Kevin Drum

Yet More VAT

| Fri Jun. 19, 2009 2:35 PM EDT

A couple of days ago the New York Times reported that House Democrats were considering a VAT (a tax similar to a national sales tax) as a partial funding source for national healthcare.  Today AP reports this again.  Jon Cohn is pleased.  Ezra Klein isn't.

I continue to think this isn't a serious possibility.  The VAT is just one of half a dozen potential revenue sources that Ways & Means is considering, and in the end my guess is that the others are far more likely to be approved than a VAT.  But I'm happy to see this on the table anyway.  One of these days I think we're going to need a VAT as a funding source for healthcare, but it's not going to happen until the ground has been prepared and it morphs from being viewed as an outré piece of European socialism to being just an ordinary and familiar option to argue over.  It's an Overton window kind of thing, and the sooner it gets started the better.

Bruce Bartlett has more on the VAT here and here.  I've written about it here. Properly constructed, it's transparent, reasonably progressive, able to raise significant sums, and economically efficient.  It's worth trying to give it a higher profile.

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Obama's Temperament

| Fri Jun. 19, 2009 1:56 PM EDT

Jacob Heilbrunn praises Obama's reaction to the Iranian election crisis:

Clearly Obama was caught flatfooted by the protests. But he does seem to be carefully ratcheting up his criticisms of the mullahs. In a Tuesday interview with CNBC, Obama said that when, "you've got 100,000 people who are out on the streets peacefully protesting, and they're having to be scattered through violence and gunshots, what that tells me is the Iranian people are not convinced of the legitimacy of the election. And my hope is that the regime respond not with violence, but with a recognition that the universal principles of peaceful expression and democracy are ones that should be affirmed."

....The truth is that the impressive thing has been how well Obama has handled the crisis....Obama's basic approach has been to follow the foreign policy equivalent of the Hippocratic Oath: "First, do no harm." Imagine the obloquy that would greet Obama if he were to champion the demonstrators and help to create a bloodbath, as Radio Free Europe did during the 1956 Hungarian revolution, when it encouraged Hungarians to revolt by assuring them that they had backing of the West, which they didn't. So far, Obama has shrewdly hewed to a middle course that allows him some flexibility in dealing with Iran.

This, of course, is Obama's basic modus operandi for everything.  He doesn't feel like he has to react immediately to every provocation.  When he does, his responses are usually measured and sober.  He looks for middle ground.  He's willing to wait for the right time to push the boundaries a little further in the direction of his choosing.

This is sometimes intensely frustrating.  The gay community, for example, is up in arms over his lack of action on issues like DOMA and DADT.  But there shouldn't be any surprise about that.  It was obvious throughout the entire campaign season that this is how he works.  He'll let the military stew over DADT for a while until they basically ask him to change it, rather than the other way around.  It might take longer, but he figures — probably correctly — that the end result will be better for everyone.  Ditto for DOMA, which doesn't yet have the votes in Congress for repeal.

And ditto for lots of other stuff.  He's shown a disturbing willingness to compromise on financial regulation and healthcare.  He hasn't engaged much with the Waxman-Markey climate bill as it slowly gets watered down into nothing.  He's a cautious guy who doesn't take a lot of chances unless he feels some real pressure to do so.  Paradoxically, this is exactly what I expected from him but I find myself disappointed anyway.  A little bit more fire in the belly would be welcome.

But he is who he is, and the same instincts that disappoint us on some issues serve him well on others. So far, anyway. The next few months — possibly the next few days in Iran — will tell us just how much real hope and change Obama's temperament produces when the rubber finally hits the road.

Regulating Risk

| Fri Jun. 19, 2009 12:52 PM EDT

I'm not really sure if the federal government needs a "systemic risk regulator."  I just don't have a strong opinion about whether this is the right way to think about managing credit bubbles.  But a couple of days ago I said that if we do have such a thing, it shouldn't be the Fed.  Instead, "you want to give the authority to an agency that's institutionally dedicated to reducing risk and considers it a primary task.  That ain't the Fed.  It's just going to get buried in the bureaucracy and forgotten there."  Tyler Cowen responds:

Assuming we are going to do it, I think it has to be the Fed, whether we like it or not.  It's the Fed who is the fireman with the awesome power to print money, move markets, lend to the banking system on a large scale, and now even conduct fiscal policy, all without Congressional approval.  Our textbooks speak of the Fed as a lender of last resort but very often it is the lender of first resort too.

Now, this might be right.  It's possible that we just don't have any choice.  But at the risk of a bit of incoherence, let me offer an alternative.

It's true that the Fed is the agency with the brute force to make things happen in an emergency.  But I'm not sure that's the relevant thing to think about.  What we want is some kind of body that works to prevent emergencies.  That requires credibility and influence, but it doesn't necessarily require a trillion dollar balance sheet.

