Clowns to the Left of Me, Jokers to the Right

It may be premature to write the obituary of health care reform today, but it’s hard to deny that it is bleeding, panting and prone. Who was responsible for what may be its mortal wounds?

It wasn’t Martha Coakley or Scott Brown. It isn’t her fault that she’s an awful candidate, or his fault that he’s a talented one. No, the bulk of the blame belongs to others. With deference to one of our honorees, let’s call these… the worst persons in the world!

This debacle wasn’t all these guys’ doing. But each of them represent in a perfect way the three groups that dimmed the dream of health care for (nearly) all. 

Republicans. Richard Nixon proposed a health care plan that was very similar to the current proposal. Mitt Romney signed a plan in Massachusetts that was also a close analogue, but failed to address costs. A proposal like this one has been well within the Republican mainstream before, yet still Republicans have maintained the fiction that this was a far-out government takeover of health care. It is hard to conceive of how a plan could do more to minimize government intervention and still broaden coverage significantly. 

The Republicans calculated that they had more to gain from a Democratic failure than from a bi-partisan success – and of course, they were right. But if they ever regain a Congressional majority, they will have to live with the culture they have created... drink the soup they've peed on, if you will. They’ve not only proven that obstruction is a winning formula, they have facilitated the means. 60 votes in the Senate, a super-majority that Republicans have not enjoyed since 1922, is now necessary for -- not just controversial -- but any significant bit of business. They might be able to lower taxes and drive us into penury through reconciliation, but anything needed and significant (like controlling Medicare costs) will be out of their reach. We are well on the way to Californiazation: a labyrinth of gridlock with Debt as the Minotaur.

Democratic Centrists. If Max Baucus had not dawdled for months in the foolish hope of getting a Republican to sign on and thus make it a little easier for his centrist buddies to cast a tough vote, this bill would already have been signed. If Lieberman had not killed Medicare expansion, a lot of support from the left would have been saved. If Nelson hadn’t held out for a Nebraska freebie, the Republicans’ best talking point would have been averted. All these guys, but particularly Baucus, share responsibility for the bill’s predicament.

Look, all sides face political pressure. And it is perfectly legitimate for legislators to fight for their interests. But politics is a team sport. It is better to score fewer points on a winning side than be the losing side’s big scorer. These guys thought they were covering their hide, but all of them will be in electoral trouble anyway; it’s impossible to defend a losing bill you voted for. When they get sent home, they won’t be able to say they saved many families from bankruptcy, or got medical care to those who needed it. They lacked circumspection and a sense of proportion about the stakes at play. They valued their place in office more than their place in history.  

Democratic Lefties. Let’s not pretend this bill’s death-knell came solely from the moderates. In fact, some timely reporting seems to indicate that it is the progressives who are setting up the roadblock in Congress. Who are these people led by? Olbermann in the media, Kucinich in Congress, Jane Hamsher in the blogosphere. They decided to draw their line in the sand at a bridge too far: the public option, a proposal that never came close to having 60 votes. Even after the public option was diluted beyond significance, they kept at it as a matter of pride. What was the effect of this? Here, why don’t I show you.
 
Given that so many are dissatisfied with the bill because it doesn’t go far enough, it’s safe to say that if the proposal had maintained the support from the left the bill would enjoy a comfortable plurality of approval in polls and the narrative that it is unpopular would never have taken root. Lefties were angry that centrists were using their leverage in full, and they wanted to have an equivalent amount of leverage. The only way to do this was to convince others (and themselves) that they were willing to walk away too. The natural effect of that was for people, on the left and in the middle, to say… “well, it must not be a very good bill then.”  

I’ve been flabbergasted at the epic ennui that so-called progressives have shown regarding the biggest progressive proposal in decades… the political dream of our lifetimes. They have placed the proposal in a murderous crossfire. Throughout, I’ve been stunned at how difficult it’s been to convince them that our most important priority should be extending coverage to the uninsured, something that I would think would be a basic assumption for them. Instead I’ve heard concern about cost controls being insufficient (as if the status quo were better), concern that the most effective form of cost control is included in the proposal, concern about the Democratic brand, concern about corporate profits, concern about ‘regressive’ taxation (on plans that cost what many would consider a healthy wage.) Really… does any of that stack up against the insuring 30 million people? Does it stack up against letting a whole lot of sick people get medical help? 

I’ll say it again… politics is a team sport. It does not help the progressive cause to destroy a Democratic Presidency that could have (and still might) launch a decades-long majority.

