I don't have as big an aversion to government loan guarantees as Megan McArdle, but after running the numbers on the loan guarantees that went through the Department of Energy over the past couple of years, she makes a good point:

I have highlighted what jumped out at me: most of the money has gone to enormous companies that should have no trouble accessing capital. Established utilities, large multinational auto manufacturers, a global warehouse owner. The bulk of these funds are not going to rectify some gap in the capital markets. They're straight subsidies to huge corporations. Even some of the smaller firms/deals are owned by large corporations like Total SA.

There were three DOE loan guarantee programs. Program #1 was funding for alternative vehicles. 81% of its $9.1 billion went to Ford and Nissan. Program #2 is the 1703 loan program. 97% of its $10.3 billion dollars went to two big nuclear power companies. Program #3 was the 1705 loan program. It's a little harder to parse, but it looks as if a fair chunk of its $16.1 billion also went to big, established corporations.

The manufactured outrage over the Solyndra bankruptcy has mostly been pretty fatuous. But if there's a reasonable criticism to be made of these programs, this is probably it: if you're going to shovel federal money into risky new technologies that private funders won't touch, shouldn't you shovel your money into risky new technologies that private funders won't touch? Why bother with subsidies to Ford and Georgia Power and NextEra? They've got plenty of access to bank capital if their projects make sense.

Part of the reason, of course, is that subsidies to big corporations are bipartisan winners. John Boehner is a big backer of loan guarantees to allow the United States Enrichment Corporation to build a uranium enrichment facility in Ohio. USEC is a $2 billion corporation. Johnny Isakson and Saxby Chambliss were strong supporters of the loan guarantees to Georgia Power, a subsidiary of Southern Company. Southern Company is a $17 billion corporation. Pretty much everyone in Michigan supported loan guarantees to Ford, a $129 billion corporation.

Now, like I said, this doesn't bother me all that much. The actual cost of the $36 billion in DOE loan guarantees will probably run around $2-4 billion over the next decade or so. That's not all that earth shattering. Still, if we're going to do something like this, I'd be pretty happy to end the loan guarantees to big companies and concentrate our firepower on smaller startups that can't find alternative financing but might be worth some taxpayer risk anyway. The big guys ought to be able to rely on the free market they spend so much time claiming to revere.

It's nice that Martin Feldstein recognizes the value of a serious program to address underwater mortgages. Unfortunately, this is the program:

If the bank or other mortgage holder agrees, the value of the mortgage would be reduced to 110 percent of the home value, with the government absorbing half of the cost of the reduction and the bank absorbing the other half. For the millions of underwater mortgages that are held by Fannie Mae and Freddie Mac, the government would just be paying itself. And in exchange for this reduction in principal, the borrower would have to accept that the new mortgage had full recourse — in other words, the government could go after the borrower’s other assets if he defaulted on the home. This would all be voluntary.

In other words, it wouldn't work. But thanks for playing.

“We had a tired puppy,” said a Republican friend of Rick Perry's recently, trying to explain Perry's less than stellar debate performances. Robert Lane Greene sums up what this probably really means:

If your background thus far has been mostly limited to your home state, you're not ready for the onslaught of impertinent, annoying questions about your policy towards Durkadurkastan. In a panic you start to study. But there are so many damned Stans! And then people want to know whether your tax-policy numbers add up, the bastards. And you're expected to know stuff like how the alternative minimum tax works. And where all of America's troops are. And then the snivelling reporter from the Globe and Mail asks a question to tease out whether you know what the prime minister of Canada's name is—you're sure it's something really ordinary, but is it Stephen Parker or Ben Harper or Michel Carter or what? Then you have to study all your rivals and what they're saying and doing, too. You have to study fast, and you're travelling all the time, and still kissing babies and begging for money over the phone. You eat fried garbage at state fairs and diners, and barely sleep. Now you probably get nervous, then tense; swagger won't turn the dynamic around. A few gaffes and you tense up more. You study harder, but there's just so much stuff to learn! And they they start digging through your past; why oh why didn't you anticipate that story getting out? Nobody told you it was going to be like this!

