Kevin Drum

California's Great Irony

| Thu Jul. 23, 2009 11:40 AM EDT

In the LA Times today, Harold Meyerson echoes a common complaint about California's two-thirds rule for approving tax increases and budget resolutions:

The most basic principle of any democracy is that of majority rule, with minority rights running a clear but close second. Simple though this precept may be, California seems to have gotten it backward. The budget deal that emerged from Sacramento on Monday was the result of minority rule — the consequence of a state Constitution that vests more power in the minority party than the constitution of just about any other state.

....Californians need to amend their state Constitution, in convention if need be, to end the practice of minority rule. Democracy — not to mention the future of the state — depends on it.

I agree, but I wonder if Republicans ever stop to think about how badly these rules have hurt them too?  Don't get me wrong: for various reasons, California would probably be a blue state these days regardless of whether we had a two-thirds rule or not.  But the fact is that Californians, like most people, are generally unfriendly to tax increases.  And yet they keep voting for Democrats anyway.  Why?

Well, why not?  Everyone knows the two-thirds rule will keep them from raising taxes, so if you like them for other reasons there's no reason not to vote for them.

But what if they could boost tax rates?  Then, basically, their bluff would be called.  They'd have to either raise taxes, thus pissing off a lot of people and giving Republicans a great campaign issue, or they'd have to leave taxes alone and take responsibility for cutting services.  There would be no Republicans to blame it on.  And guess what?  That might make Democrats quite a bit less popular.

Now, it's unlikely that anything could turn the California legislature over to the GOP in the near future, but in the past 25 years California has had only one Democratic governor — and we recalled him after five years in office.  We're not all that unfriendly to Republicans.  If Democrats had the power to raise taxes — and actually did it — we might become even less unfriendly toward the GOP.

In other words, even though the two-thirds rule is the only thing that currently gives Republicans any influence at all in Sacramento, repealing it might be their only long-term hope of ever taking back the California legislature.  Ironic, isn't it?

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Where are the Witnesses?

| Thu Jul. 23, 2009 11:14 AM EDT

Question about Henry Louis Gates' encounter last week with Cambridge's finest: what's up with the witnesses?  The initial reports suggested there were half a dozen onlookers, but I haven't heard anything further about this.  It's hard to believe that no one has managed to round up at least a couple of them since Thursday.  Like, say, the neighbor who took this picture.  Have I just missed something?  Did I read the initial reports incorrectly?  Or what?

Anybody know?

Business and Healthcare

| Thu Jul. 23, 2009 10:14 AM EDT

Yesterday a reader emailed to ask whether the business community was supporting or opposing healthcare reform.  Well, as the Washington Post notes, the Chamber of Commerce recently came out against it while Wal-Mart has come out in favor:

Less noted has been the diversity of opinion among small and medium-size businesses. Many agree with the Chamber that a public insurance option would undermine the private insurance market and that requiring companies to provide coverage would impair job growth. Others say the current system is so broken that they are assessing whether to support the reform plans.

The wait-and-see approach that many businesses are taking — alternately skeptical and hopeful — is a further sign that the alliances that previously scuttled health-care reform may be scrambled this time around, not just in the health-care industry but also in the business world at large. President Obama and congressional Democrats face formidable obstacles to their reform efforts, but one factor in their favor is businesspeople who may not be as inclined as they were in the past to bring grass-roots pressure against reform.

This is probably about as good as we could have hoped for.  When the bullets finally start flying, it was always unlikely that either big or small businesses would be enthusiastically in favor of healthcare reform.  It's just not in their DNA, and the web of allies and lobbyists they're part of naturally works to keep them skeptical.  Still, the mere fact that they're divided, not rabidly opposed, demonstrates just how far things have come since 1994.  Whether that's enough to help deliver a few Republican and Blue Dog votes is hard to say, but at least it probably won't cost us any.