And how has Obama done? I think his strategy was sound, but he is on the verge of a big mistake, if we take his morning talk seriously. Kevin Drum is absolutely right: going back to the Senate would be very foolish. If Obama tries to negotiate a new bill with Snowe and the Republicans, they will do the exact thing they did in 2009. String him along for months but leave him stranded well before a roll call is called. The preferable option is for the House to pass the Senate bill with a reconciliation sidecar. If it can’t do that, then they should pass a (by necessity) more modest bill with reconciliation. Ezra Klein suggest Medicare buy-in, Medicaid expansion, and taxes on the rich to pay for it.

If Obama does choose to go back and grovel to the Republicans, he will have lost this faithful supporter. As the former President Bush once sagely said: "Fool me once, shame on me. Fool me twice… won’t get fooled again."

Fiscal Infantilism

My major beef against the GOP is that it is the major purveyor of fiscal infantilism in our country. What's the standard line?

"Obama has run up a $1.2 trillion deficit! We need to cut spending to bring down that deficit, and cut taxes to get our economy going again."

But won't cutting taxes hurt our deficit?

"No! Cutting taxes pays for itself by spurring the economy."

Even among conservative economists, the only ones who believe this last claim are hacks like Larry Kudlow who are willing to deceive themselves on the historical evidence. Look at this graph:



The Republican tax cuts of the early 80s and early aughts both raised the deficit, even as a percentage of GDP. Reputable conservative economists like Gregory Mankiw readily admit that tax cuts cost money.

But for the sake of argument, let's imagine unicorns exist and tax cuts pay for themselves. Can we balance the budget by spending cuts alone? Well, how much is the deficit projected to be next year again? $1.258 trillion. And how much is discretionary spending for next year, including defense? $1.250 trillion. You could literally cut ALL of government except for Medicare and Social Security and still not be able to balance the budget. (And of course, we know from the current health care debate that Republicans would NEVER cut Medicare spending.)

The smart conservatives all know that they can't make these promises and be fiscally responsible, but they wink at each other and say "hey, tax cuts have been pretty good for getting us elected in the last 30 years. Why change a winning formula?"

Because you can't govern responsibly by getting elected on this platform.

And why do the talking heads, who often profess to be intensely concerned with matters of fiscal rectitude, why are they unable to ask a Republican a tough follow-up when they propose mathematically impossible remedies for our country's problems?

Honest disagreements are possible in politics, but this is surely a question of character. The numbers are inescapable. If a politician is willing to run on the standard Republican platform, he is either a stone-cold idiot or someone who cares more about power than their country.

Beyond Theory

In this recent op-ed David Brooks contrasts Bentham, an arrogant central planner, with Hume, a humbler fellow who prefers decentralized, market-based solutions to problems.

I agree that there are two kinds of people in the world, but I don't divide them this way: my two groups are pragmatists and ideologues. One group works from the evidence to the solution; the other works from the solution to the evidence.

At this point in history, we can safely say that we know these things for sure: pure, unfettered markets do not work and central command economies do not work. The ideal is somewhere in the middle; we need to sort out when it is the right time to to intervene and regulate, and when we need to let the market do its magic. Who do we trust to do that? Who can look at the evidence dispassionately, and make decisions based on facts instead of predilections?

If I know nothing else about them, I'll go with the person who doesn't enter the room trumpeting his principles.

In Angels in America, Tony Kushner has the world's oldest living Bolshevik plaintively ask "how are we to proceed without theory?" That same question seems to be stirring in the hearts of many conservatives today.

Pssst! My Negotiating Position Is Not My Real Position

I know I’m not supposed to say this. I’m supposed to say “the public option is non-negotiable! No public option, no health reform!”

I realize why I’m not supposed to say what I’m going to say. The people who are willing to walk away from a deal are the ones who have the negotiating leverage. I know this. But even though I really want to see the health care reform bill include the public option, I have this thing… I can’t help but blurt out the truth sometimes. And the truth is I wouldn’t dream of letting health care reform die just because public option wasn’t included. Why? Well, isn’t it obvious?

What would happen if health care reform failed?

• Barack Obama’s presidency would be crippled. Any hopes of passing cap-and-trade, financial reform, or an immigration bill on our terms would be dimmed dramatically.


• The Democrats would likely be punished in 2010. The last time a popular Democratic President failed to pass health care reform the Dems lost 54 seats in the House. A swing of that magnitude would give the Republicans the lower chamber again.


