Kevin Drum

Permit, Permit, Who Gets the Permits?

| Tue Jun. 16, 2009 9:17 PM EDT

Does the Waxman-Markey energy bill really give away 85% of its emission permits to big polluters?  Dave Roberts says no: most of the permit allocations go to consumers, households, and green energy programs.  Only about 22% of the permits go to big industrials.  That's still about 22% too high, but it's a lot less than most press reports would lead you to believe.  Details here.

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Actions Speak Louder Than Words

| Tue Jun. 16, 2009 5:23 PM EDT

Twitter was scheduled to go down for scheduled maintenance today, but it was postponed at the request of the State Department:

Confirmation that the U.S. government had contacted Twitter came as the Obama administration sought to avoid suggestions it was meddling in Iran's internal affairs as the Islamic Republic battled to control deadly street protests over the election result.

....Twitter Inc said in a blog post it delayed a planned upgrade because of its role as an "important communication tool in Iran." The hour-long maintenance was put back to 5 p.m. EDT/2100 GMT, which corresponds to 1:30 a.m. on Wednesday in Iran.

Fascinating.  The original upgrade schedule would have cut service in the middle of the day in Tehran.

Via Sullivan, of course.

Wall Street Breathes a Sigh of Relief

| Tue Jun. 16, 2009 5:07 PM EDT

It's still good advice to say that we should wait until tomorrow, when the administration's new financial regulations are formally unveiled, before we start taking potshots at them.  But if Binyamin Appelbaum's report in the Washington Post is on target — well, we might as well get started today after all.

Let's see.  The SEC will expand its database of securities and will "encourage" the adoption of standardized contract language.  Yippee.  Credit rating agencies will be required to make "a clear distinction" between the ratings assigned to asset-backed securities and other forms of debt such as corporate bonds.  This is about #287 on the list of regulatory problems we need to solve.  And then there's this:

Sales of asset-backed securities provided the bulk of funding for mortgages and other consumer lending during the economic boom, as investors spent trillions of dollars buying what was often advertised as a safe, more lucrative alternative to ordinary bonds....The administration concluded that securitization encouraged looser lending standards, because companies that sold loans to investors had little reason to care whether borrowers could repay those loans.

....The administration's proposal is not just an attempt to clean up the securitization market. The goal is also to help revive that market, which has seen almost no activity in the last year....The final component addresses financial incentives, for instance requiring firms to retain a [5%] stake in each security. The plan also would prohibit firms from hedging that risk, meaning that they could not make an offsetting investment.

Are they kidding?  First, how do you prevent banks from hedging risk?  There are just too many clever ways to do it.  The SEC will never be able to keep up with this.  Second, 5%?  Seriously?  What's the point?  There are lots and lots of recklessly constructed securities that are enormously profitable even if you know to a near certainty that you're likely to lose 5% of the value sometime down the road.  That's not nearly enough to rein in the bubbling endorphins and giddy short-term greed that drives credit bubbles.  And it's especially not enough if Wall Street continues paying its traders and executives based on how much money they earned in the past 365 days.

Look: I'll wait until tomorrow, and then listen to what smart people have to say about the full regulatory package.  But if this is the starting point of negotiations as this package heads off to Congress, things are really, really not looking good.

Controlling Healthcare Costs

| Tue Jun. 16, 2009 3:37 PM EDT

Can Barack Obama and congressional Democrats control healthcare costs?  Megan McArdle doubts it:

I'd say we have substantial empirical evidence that we are not going to control the health care cost inflation which is busting Medicare's budget, much less the new costs the administration is planning to add.  We have been trying to control health care costs since the 1970s made it clear that Medicare was going to get really, really expensive.  And any idea that you care to name, from comparative effectiveness research to healthcare IT to preventive medicine . . . these have all been on the table for more than thirty years, under one name or another.  They haven't happened.

The answer that those promising magical cost reductions need to ask is "Why haven't they happened?" and "What has changed to make them feasible now?"  But when I ask this question, I get angry demands that I put forward my plan for cost control, rather than merely critiquing everyone else's.  This seems rather like demanding that I put forward my design for a perpetual motion machine before I am allowed to point out problems in the US energy market.