Ka-Ching!

| Thu Jul. 23, 2009 12:55 AM EDT

I'm glad to see that things are back to normal:

Wall Street, helped by improving profits, is on track to pay employees as much as, or even more than, it did in the pre-crisis days. So far this year, the top six U.S. banks have set aside $74 billion to pay their employees, up from $60 billion in the corresponding period last year.

....Some analysts and investors had especially sharp words for Wall Street rival Morgan Stanley, which reported Wednesday that it had set aside $6 billion so far this year for compensation expenses even as it recorded its third straight quarterly loss. In reporting its second-quarter results, Morgan Stanley said it lost $1.26 billion, after accounting for one-time charges including an $850 million expense related to paying the government back after its bailout. Still, the company set aside $3.9 billion in compensation expenses, representing 72 percent of its revenue for the quarter.

As long as bankers are paid obscene salaries and bonuses, all is right with the world.  I'm sure we'll all rest easier tonight knowing this.

Press Conference Liveblogging

| Wed Jul. 22, 2009 7:30 PM EDT

Half an hour into tonight's press conference Barack Obama has answered a grand total of three questions.  This is not a good performance.  He really needs to pick up the pace and make his answers crisper and more comprehensible.

UPDATE: Aside from the rambling nature of his replies, I don't think Obama has been good on substance either.  His opening statement had a little bit of good stuff about healthcare security, but he's spent the vast bulk of his time on deficits and cost cutting.  That's just not a good sales job.

UPDATE 2: All done.  I'm curious to hear what other people thought, but this really struck me as nowhere near his usual performance.  Obama avoided giving direct answers, rambled a lot, kept interrupting himself with asides, and didn't explain things in terms that ordinary viewers were likely to understand.  He's supposed to be the communicator-in-chief, but I wouldn't be surprised if a lot of people came away more confused than they were when they tuned in.  Bottom line: There were bits and pieces that were fine, but overall I'd give it a C-.  Other comments?

Bending the Curve

| Wed Jul. 22, 2009 6:16 PM EDT

Brad DeLong tries to figure out why the Congressional Budget Office has been so pessimistic about the potential for healthcare reform to reduce long-term costs:

The problem, I think, is that the CBO has a category for cost control but no category for getting system incentives right. It is a budget office, after all, not a philosopher-king office. The problem, however, is that it is the only arbiter out there. And there appear to be a lot of members of congress who think controlling costs = getting system incentives right.

I don't think we should care much about costs: it might be in the future we want to spend a lot on health; it might be that in the future we develop magic treatments and so want to spend a lot less. If we get the system incentives right, then whatever we spend on health will turn out to be the right thing to do.

There are useful things we can do that will help control costs.  Better IT, for example.  Lower administrative overhead.  Comparative effectiveness research.  For the most part, though, these are one-shot deals.  They're worth doing, but you only get to do them once.  And once they're done, costs keep going up.  They go up from a lower base, but they still go up.

Then, as Brad says, there are things that help align incentives better and (maybe, possibly) bend the curve of rising healthcare costs downward.  Moderate copays, for example, can help reduce unnecessary doctor visits.  Cheap (or free) access to preventive medicine can keep chronic ailments from turning into expensive acute crises.  Paying doctors straight salaries probably promotes more efficient use of expensive services than either capitation or fee-for-service. Universal coverage can prevent overuse of expensive emergency room services.  A more sensible malpractice regime might reduce defensive medicine (and more fairly compensate victims of genuine malpractice in the bargain).

But in the end, both as individuals and as a society, we're going to spend as much on healthcare as we feel like spending.  And why not?  We should spend our incomes on whatever we value the most, and for a lot of us that's healthcare.  If that turns out to be 30% of GDP, then it's 30% of GDP.

And that's what will eventually bend the curve in healthcare costs: when we all finally decide that we're spending enough.  Whether we're doing it as individuals, as employees with healthcare insurance, or via tax dollars, we'll get serious about controlling costs when we decide that costs have gotten too high.  Until that happens, though, well-designed incentives may make things more efficient but won't appreciably reduce the rise in total spending.  I don't think politicians can afford to say that in public, but it's probably true.