• Health insurance companies would be able to continue to dump sick patients from their rosters.


• Coverage would continue to be out of reach for those with prior conditions.


• Lifetime caps and high out-of-pocket requirements would ensure that the endless march of healthcare bankruptcies continued.


• We likely would not see another attempt to reform health care for a generation, if ever. 18,000 people die from lack of health coverage every year; extend that number over two or three decades and perhaps half a million people might die unnecessarily if we fail to gain universal coverage.

I’m not willing to pay this price. All these items could be avoided and reversed, even with a plan that did not contain a public option. Would a true progressive put an ideal bill above the pressing interests of 47 million uninsured? No, of course not. But we have to say we will!

Pretending that we are willing to kill health reform forces us to use unconvincing arguments sometimes. For instance, we say that if we don’t get the bill right this time, we’ll never get it right. This is baloney. Comprehensive health reform is extremely hard to pass: Truman, Johnson, Carter, and Clinton all failed at this challenge. There’s simply no evidence that tweaking health programs once they are law is nearly as difficult. S-CHIP has been repeatedly amplified and refocused, Medicare grew a prescription benefit, and Medicaid has been tweaked many times over the years, sometimes for the better and sometimes for the worse.

We also say that if we don’t pass the public option health care expenses will grow out of control and the Dems will be blamed for it, allowing the Republicans to roll back our reforms. Of course, the other side will try to blame us for growing expenses (and they will likely grow anyway, with or without the public option.) But what would happen with no bill at all? Many significant measures that would lower cost and improve quality – like comparative effectiveness research, more power to MedPAC, and health care IT expansion – would be lost. As for the idea that the Republicans would roll back universal coverage, I say this: Will. Never. Happen. No industrialized nation that has achieved universal coverage has ever gone back. Even Margaret Thatcher, a political giant who privatized every damn thing she touched, didn’t dare touch the British health service.

We have to over-sell the public option. CBO says it will save the government $150 billion over 10 years; a whole lot of money, but we have to pretend the fate of the trillion dollar plan depends on these savings. And we have to exaggerate the scope, even though it’s likely that only 10 million people will be covered by the public option.

Finally, in order to make sure that Obama puts maximum pressure on the Senate centrists, we have to pretend that he has the magical ability to buckle Senators from states where he lost by 15 points. Even though we’re a ways from getting even 50 votes in the Senate, we have to pretend that 60 is a cinch. As they say, the squeaky wheel gets the grease.

I know I sound like I’m being ironic. The thing is I’m not. Yes, the public option is an uphill battle, but it’s definitely not a lost cause. That’s why Steve Pearlstein is wrong in saying we should give it up. Intrade lists the public option’s odds at 35%. We are still in the game, and not letting on to our bottom line is a big part of the game.

So maybe someone in comments is going to “disagree” with me. You’re going to call me a sell-out and a weak-kneed accommodator. You’re going to say of course we should ditch the health care bill if it doesn’t have the public option… it would be worthless without it! That's exactly what you should say, thank you. Sorry we “disagree” (wink, wink.)

Others of you (not many I hope) are going to share my lack of discipline and surfeit of honesty and tell me you agree with me. All I can say is… shame on you.

Okay, maybe now I’m being ironic.

For Übergeeks Only: Why Krugman Is Wrong

A couple of days ago, Paul Krugman wrote a widely cited post where he argued that the Geithner plan would amount to a huge subsidy for banks. The taxpayers, he fretted, would once again be taken to the cleaners. To fill in some background: in the Geithner plan Treasury funds are combined 1:1 with private equity; together they go to the FDIC and obtain a non-recourse loan six times greater than the original principal. Private investors decide how to invest while the Treasury piggy-backs on their expertise, splitting the proceeds with them.

Krugman is skeptical. The fact that the loans are non-recourse, he writes, would mean that investors would likely take greater risks since their losses are capped, costing the taxpayer dearly. I know... he won a Nobel Prize and I didn't. But he's wrong and I'm going to prove it.

Here's the example Krugman cites:

Suppose that there’s an asset with an uncertain value: there’s an equal chance that it will be worth either 150 or 50. So the expected value is 100.

But suppose that I can buy this asset with a nonrecourse loan equal to 85 percent of the purchase price. How much would I be willing to pay for the asset?