This is an entirely reasonable position.  But I suspect the answer to cost containment lies less in technical arguments about healthcare policy than it does in arguments about taxation.  Right now, not only is America is rich enough to afford expensive healthcare, but the cost of that care is largely hidden.  For seniors, it comes via Medicare, and Medicare taxes haven't gone up much recently.  Its problems are still largely in the future.  The rest of us mostly get healthcare from our employers, and the only cost increases we see are higher copays — which are painful, but not quite painful enough to spur us to do much about them.

So what will spur us to get serious about cost containment?  My guess is: universal healthcare, paid for out of taxes.  A taxpayer funded system actually makes healthcare costs more visible than our current system, and a universal system is much bigger than Medicare alone.  A universal public system will, eventually, require painful tax increases, and that's the point at which the public will finally be willing to accept cost containment measures.

And if it doesn't?  Then it means, via revealed preferences, that Americans want expensive, unlimited healthcare even when the costs are fully and completely known to them.  That's not my preferred outcome — I think a lot of that money could be far better used on other things — but if that's what taxpayers turn out to want, then that's what taxpayers turn out to want.  That's how market democracies work.  My guess, though, is that it's not what they want.  They just don't know it yet because they're too far removed from the costs of the current system.  National healthcare will change that.

Waterboarding Update

| Tue Jun. 16, 2009 2:59 PM EDT

Torture apologists are fond of telling us that "only" three prisoners have ever been waterboarded.  Two of those three were Abu Zubaida and Khalid Sheik Mohammed.  Today, documents released in response to an ACLU lawsuit shed some new light on both of them:

An al-Qaeda associate captured by the CIA and subjected to harsh interrogation techniques said his jailers later told him they had mistakenly thought he was the No. 3 man in the organization's hierarchy and a partner of Osama bin Laden, according to newly released excerpts from a 2007 hearing.

"They told me, 'Sorry, we discover that you are not Number 3, not a partner, not even a fighter,' " said Abu Zubaida, speaking in broken English, according to the new transcript of a Combatant Status Review Tribunal held at the U.S. military prison in Guantanamo Bay, Cuba.

....Mohammed, who was waterboarded 183 times [...] said he lied in response to questions about bin Laden's location.

"Where is he? I don't know," Mohammed said. "Then he torture me. Then I said yes, he is in this area."

I'm exaggerating when I say that this is really "new" information, but it is more extensive information than we've had before.  And it's not exactly a great advertisement for either the efficacy or the morality of waterboarding.  Adam Serwer has more here.

The VAT in the Hat

| Tue Jun. 16, 2009 1:48 PM EDT

The New York Times reports that House Democrats are considering a value added tax as a way of financing healthcare reform. A VAT is one of those things that economists and think tankers all love, but it's also one of those things that's never had any real chance of being adopted in the United States.  So it surprised me that Dems were even seriously talking about it.

But Tyler Cowen has a take on this that I hadn't thought of:

From my distant perch out here in Fairfax (and Arlington), I believe this means health care reform is falling apart.  It means the unions won't let them tax health insurance benefits and the CBO won't let them punt on the issue of finance.

Hmmm. That sounds unduly pessimistic.  But given the fact that congressional approval of a VAT is vanishingly unlikely without years of preparing the ground first, the fact that it's being discussed suggests that pretty much all the likely sources of revenue have already been ruled out.  That's not a heartening thought.

The reference in the Times was made almost in passing, and maybe it doesn't mean anything.  I certainly wouldn't make too big a deal out of it at this point.  But I figure it's worth a brief mention as a possible canary in the coal mine.

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The GOP vs. the Troops

| Tue Jun. 16, 2009 1:09 PM EDT

Via Matt Yglesias, I see that the GOP has decided that supporting the troops is so last week:

House Republicans are preparing to vote en bloc against the $106 billion war-spending bill, a position once unthinkable for the party that characterized the money as support for the troops.

....Republicans say this year is different. Democrats have included a $5 billion increase for the International Monetary Fund (IMF) to help aid nations affected by the global financial crisis. Republicans say that is reason enough to vote against the entire $106 billion spending bill and are certain voters will understand.

“Once the American people learn that the Democrats are using a war-funding bill for a global bailout, they’ll know what to do,” House Republican Conference Chairman Mike Pence (Ind.) told The Hill. “We’ll take the message to the floor and to the American people, and I expect we’ll win this fight.”

Hypocrisy is overrated as a vice, but this is still pretty stunning.  I mean, they're doing this over $5 billion in net IMF contributions to help out with the global financial meltdown?  Seriously?  That's about .1% of the federal budget, and one of these days it might help prevent a collapse that spreads across the ocean and sends Wall Street into yet another tailspin.  That's what Republicans are going to the mat for these days?  Crikey.