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Time to Leave the Island

| Wed Jul. 22, 2009 4:04 PM EDT

Rich Miller of Bloomberg reports:

Global investors give Federal Reserve Chairman Ben S. Bernanke top marks for combating the worst financial crisis since the Great Depression and overwhelmingly favor his reappointment amid optimism that the world economy is on the mend.

Well, I don't favor it — and this has nothing to do with whether Bernanke has done a good job or not.  Just look at a couple of the quotes Miller dug up.  "He's the best, maybe around the world," says one guy.  "If he weren't renominated, it could have potentially very serious and severe repercussions on the stock market and the economy," says another.  Spare me.

Look: Bernanke isn't indispensable, any more than Alan Greenspan or Paul Volcker or William McChesney Martin were.  But everyone thought they were indispensable at the time, and that's a dangerous way to think about these guys.  Putting Fed chairmen on a pedestal, as the financial community does routinely, breeds both complacency and insularity.  In the long run, it's bad for business.

Wall Street needs to calm down and learn that being Fed chairman for a few years doesn't make someone superhuman.  The world won't end if Bernanke is replaced by one of the other dozen or so highly qualified candidates available, and Obama should take the chance to demonstrate this when he chooses Bernanke's replacement.

How to Be a Very Serious Person

| Wed Jul. 22, 2009 1:23 PM EDT

If you want to be a Very Serious Person in the foreign policy wonk community, Stephen Walt lays out the rules of the road here.  I'm not sure he's correct about #5 and #6, but the others sound about right.  Via Dan Drezner.

Righteous Anger

| Wed Jul. 22, 2009 12:38 PM EDT

It's true, as Josh Marshall said yesterday, that the political and institutional landscape is more receptive to healthcare reform this year than it was in 1994.  We have bigger majorities in Congress; the GOP is in tatters; the HMO revolution has failed; the AMA and the hospital industry are willing to play ball; unions are working with us; business opposition is far more muted; and Obama's legislative strategy is more sophisticated than Clinton's.

Oh, and the public mood is more favorable to healthcare reform too.  Right?  Bob Somerby doesn't think so:

In fact, the Democrats “went into this round” with a public which is massively clueless about health care reform — and massively lacking in righteous anger, in angry desire for change....Real progressives would work for years — for decades — to develop public understanding and anger about such complex affairs. It takes a long, aggressive struggle to develop progressive political frameworks. As Krugman explained, the other side has pimped its poll-tested narratives down through all those years. But our own denatured “liberal leaders” are too fat and happy to fight against that. When have you ever seen them fight to develop a winning politics about anything known to this earth?

I'm not quite that gloomy, but I think Bob is basically right.  Sure, if you take a survey and ask people if they "support healthcare reform," a large majority will say yes.  But while that may be better than a large majority saying no, it's mostly meaningless.  Most repondents haven't thought about it much, don't really know what healthcare "reform" is, and will switch views in a millisecond once they see a single TV attack ad.  What you need isn't people willing to murmur yes to a pollster, it's people pissed off enough to inundate their congressmen with phone calls.  But we don't have that.

Even though it's an even day and I'm supposed to be pessimistic about healthcare, I still think it's more likely than not that we'll get a fairly decent bill passed this year.  Call it 60-40, maybe a little better.  But the odds would be a lot shorter if liberals had done a better job over the past decade of getting middle class voters as angry about their healthcare as they get over, say, a pothole outside their front door.  Note to Dems: it's still not too late.

Lou Dobbs is a Crackpot

| Wed Jul. 22, 2009 11:37 AM EDT

I see that Lou Dobbs is continuing to take seriously the "birthers" — the clowns who claim that Barack Obama wasn't really born in Hawaii and is therefore president illegally.  I'm very pleased to hear this, since it means maybe — just maybe — it will finally make obvious to the broader world just how far off his rocker Dobbs has gone.  If it does, it will have been worth it.

POSTSCRIPT: And as long as we're on the subject, note that this guy is my congressman.  Dresses nice, doesn't he?