I guess the model I have in mind here is the Congressional Budget Office.  The CBO is unknown to most people, but despite its small size and low public profile it has a remarkable amount of power.  This power comes from two sources.  First, it has institutional credibility.  I honestly don't know how it's managed to keep this credibility in the face of what must be enormous partisan pressure, but it has.  It's widely considered an honest broker and its budget estimates are taken seriously by everyone.

Second, although the CBO itself doesn't have a huge staff or control of a huge budget, Congress has agreed to abide by its cost estimates for legislative programs.  This means that CBO analysts have considerable indirect control over a lot of money.  And in Washington, money equals power.

So my question is: could we create an agency like the CBO, but charged with monitoring systemic risk in the financial system?  It would have to be nonpartisan and independent.  It would need to have risk management baked into its DNA as its primary mission, rather than being #7 on a list of ten goals — with everyone knowing that only the top three get any real attention anyway.  Its director would need the kind of credibility that makes people listen when he warns that other agencies are allowing too much giddiness on Wall Street.  And, finally, it would need the right mix of authority, either direct or indirect, that's enough to force people to take it seriously when its mere credibility isn't quite enough.

But here's the incoherent part: I'm not quite sure how you'd construct such an agency or what authority might be sufficient for it to do its job without getting it hopelessly at odds with other regulatory agencies.  One way or another, though, I feel that giving this mission to the Fed is simply a waste of time.  Right now, virtually every impulse — both at the Fed and in the private sector — works in the direction of either ignoring credit bubbles or actively cheering them on.  If we're going to put a brake on this, we need to think about institutional priorities and balances of power, and figure out what it would take to get systemic risk established as a bureaucratic turf with a built-in constituency dedicated to protecting it over the long term.

Smart people, help me out.  What should this look like?  Or is it foolish to think this is even possible?

Twenty Bucks on Healthcare

| Fri Jun. 19, 2009 12:07 PM EDT

It's been a rough week for healthcare reform, but Ezra Klein points to a recent Wall Street Journal poll that has a smidgen of good news:

Luckily, there are some elements of health reform that meet with overwhelming public approval. Among them is the public plan. According to the poll, 76 percent of Americans believe it's either "extremely important" or "quite important" to "give people a choice of both a public plan administered by the federal government and a private plan for their health insurance."

Hmmm.  A crisp new twenty dollar bill says this poll result is meaningless.  My guess is that (a) the vast majority of these respondents have no real idea what this even means and (b) would change their mind in an eyeblink if they saw even a single 30-second attack ad on the subject.

On the other hand, maybe I'm just cranky this morning.  In fact, I am cranky this morning.  But twenty bucks still says I'm right about this.

Khamenei's Sermon

| Fri Jun. 19, 2009 11:51 AM EDT

Iran's supreme leader, Ayatollah Ali Khamenei, gave his long awaited sermon today, and it wasn't pretty:

Addressing huge crowds at Tehran University, the ayatollah voiced support for President Mahmoud Ahmadinejad, saying the president's views on foreign affairs and social issues were close to his.

....Responding to allegations of electoral fraud, the ayatollah insisted the Islamic Republic would not cheat. "There is 11 million votes difference," the ayatollah said. "How can one rig 11 million votes?"

....He said the election was a "political earthquake" for Iran's enemies — singling out Britain as "the most evil of them" — whom he accused of trying to foment unrest in the country.

"Some of our enemies in different parts of the world intended to depict this absolute victory, this definitive victory, as a doubtful victory," the Supreme Leader said.

Until now, there was some thought that Khamenei might back down and look for a compromise solution of some kind.  Doesn't look that way now.  On the bright side, though, Obama's careful reaction seems to have shifted the mantle of Great Satan to a different country for at least a few days.

Steve Aquino has more here.

Best in Blog: 19 June 2009

| Fri Jun. 19, 2009 9:00 AM EDT

Happy Friday to the cats and the frog. Three quick MoJo must reads before you glue yourself to today's Iran coverage:

1) Sotomayor With A Starr

Conservative legal stalwart Kenneth Starr has endorsed Obama's Supreme Court pick. David Corn broke the news, writing: "He noted that he has not written any official endorsement letter for Sotomayor but that no one had asked him to do so—suggesting he would if requested." How will Rush, Newt, and other 4-letter-word Republicans take it? Read more.

2) John Ensign's Interns Pack It In

Now that anti-gay marriage Sen. John Ensign has admitted his own opposite-marriage problem with The Ladies, will we get an Ensign resign? Note to Ensign interns: MoJo's hiring! Join our scandal-free DC bureau and investigate your ex-boss and his ilk for a living. Read more.

3) Did Lead-Laced Sludge Taint Michelle Obama's Garden?

It's not easy being green. After the National Park Service disclosed that the White House plot was a wee bit toxic, lead-based paint was fingered as the culprit. But what if the real plot problem is the Clinton-era "very clean poo" once used to fertilize the White House South Lawn? Read more.

Plus, keep an ear out later today for David and Kevin's week-in-review podcast.

