Kevin Drum

Chart of the Day

| Thu Jul. 16, 2009 11:37 AM EDT

Via Conor Clarke, this chart shows the effective federal tax rate paid by the rich over the past 15 years.  The basic story is simple: As their incomes have gotten ever higher, their tax rates have gotten ever lower.  So if tax rates on the rich are raised to help pay for healthcare reform, as some Democrats are proposing, it would just return us to the rates of the early 90s, not some hellish confiscatory dystopia.  Bruce Bartlett says that if this happens, Republicans have only themselves to blame:

For many years, I have urged conservatives to think about ways of raising new net revenue for the government. My fear has always been that sooner or later, pressure to raise taxes will become overwhelming. If there wasn't a conservative option available, then the default policy would be to sharply raise tax rates on the wealthy. Now it looks as if that day has arrived.

....In the end, higher tax rates on the rich are inevitable if only because of expiration of the Bush tax cuts next year. Since that would just return rates to where they were in the 1990s when growth was robust, any claim that this will destroy the economy should be taken with many grains of salt.

Still, it would be better to pay for health reform some other way. But if Republicans refuse to propose any alternative, insisting instead that taxes should never be raised for any reason, they pretty much guarantee that Democrats will raise the top rate. If that happens, Republicans will bear some responsibility as well.

Yep.  If I were designing a system from scratch I'd probably finance it differently too.  But Republicans have been so successful at demonizing taxes over the years that there aren't very many practical alternatives open any more.  Returning top marginal rates to the level they were at in the 90s is one of the few left.

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Assassination by PowerPoint

| Thu Jul. 16, 2009 11:15 AM EDT

Robert Baer writes in Time about the CIA program that's been kept secret from Congress for the past eight years.  It was, as well all know by now, an "assassination squad":

Like many of these stories, there's less to it than meets the eye. The unit conducted no assassinations or grabs. A former CIA officer involved in the program told me that no targets were picked, no weapons issued and no one sent overseas to carry out anything. "It was little more than a PowerPoint presentation," he said. "Why would we tell Congress?"

That's a good question, especially since the program was an open secret. On Oct. 28, 2001, the Washington Post ran an article with the title "CIA Weighs 'Targeted Killing' Missions." And in 2006, New York Times reporter James Risen wrote a book in which he revealed the program's secret code name, Box Top. Moreover, it is well known that on Nov. 3, 2002, the CIA launched a Hellfire missile from a Predator drone over Yemen, killing an al-Qaeda member involved in the attack on the U.S.S. Cole. And who knows how many "targeted killings" there have been in Afghanistan and Iraq?

As Baer goes on to point out, assassination is a no-no: "In the CIA, that was the closest thing we had to the Ten Commandments."  But what about assassination during wartime?  A plot to assassinate Saddam Hussein in 1995 would have been illegal, but the same plot in March 2003 would surely have been OK.  In fact, we tried pretty hard to do exactly that during the "shock and awe" bombing phase that kicked off the war.

But as usual, the "war on terror" is in a gray area all its own.  Is it a real war?  Is a guy with a sniper rifle different from an Air Force specialist guiding a Predator drone?  Is the CIA under the same restrictions it would be under during peacetime?  What are the rules?

If the news reports are right about this program, it deserves a full-scale investigation by Congress.  Everybody knows we're trying to kill al-Qaeda operatives one way or another, so it's not as if we'd be revealing any dark secrets of national security.  And if the whole thing really was just a "PowerPoint presentation," it might exonerate the CIA and remove the cloud currently surrounding them.  What's the argument against doing this?

Al Franken's Perry Mason Moment

| Thu Jul. 16, 2009 1:51 AM EDT

Hey, it's Laura. Instead of doing a MoJo Mix tonight, I thought you might like this video of Al Franken's first funny as senator. His Perry Mason bit (see below) comes from Wednesday's Sotomayor hearings, (which you can watch with livestreaming MoJo commentary all week on our All Things Sotomayor blog/video extravaganza page). Worth a watch:

And if you missed the hearings Monday, Tuesday, or Wednesday, check out Stephanie Mencimer's wrap-ups: Pride and Prejudice, Where Did Sotomayor's Empathy Go?, and Sotomayor Slips Up. [For Thursday's live analysis, there's our video and live blog here, or follow Stephanie's and David Corn's coverage on Twitter.]