My guess: Perry's political life in Texas has just been too easy. His competition has been weak and his more-Texas-than-thou persona, along with some smart consultants, has been enough. He didn't need to know anything. But on the national stage — even the GOP version of it — you do. And he simply had no idea just how tough it was going to be. As near as I can tell, he still hasn't figured it out.

Here are the results of the latest Time magazine poll in handy chart form. At least for now, the Occupy Wall Street folks are way, way, way more popular than the Tea Party. And why not? In other questions:

  • 86% agree that Wall Street and its lobbyists have too much power in Washington
  • 79% agree that the gap between rich and poor has grown too large in America
  • 71% think the Wall Street executives responsible for the financial meltdown should be prosecuted
  • 68% think the rich should pay more taxes

However, 56% believe the OWS protests will have little impact on any of this. Sadly, they're probably right. As Dana Milbank says after surveying recent congressional priorities, "For all the talk of populist foment — the Tea Party on the right and the new Occupy Wall Street movement on the left — business interests remain firmly in control. Forced to choose between their voters and their donors, lawmakers don’t hesitate before choosing the latter."

No they don't, do they? After all, the tea partiers and the OWSers might have all the energy and get all the media attention, but business interests still have all the mother's milk of politics.

The University of Southern California's Edward Kleinbard performs the thankless task of trying to figure out the actual impact of Herman Cain's 9-9-9 campaign slogan cum tax plan, and he comes up with the following. Warning: It gets a little complicated:

Now let's put the three taxes together. Starting with $100 of pretax firm-level gross income available to pay salaries, the employee receives $91 in wages, and the firm pays $9 in "business flat tax." The employee then pays $8.19 in "individual flat tax" (9 percent of $91.00). Finally, the employee incurs a $7.45 further tax (the sales tax, measured as 9 percent of $82.81 in post-flat tax cash available for consumption), leaving her with $75.36 after all federal taxes to invest or spend. That represents a 24.6 percent all-in tax on the firm's gross income attributable to the employee's added value. Converting the $24.64 in total tax to a payroll tax equivalent, by comparing that tax to the $91 in salary the employee receives, yields a payroll tax equivalent rate of 27 percent ($24.64/$91).

In other words, when you take a look at the actual effect of the three different parts of Cain's plan, they all act similarly to a flat payroll tax. And the three parts add up to 27 percent. This means that if you're an average worker who spends most of your paycheck each month (in other words, virtually all of us), you'll be paying 27 percent of your income in federal taxes under Cain's plan. This compares to a current federal tax burden of about 14 percent for an average family.

Bottom line: If you make, say, $50,000 a year, your current total federal tax burden is about $7,000. Under Herman Cain's plan, it would be about $13,000. Even if you tweak the numbers a bit to make up for different measurement methodologies, that's a big difference.

So here's Herman Cain's new slogan: If you want to double your federal taxes, vote for me! I know I'm not a conservative and can't really pretend to understand what conservatives want, but I'm pretty sure this is not a tea party winner.

Via Ezra Klein, who adds the obvious point that Cain's 9-9-9 plan isn't a real plan anyway; it's just a brief set of bullet points. Which is just another way of saying that it's a joke.

First we had Romney vs. Trump, then Romney vs. Bachmann, then Romney vs. Perry, and now we have Romney vs. Cain. Remember Joe Louis' Bum of the Month club? That's what the Republican primary campaign looks like this year.

The problem with Herman Cain, of course, is basically the same as the problem with Donald Trump: He knows how to stir the troops, but the whole campaign is basically a joke to him—and even tea partiers aren't going to stick with a guy who treats the presidency like a joke. The zingers are all great, but if you want to be the leader of the free world you can't perform stupid burlesque about not knowing anything about Uzbeki-beki-beki-stan; if you want to run the economy you can't build your whole campaign around a corporate slogan like 9/9/9 that even the marks know is ridiculous; and if you want to be commander-in-chief you can't transparently not care about foreign policy. It's all fun for a while, but it wears thin pretty quickly when it becomes clear you're really campaigning to get a Fox News show, not to sit in the Oval Office.