The answer is, slightly over 130. Why? All I have to put up is 15 percent of the price — 19.5, if the asset costs 130. That’s the most I can lose. On the other hand, if the asset turns out to be worth 150, I gain 20. So it’s a good deal for me.

Here is what he means. A bid of $130.50 makes the average outcome of the scenarios $0. That is the breakeven point... a higher bid than that will, on average, result in a loss:
In another post, he explains that "two-state numerical examples" are the natural way to think about these things. Really? Just out of curiousity, what would happen if we went to a three-state numerical example?
Huh. When you add a middle scenario, all of a sudden the breakeven point has gone down to $116.28. Of course, in real life outcomes don't isolate themselves into two faraway islands. What if we kept on adding scenarios...
Wow. It looks like if we modelled this more like real life the overbidding Krugman writes about diminishes. If there were an infinite number of scenarios between $50 and $150, as there would be in real life, the degree of overbidding might even be reduced to single digits.

Let's also ask ourselves: is the spread of uncertainty likely to be as wide as Krugman's example? Think about it. There's a 3x spread between the high value and the low value. This would be like saying that a security with a face value of a dollar could as easily cost 25 cents as 75 cents. Remember that investors will have information about the payment history and location and credit history of the borrower, and remember that they have a wealth of prior experience on how similar borrowers have performed before. Isn't it likely they will be able to make far better projections than that? What if we narrowed the scope of uncertainty?
That makes a huge difference. Now the rational investor is only overbidding by just under 5%. But okay, let's say we overshot when we narrowed the spread of the scenarios. After all, no one can really predict economic performance, and that will certainly be a significant variable. Let's widen the scenarios a little to say... 40% on either side. But let's not pretend that there's an equal chance of getting extreme scenarios as opposed to the middle scenarios. Let's weigh the scenarios on a bell-shaped curve, giving more weight to the likelier middle scenarios, and less weight to the unlikelier extreme scenarios:
Still, a rational investor is only overbidding by around 5%. But I hear you say: 5% of a trillion bucks is an awful lot of money. It sure is. But there are other factors we have not considered yet.

First of all, the FDIC loans are low-interest... but they're not no-interest. The government will be making some money on the loans that do happen to perform.

But more importantly, there is a fallacy in our calculations. We're pretending investors are eager to risk capital just for the sake of breaking even. That's crazy. On the day the Geithner plan was rolled out, Bill Gross of PIMCO went on CNBC saying he expected returns in the "low teens." For any investment where the entirety of your capital is at risk, that is the minimum you should expect. So the bids are going to be lower than the breakeven price; they need to factor in their profit. Notice also that profit expectations increase as the range of uncertainty we mentioned above, the risk, increases.

Nor should we forget that it's not cheap to pore over loan tapes and make calculations that are far, far more sophisticated than the ones we've just done. Expenses will be at least 1%... probably more. Lower the bid by that amount. (Meanwhile, our government will have no such expenses.)

Together, these underbidding effects will dwarf any overbidding due to the capped losses. While there is no guarantee that the U.S. will not lose money on this deal, it is far likelier that we will profit. As many economists before, Prof. Krugman has let his theory come untethered from reality.

Update: I forgot to decrease the cap amount as the bid decreases! Still, that doesn't change the numbers too much. In the final case, I still have a number just slightly above 5%. I'll update with correct numbers later. 1:32PM: The numbers are now corrected.

How Long Does Obama Have?

Everyone seems to be asking themselves how long Obama has before the American people start getting -- as Andrew Sullivan puts it -- pissy. Nate Silver looks at polling data and guesses that it will be a year and a half. Blumenthal is skeptical, but not very specific.

I'd like to approach the question not from current poll data but from historical analogy. The other harsh recession since the great depression was the 1981-82 slump, when Reagan was in power. Like Reagan, Obama is a President with a pretty strong connection to the American people, so the comparison is apt that way. Let's look at the unemployment rate since that seems to be the measure that's most connected to popular anxiety, even if it is a trailing indicator for the economy.

Unemployment started going up in July 1981 and peaked in December 1982. Reagan's popularity bottomed around 45% in January of 1983, so it never really cratered. It was above 50% until October 1982. That seems to confirm Nate Silver's guess: about a year and a half, maybe a little less. I would just add two things: Reagan's recession began during his term. He was quite effective in blaming it on Carter, but the timing surely didn't help him. Obama's recession is more closely identified with his predecessor because it was already a year old when he stood on the Capitol steps to take the oath. Also, I would note how fast Reagan's popularity rebounded as the economy improved. Even though the unemployment rate was still above 10% half way through 1983, the economy was showing signs of recovery, so his approval rating was steaming back up to 60% by the fall of that year. Which is to say, if we start getting a visible recovery by Spring 2010, Obama's numbers may not fall below 50% at all.