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Quote of the Day

| Thu Jun. 18, 2009 7:38 PM EDT

From Mohsen Makhmalbaf, Iranian filmmaker and external spokesman for Mir Hossein Mousavi, telling Foreign Policy magazine that rapprochement with Iran will only happen when both Iran and the United Status have leaders willing to put aside bluster and pursue real engagement:

FP: Would Mousavi pursue a different foreign policy than Ahmadinejad?

MM: As you may know, former President Mohammad Khatami, who is supporting Mousavi at the moment, was in favor of dialogue between the civilizations, but Ahmadinejad talks about the war of the civilizations. Is there not any difference between the two?

We are a bit unfortunate. When we had our Obama [meaning President Khatami], that was the time of President Bush in the United States. Now that [the United States] has Obama, we have our Bush here [in Iran]. In order to resolve the problems between the two countries, we should have two Obamas on the two sides. It doesn't mean that everything depends on these two people, but this is one of the main factors.

Actually, Khatami served most of his first term during Bill Clinton's non-blustery presidency, but at the time both presidents were too afraid of conservative backlash at home to make any real progress in U.S.-Iranian relations anyway.  Still, Makhmalbaf is right that it's more helpful than the alternative.  Keep your fingers crossed.

Starr Endorses Sotomayor

| Thu Jun. 18, 2009 5:47 PM EDT

Ken Starr, the uber-conservative special prosecutor last heard from trying to chase Bill Clinton out of office, says he "thinks very well" of Sonia Sotmayor and has told several senators that he supports her nomination to the Supreme Court.  David Corn has the details.

The Party of Nyet

| Thu Jun. 18, 2009 5:18 PM EDT

Jim Manzi is opposed to the Waxman-Markey climate bill because he thinks it won't be effective and wouldn't be worth it even if it were.  Fine.  But there's something missing here:

At a practical political level, as far as I can see, the fulcrum of the debate is among midwest and mountain state Democrats. The Republicans (excepting the senators from Maine) seem solidly against it, and most coastal Democrats solidly for it. The legislative strategy appears to be to cut whatever side deals are necessary to get the swing Democrats to support it. This mostly has meant giving away special allowances and spending programs to pretty much every industry or region that actually produces greenhouses gasses at sufficient scale to play the lobbying game.

There does not seem to be any line in the sand that they will not cross. At this point, the side deals seem to have consumed the cap. That is, when you look under the hood, there is not really a material binding cap in this bill for at least a decade....In fiscal terms, Waxman-Markey will bring in almost nothing. We’ve given it all away.

Obviously I have a more generous view of Waxman-Markey than Manzi, but even if you accept his political analysis (which is basically correct, I think) you have to ask: Why is there no line in the sand that the bill's sponsors won't cross to get support from midwestern Dems?  Why are they so eagerly giving away the farm?

And the answer is obvious: it's because Republicans have cynically decided nearly en masse to blindly oppose any action on climate change whatsoever.  This means that Waxman and Markey have no choice except to grimly cut deals with every last parochial interest on the Democratic side just in order to get anything passed at all.  So that's what they're doing.  And it's ugly.

Now, if they wanted to, Republicans, in return for their votes, could fight to keep the bill cleaner, keep it more effective, and insert provisions that would make it more acceptable to conservatives.  That would be great.  Waxman and Markey wouldn't have to give away the store to every congressman with a coal mine in his backyard if there were even a small band of serious Republicans willing to support a climate change bill and bargain in good faith to help get it passed.

But there isn't.  It's the Party of Nyet that's created this political dynamic.  They can stop it anytime they want.

Philosophy!

| Thu Jun. 18, 2009 2:19 PM EDT

Matt Yglesias translates some questions from Le Bac, France's college admission test/high school leaving exam.  These are from the philosophy test:

— Does objectivity in history presuppose the impartiality of the historian?

— Does language betray thought?

— Explicate an excerpt from Schopenhauer’s The World as Will and Representation

— Are there questions that are un-answerable by science?

Matt says the correct answers are "no, no, I don’t know anything about Schopenhauer, and yes."  That's surely wrong.  The correct answers are no (but it helps); sometimes; I don’t know anything about Schopenhauer; and yes.

That last one is especially strange, isn't it?  The answer is obviously yes in a trivial sort of way: science will never determine whether chocolate ice cream tastes better than vanilla, for example.  But that's so dumb it makes you wonder if something got lost in translation.  So here's the original: "Y a-t-il des questions auxquelles aucune science ne répond?"  Anyone care to retranslate?

As for the question getting the most mockery — "Is it absurd to desire the impossible?" — I would use the standard dodge of philosophy students everywhere: please first define "absurd."  That should be sufficient to derail the conversation long enough for everyone to get bored of the whole topic.

Relatedly, Dana Goldstein asks, "Could you ever imagine the SAT or ACT asking students to write an essay on such complex, intellectual topics?"  No, I couldn't — though I could imagine questions of similar difficulty showing up on an AP philosophy test.  If there were an AP philosophy test, that is.  Which there isn't.  However, I'd be very careful before using this as evidence of the superiority of French education.  It's different, surely, but not necessarily better.