Anyway, to show this graphically, I've helpfully extended the latest poll of polls from Real Clear Politics. Perry might do a little better than I'm predicting, but not much. As for Cain, he better enjoy his moment as Mitt Romney's latest bum. It won't last much longer.

Climate change is the public policy problem from hell. If you were inventing a problem that would be virtually impossible to solve, you'd give it all the characteristics of climate change: it's largely invisibile, it's slow moving, it's expensive to fix, it requires global coordination, and its effects will be disproportionately borne by poor countries that nobody cares about.

That last item might seem like a harsh way of putting things, but it's pretty much the truth. And today, via Brad Plumer, we have a new OECD report that illustrates the problem starkly. It examines which cities will have the most residents vulnerable to coastal flooding due to storm surge and high winds in 2070, and as you can see on the map below, the risk is almost entirely concentrated in developing countries in Asia and Africa. New York and Tokyo have a small bit of exposure, leaving Miami as the sole rich city with a substantial exposure. The total number of vulnerable residents will increase from 40 million today to 150 million in 2070, with the vast bulk of the increase coming in developing countries. The five riskiest cities — by a large margin — are Kolkata, Mumbai, Dhaka, Guangzhou, and Ho Chi Minh City.

Can we just adapt to this? Sure, I suppose we could, if the rich world were willing to donate enormous sums of money to these cities to finance a massive campaign of preparation and amelioration. But what are the odds of that happening? After all, the rich world isn't even doing that in its own cities.

Matt Taibbi, the man who memorably dubbed Goldman Sachs "a great vampire squid wrapped around the face of humanity," is unsurprisingly sympathetic to the Occupy Wall Street protesters. "But the time is rapidly approaching when the movement is going to have to offer concrete solutions to the problems posed by Wall Street," he says. "To do that, it will need a short but powerful list of demands." Here's an abridged version of his five suggestions:

  1. Break up the monopolies....There are about 20 such firms in America, and they need to be dismantled.
  2. Pay for your own bailouts. A tax of 0.1 percent on all trades of stocks and bonds and a 0.01 percent tax on all trades of derivatives would generate enough revenue to pay us back for the bailouts, and still have plenty left over to fight the deficits the banks claim to be so worried about.
  3. No public money for private lobbying. A company that receives a public bailout should not be allowed to use the taxpayer's own money to lobby against him.
  4. Tax hedge-fund gamblers. For starters, we need an immediate repeal of the preposterous and indefensible carried-interest tax break.
  5. Change the way bankers get paid. We need new laws preventing Wall Street executives from getting bonuses upfront for deals that might blow up in all of our faces later.

I think Taibbi is probably right that the OWS protest can't stay chaotic and inchoate forever. The anarchist types in the crowd are apparently opposed to anything that suggests they merely want to reform the existing system instead of tearing it down completely, but let's face it: that's a path to irrelevancy before too much longer.

Taibbi's list is pretty good — and surprisingly measured — and makes a workable starting place. I think #3 probably isn't practical for a variety of reasons, and #5 would be a little tricky, but doable. The others all sound great. If it were up to me I'd slot in some kind of leverage requirement in place of the lobbying item, but I recognize that this wouldn't exactly be a populist crowd pleaser. So if that doesn't work, how about banning credit default swaps? Despite the best efforts of several people to convince me otherwise, I remain skeptical that they're a net positive for the financial system. I don't know how practical an outright ban would be unless we got the rest of the world to go along, but it's probably a little bit better as a rallying cry than "Hey hey, ho ho, risk-based capital has got to go, and it should be replaced by a simple leverage ratio of at least 10%." On the other hand, free silver at 16:1 caught on big a century ago, so who knows?