Responding to Iran

| Tue Jun. 16, 2009 12:44 PM EDT

Jonah Goldberg on Obama's response to the mass protests in Iran:

Reportedly, you are biding your time, waiting to see what happens, as if it is a great mystery. Your campaign lived and breathed YouTube. Check it now, check it often. You and your team promised "soft power" and "smart power." Well, let's see some of that. Because by not clearly picking a side, it appears you have chosen the wrong side.

Do you fear antagonizing the powers-that-be in Iran? That ship has sailed. Though I am sure they're grateful for your eagerness not to roil the seas around them. Is it because you think "leader of the free world" is just another of those Cold War relics best mothballed in favor of a more cosmopolitan and universal awe at your own story?

"Enough about those people bleeding in the street. What do you think of me?" Is that how it is to be?

Obama really drives conservatives to the loony bin, doesn't he?  I mean, the story here is pretty simple: if the Great Satan forcefully intervenes on Mousavi's side, it gives the clerics just the excuse they need to brand him a foreign stooge and really crack down.  Goldberg can't possibly not know this, can he?  Obama, so far, is doing exactly the right thing: deploring the violence but otherwise staying in the background until and unless Mousavi and the protesters themselves ask for more.  He's doing his best not to make it about him, but about them.

Yet More on Charter Schools

| Tue Jun. 16, 2009 12:11 PM EDT

A new Stanford University study on charter schools was released yesterday.  The LA Times summarizes:

The study of charter schools in 15 states and the District of Columbia found that, nationally, only 17% of charter schools do better academically than their traditional counterparts, and more than a third "deliver learning results that are significantly worse than their student[s] would have realized had they remained in traditional public schools."

That's accurate as far as it goes.  The overall results showed charter schools nationwide delivering slightly poorer results than public schools.  However, there were a couple of significant caveats in the report itself:

Charter students in elementary and middle school grades have significantly higher rates of learning than their peers in traditional public schools, but students in charter high schools and charter multi‐level schools have significantly worse results.

....Students do better in charter schools over time. First year charter students on average experience a decline in learning, which may reflect a combination of mobility effects and the experience of a charter school in its early years. Second and third years in charter schools see a significant reversal to positive gains.

The pair of charts below shows the size of the effect: compared to public schools, charters are moderately better in elementary and middle schools but fall off a cliff in high school.  Likewise, kids tend to do a lot worse in their first year in a charter school — possibly the result of adjusting to a new environment — but are doing considerably better by their third year.

Overall, then, the results are mixed.  And once again we see that the biggest problems are in high school.  Improving test performance in elementary school appears to be quite doable, but the effects usually wash out by the time kids are 17.  It's unclear how to fix this.

However, if the Stanford report is correct, at least it provides a strategy for confused parents: put your kids in a good charter school in first grade so they get past the first year jitters early and then get seven years of higher performance than they'd get in public schools.  Then, after eighth grade, switch them to a public high school, where they'll get higher performance than they would in a charter school.  It's as good a plan as any.

The full report, including state-by-state results, is here.  Note that the methodology employed by the study isn't perfect, but appears to be pretty good.  Their results are probably worth paying attention to.

The Fiery Judge

| Mon Jun. 15, 2009 7:38 PM EDT

Does Sonia Sotomayor have a temperament problem?  Ann Friedman directs us to an NPR piece by Nina Totenberg today:

Judge Guido Calabresi, former Yale Law School dean and Sotomayor's mentor, now says that when Sotomayor first joined the Court of Appeals, he began hearing rumors that she was overly aggressive, and he started keeping track, comparing the substance and tone of her questions with those of his male colleagues and his own questions.

"And I must say I found no difference at all. So I concluded that all that was going on was that there were some male lawyers who couldn't stand being questioned toughly by a woman," Calabresi says. "It was sexism in its most obvious form."

And what if such criticism came from a woman lawyer? Well, says Calabresi, women can be just as sexist as men in their expectations of how a woman judge should act.

NPR played a couple of snippets of Sotomayor in its piece so listeners could judge for themselves.  Ann did: "Listening to the clips, Sotomayor sounds an awful lot like John Roberts — who did not face any concerns about his 'fiery temperament' during his confirmation hearings. Totenberg exposes this talking point for what it is: straight-up sexism, with some racism mixed in for good measure."