's made clear many times before, though, he's not.  He knows perfectly well that what he's doing will take a lot of time and will work, at best, "at the margins."  It will reduce the recruiting power of terrorists a bit, it will reduce the intransigence of Middle Eastern governments a bit, and it will reduce the general hatred of American foreign policy a bit.  But add up the bits over several years, and they can make a real difference.

Still, there's no question it's a long-term project.  A recent PIPA poll, for example, shows that the Egyptian public is way more enthusiastic about Obama than about Bush.  But click the link for more and you'll see that their view of U.S. goals in the Middle East is every bit as negative as it's ever been.  This is going to be the work of many, many years.