Laura McClure hosts podcasts, writes the MoJo Mix, and is the new media editor at Mother Jones. Read her investigative feature on lifehacking gurus in the latest issue of Mother Jones.

Fighting the Zombies

| Wed Jul. 15, 2009 9:02 PM EDT

Bryan Caplan offers up a criticism of the House healthcare reform bill:

The Krugman we've got is sold on the House health bill.  But the Krugman we had, the thoughtful economist who wrote The Accidental Theorist, would have responded differently.  Krugman Past, unlike Krugman Present, would have pointed out that when the unemployment rate is 9.7%, it's a bad idea to legislate an 8% payroll increase on businesses that fail to offer health insurance.   Employers are reluctant to hire workers at today's wages; how are they going to feel once the marginal worker gets 8% pricier?

It's not just Krugman who should be against such legislation at a time like this; so should any sensible Keynesian.

"At a time like this."  I think I've read critiques similar to this about a thousand times now.  I guess it sounds mighty clever, hoisting Keynesians by their own petard or something.  But it's nonsense.  The "pay-or-play" payroll tax increase doesn't go into effect until 2013 — and if the recession isn't over by then we've got way bigger things to worry about than a minor increase in payroll tax receipts.

Ditto for Waxman-Markey, which frequently gets the same treatment.  But W-M won't have any effect on energy prices for years, and even when it does the impact will be tiny at first.  Like healthcare reform, it won't have the slightest effect on the recession because it won't take effect until well after the recession is over.

If you want to argue that higher payroll taxes are bad in general, then fine.  I might even agree with you depending on what alternative you offer up.  But leave the recession out of it.

Reid on DADT

| Wed Jul. 15, 2009 1:15 PM EDT

Harry Reid says he'd support a permanent repeal of the Pentagon’s “don’t ask, don’t tell” policy on gays in the military:

“We’re having trouble getting people into the military,” Mr. Reid told reporters when questioned about whether he could support an 18-month moratorium on enforcing a prohibition on gays in the armed forces. “And I think that we shouldn’t turn down anybody that’s willing to fight for our country, certainly based on sexual orientation.”

Mr. Reid said he would go the proposal, being considered by Senator Kirsten Gillibrand, Democrat of New York, one better and support a permanent repeal of the ban.

This is a useful bellwether.  Reid doesn't generally stick his neck out on stuff like this, and up until recently he's been distinctly lukewarm about even engaging with the issue.  So if he's decided to take a firm stand, it's probably because he doesn't think there's really much risk in it anymore.  It's become a pretty mainstream position.  If we can just get the Pentagon brass to say the same thing, maybe we'll finally make some progress on this.

Web Design Woes

| Wed Jul. 15, 2009 12:51 PM EDT

I came to the conclusion some time ago that news site redesigns are always bad.  Compared to the previous site, redesigned sites are almost invariably slower, more annoying, harder to use, or a combination of all three.

But Time magazine really takes the prize.  Their old site was plain but basically fine.  The new one is so ugly, squashed, and badly laid out that I can hardly stand to read it anymore.  So I guess I'll do what I always do in these cases: add it to my RSS feed and never go back again.  Yeesh.

UPDATE: No joy.  The new site engages in one of my pet peeves: cutting off all posts after the first paragraph so you have to click each and every post separately if you want to see what the Swamplanders are talking about today.  RSS to the rescue!  But no.  They only offer a partial feed.  Jesus.

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Explaining Al Gore

| Wed Jul. 15, 2009 12:29 PM EDT

Bob Somerby, employing his traditional royal we, makes an announcement today:

After Labor Day, we plan to roll out a new product; at a new web site, we plan to start posting our (largely written) book about the press corps’ coverage of Campaign 2000.

That's good news — though I confess I'd personally prefer to simply read the whole thing at once instead of getting it a chapter at a time on the web.  How about a Kindle version, Bob?