Same as the Old Boss?

Two full days ago, the following appeared in the Wall Street Journal (emphasis mine):

CIA Director Leon Panetta, in his first meeting with reporters, said the agency will continue to carry out drone attacks on militants in Pakistan. He also said that while CIA interrogations will have new limits, President Barack Obama can still use his wartime powers to authorize harsher techniques if necessary.

Is he saying that the President’s powers as Commander-in-Chief under Article II give him the power to override the law of the land, which includes our treaty obligations such as the Convention Against Torture? I thought we got rid of the people who told us that last election.

Then this is somewhat comforting…

The main change Mr. Panetta has planned, he said, is to establish "a clear set of ground rules" for interrogations and detainee treatment that are "in line with our ideals."

But you have to wonder what he could possibly mean by that, because the big slap in the face is yet to come:

On interrogations, Mr. Panetta said he believes the CIA can be effective if it limits itself to the 19 techniques the military is allowed to use. He said the administration is evaluating the effectiveness of so-called enhanced interrogation tactics such as waterboarding and will make recommendations to the president on what techniques should be allowed. In the interim, only the 19 techniques will be used.

Leon Panetta, head of the Agency that was given leeway to torture during the Bush administration, is now saying that waterboarding not only would be legal but is under active consideration?

I believe profoundly in President’s Obama’s governing project. In the joint address to Congress he said:

And that is why I can stand here tonight and say without exception or equivocation that the United States of America does not torture.

Did he just mean right now? It should be the position of this administration that neither the President nor anyone in his administration has the authority to order torture; that it is already illegal and illegitimate.

What I find a little surreal is the almost perfect silence in the blogosphere about this. Glenn Greenwald? Nothing. Andrew Sullivan? Nothing. Josh Marshall? Nothing. Atrios? Nothing. All the powderkegs of outrage are suddenly powderpuffs of indifference.

The Director of Central Intelligence has just told us that torture is an option… we’re just not choosing to exercise it right now. We are one election away from a torture regime again, and they will be able to say "not only did Bush say we have the right to torture, but Obama agreed." It seems like our national shame is not over.

The Fifth Age

After two disappointing elections, conservatives are wondering where their future lies. The clear-eyed ones realize that their project, as Reagan defined it, is finished if not complete. From 1980 to 2008, the highest marginal tax bracket was lowered from 70% to 35%. Welfare was reformed. The Soviet Union collapsed. Many businesses were deregulated. (Plainly, these items weren’t all their doing, but their wishing was in them.) On the other hand, the more ambitious conservative goals – privatization of Social Security, school vouchers, an imperial American presence worldwide, drastic reduction in the size of government – have little, if any, chance of coming to fruition.

We sometimes see the affinities of our ideological side as permanent. Of course, nothing could be further from the truth. Today, conservatives are known for wanting to shrink the size of the state, but in the first age of American politics, it was the Jeffersonian liberals who wanted to limit the federal; they thought that power should lie with the people, not a King-like figure. The Hamiltonian conservatives, on the other hand, argued for a strong central authority; they considered it necessary in order to resist the passions of the mob. It was an age that was both inspired and spooked by revolutions, both here and abroad.

Since that time we’ve had many inflection points, when the dividing lines between parties shifted. Are we coming to one of those moments? First, let’s consider the prior ones.

The second age of American politics was dominated by the Civil War; it runs from Jackson to the end of reconstruction. The issue that dominated the era was how much power should lie with the federal government, and how much of it should be retained by the states. The south saw the war as a conservative revolution… an attempt to protect a way of life.

The age of reform comes next. It runs from reconstruction to 1932. It is the only age that is not dominated by a single issue, but rather, many discrete questions. During this time, the mechanics of industrial capitalist democracy are refined, and it is largely (though not exclusively) the Republicans who are leading the way, doing some things that today we don’t usually associate with them, like taming large companies and conserving wild land.

The fourth age begins with Roosevelt’s coming to office in 1932. Beginning here, the primary argument is the size and scope of government. In many ways, the debate is framed by the rise and fall of the Soviet Union. Roosevelt wanted to save capitalism from itself, to institute reforms that averted the real possibility of social unrest and even revolt. Reagan wanted to diminish any resemblance to the old Soviet Union, to return to a primacy of the individual and the marketplace.