Every Republican candidate has sworn that repealing Obamacare will be his or her very first item of business once Obama himself is booted from the Oval Office. Last night, Mitt Romney got a little more specific: On Day 1, he said, he'd issue a waiver from Obamacare for all 50 states, and on Day 2 he'd repeal the whole enchilada via a reconciliation bill, which requires only 51 votes and can't be filibustered.

Sounds great! (Assuming Republicans take control of the Senate, of course.) But would it work? Well, reconciliation can only be used on things that affect the budget, so there's a lot of Obamacare that could indeed be repealed that way. But not quite all. You see, one part of the bill establishes what's called "community rating," which means that health insurers are required to take on all comers and are required to charge them all the same price. This is a godsend for really sick people, who will sign up in droves for health insurance, but not so great for the insurance companies that have to shell out big bucks to keep them healthy.

Crucially, though, this is a regulation that's not budget related. This is why the main healthcare bill was passed via regular order, not reconciliation, and it's why it can't be completely repealed via reconciliation either. And while insurers don't like community rating much, they were willing to accept it as long as everyone, not just the sick, was subsidized by the government and required to get insurance. Jon Chait explains the real-life choices Republicans will have once this becomes clear:

If they eliminate the subsidies but leave the regulations in place, you’ll have insurers required to sell policies to people who are sick, but no way to bring healthy people into the risk pool. A few states tried that. It created a cost spiral that collapsed the whole market. Romney would end up screwing the health insurance industry, which is much harder to do, politically, than screwing the uninsured. The industry has lobbyists.

Those lobbyists were happy to preserve the old system, which screwed all the uninsured and none of the insurance companies. They were fine with the Obama plan that screwed none of the uninsured and none of the insurance firms. They're not going to be happy about creating a system that screws some of the uninsured and all of the insurance companies.

So things aren't so simple. Unless Republicans get rid of the filibuster, they can damage Obamacare but they can't kill it completely. And health insurers, who know perfectly well that repealing the mandate and the subsidies while leaving community rating in place would destroy them, will make their position perfectly clear. For them, repeal is an all or nothing affair.

Obviously, Romney and the other GOP candidates aren't eager to acknowledge this bit of grubby reality. But it's there, and it's going to give fits to any Republican who wins the presidency. To me and my fellow radical socialist America haters, of course, avoiding this whole mess and keeping Obamacare intact is a pretty good reason not to elect a Republican president in the first place — quite possibly the best reason at the moment. But even God's chillun need to acknowledge reality and figure out what their real game plan is going to be if they win next year. Flat out repeal just isn't in the cards.

Steve Benen and James Fallows remind me of one of my favorite pet peeves today: the routine use of headlines that blame "the Senate" or "Congress" for blocking a bill. For example: last night every Senate Republican banded together to filibuster a vote on Obama's jobs bill. So how did the New York Times copy desk headline this? Like so: "Obama's Jobs Bill Fails in Senate in First Legislative Test." Nothing about Republicans and nothing about a filibuster. Fallows comments:

The subhead and story make the real situation clear. So how about a headline that says plainly what happened: "Obama's Job Bill Blocked by GOP in Procedural Move" It would fit. And it would help offset the mounting mis-impression that the Constitution dictates a 60-vote margin for getting anything done.

Consider yourselves lucky, guys! My morning copy of the LA Times headlined it just as badly, and unlike the NYT, the subhead doesn't make things any clearer. Needless to say, there was no need for this. The hed could just as well have read "GOP Kills Obama Jobs Plan" if they'd wanted it to.

So why didn't they? This is a genuine question. Why do newspaper editors shy away from making partisan differences clearer in headlines? Is it because two (2) Democrats also voted against the bill, so they think it's unfair to blame it all on Republicans? Is it because they don't want to seem too partisan themselves? Or what? If any friendly copy desk chief has an explanation for this, I'd be happy to pass it along.