Robin Hood

| Wed Jul. 15, 2009 11:18 AM EDT

Ezra Klein spots a trend:

My colleague Binyamin Appelbaum noticed something interesting yesterday: Robin Hood movies are tied to recessions. We're talking here about the adult Robin Hood movies. So set aside "Men in Tights" and the Disney cartoon. Instead, look at first major Robin Hood film, "The Adventures of Robin Hood". Release date? 1938. Similarly, "Prince of Thieves" came out in 1991, another recessionary year. And I ran a quick Google search: Sure enough, there's another Robin Hood movie slated for May of 2010.

1938 marked the first major Robin Hood film?  Please.  I claim a point of personal privilege.  My father's name was Dale Douglas Drum.  His first name was based on the character Allan-a-Dale and his middle name was taken from the actor Douglas Fairbanks.  Why?  Because shortly before he was born my grandparents had seen the 1922 version of Robin Hood starring Fairbanks and the names were fresh in their heads.  It was quite famous in its day.  But was there a recession in 1922?

Decide for yourself.  NBER says there was an 18-month recession from January 1920 to July 1921 and a 14-month recession from May 1923 to July 1924.  So it was a generally contractionary period.  But 1922 itself?  Recession free!  I claim a foul.

In related news, my father was born in 1926, which just goes to show how long it took movies to make their way into smaller cities back then.  The good citizens of Portland get better treatment from Hollywood these days.

The End of CDS?

| Wed Jul. 15, 2009 11:02 AM EDT

Do you think the country would be better off if credit default swaps were banned?  Apparently so does someone in the House, who inserted language into the Waxman-Markey climate bill that would outlaw them.  The intent of the language, apparently, is to ban "naked swaps"; that is, to allow people to buy CDS insurance only on credit instruments that they themselves own.  But the actual language goes further.  Zach Carter reports:

Today, if a bank is worried that a debtor might default on a loan, it can still go to a CDS issuer like American International Group Inc. and buy insurance on that debt. But completely unrelated firms with no interest in the underlying loan can also go to AIG and bet that the debt will not be repaid. This kind of bet is known as a "naked swap" and, by 2007, the market for naked swaps was completely out of control. The notional value of the CDS market had exploded to over $62 trillion, according to the Depository Trust and Clearing Corporation, well in excess of the entire global economic output for a full year.

"Let's say there's $1 trillion worth of obligations in the economy. You can use CDS to create $5 trillion worth of additional obligations," said Joseph Pastore III, a managing partner with the Fox Rothschild LLP law firm who works with CDS. "When you melt it all down, and there's only $1 trillion worth of cash and $5 trillion worth of obligations, it causes absolute economic devastation."

Here's the key passage from Waxman-Markey, buried on page 1,070 of the 1,428-page bill introduced in the Senate on July 6:

[Blah blah blah....]

"Clearly, the intent was to limit the multiplier effect of CDS by requiring only those parties with a risk to be able to insure the risk," Pastore told SNL.

But the restrictions apply to "any person" who would "enter into" a CDS contract, not merely to any company that would purchase one. That means banks are allowed to hedge risks by purchasing CDS, but CDS issuers like AIG are actually forbidden from selling them. When AIG offers insurance protection, AIG is not hedging anything; it's just making a speculative bet that a certain debt will not be repaid. In practice, then, Waxman-Markey would ban any credit default swap whatsoever, hedge or bet.

"A literal reading of it would prevent anyone from entering into a CDS contract, because the party that owns the underlying instrument needs to find somebody else to enter into the swap agreement with," Pastore told SNL.

I assume this language will get cleaned up, and even if it doesn't the courts will likely rule that "enter into" merely means "buy."  But maybe not!  Maybe Waxman-Markey will obliterate the CDS market entirely.  Stay tuned.

Progressives

| Tue Jul. 14, 2009 9:09 PM EDT

I've finally given up on progressives.

Lenses, that is.  I tried 'em for over a month and just couldn't adjust.  Distance vision was fuzzy everywhere except dead center, and the reading portion didn't work at all.  So I took them back and in a few days I'll have a pair of genuine old-man bifocals.  Just like my hero, Benjamin Franklin.