Today, the argument is largely – though not completely – concluded. “The era of big government is over,” announced Bill Clinton. Barack Obama described the role of government modestly: “Government must do what we cannot do for ourselves.”

Transformational liberal projects remain – universal health care, day care, perhaps others – but liberals have been chastened by their 28 years in the wilderness. Hardly anyone in the Democratic Party hankers for a return to the 70% top marginal rate or welfare as we knew it. Sometime in the next decade or two we will still have arguments about the extent of government… but probably without even realizing it, we will come to some sort of near-consensus on the role of government.

Even today, the size and scope of government is no longer the dominant issue. We are at the dawn of the fifth age of American politics. The great tectonic shift of our lifetime is globalism. China, India, and much of the rest of the developing world are enjoying an unprecedented growth spurt; they will demand power comparable to their financial gains. Problems such as global warming will require coordinated international responses. The great technological innovation of our times, the Internet, is a beast that knows no borders; it will need international authorities. Perhaps as a reaction to globalism, tribal conflicts seem to be on the upswing; they will necessitate multi-lateral responses. Our current financial crisis illuminates how completely trade and investment have bound us together; financial coordination and regulation will need to develop.

It is around these questions that the fifth age of American politics will be organized: pro-globalist vs. anti-globalist; free trade vs. ‘fair’ trade; submission to international authorities vs. maintenance of sovereignty; pro-immigrant vs. anti-immigrant; multilateralism vs. unilateralism; pro-foreign aid vs. anti-foreign aid; seeing the U.S.A as a leader of a new, multi-polar world vs. looking backwards to the U.S. as unipolar superpower.

The next conservative movement will be populist and nativist. They will inherit the socially conservative, church-going constituency of today’s Republican party (social conservatism will never disappear, although with the baby boomers aging past their child-rearing years, it will lose some ferocity.) It will be an anti-immigrant and protectionist movement, strong on defense, but inward-looking in foreign policy. They will heap scorn on treaties, as well as international organizations such as the United Nations, the WTO, the IMF, and others yet to be conceived. On global warming some will be denialists, some will fatalists, others will point to the sins of other nations as an excuse to avoid action ourselves. The new conservatives will lose support from the business community, but they will gain it from an increasingly disenfranchised working class. They will not be scared of government programs, and indeed, will advocate them for their constituencies.

Most surprisingly, these new conservatives are probably just as likely to take over the Democratic Party as the Republican Party. If it were the Republicans, we would probably see the new movement as son-of-Pat Buchanan, a new breed of paleocons. If it were the Democrats, we would probably see them as son-of-Dick Gephardt, pro-union pols in touch with their constituency’s conservative side.

Conservatism is not just a philosophy; it is a temperament. Liberals see social bonds as fraternal; conservatives see them as filial. Liberals identify with the collective, the people; conservatives identify with the nation – the motherland or fatherland. Globalism, the great seismic event of our lifetimes, will inspire a complex of passions close to the conservative heart. The emotions these questions raise will in coming years eclipse the old arguments about how much government we need.

Fix Social Security... So We Can Afford the Stimulus

A couple of weeks before his inauguration, Barack Obama was asked the following:

QUESTION: Mr. President-elect, budget experts, as you know, agree that the real key to controlling federal spending lies with the entitlement programs. How early do you plan on addressing Medicare and Social Security? And what will your approach be?
OBAMA: Well, first of all, as I noted in my remarks, we’re going to be inheriting a $1 trillion-plus deficit. And if we do nothing, then we will continue to see red ink as far as the eye can see.[…] We are working currently on our budget plans. We are beginning consultations with members of Congress around how we expect to approach the deficit. We expect that discussion around entitlements will be a part, a central part, of those plans. And I would expect that by February, in line with the announcement of at least a rough budget outline, that we will have more to say about how we’re going to approach entitlement spending, how we’re going to approach eliminating waste in government, one of Nancy’s tasks.

This is tantalizing, but not an indication that Obama -- in the first year of his first term -- will plunge headlong into the mythical third rail of American politics. Still... should he? Sadly, if Obama were to tackle Social Security most of the resistance would come from his own side. The reasonable argument the left wielded to defeat Bush’s privatization effort was the following: “Social Security ain’t broke. Yes, it will start running deficits in about a decade and exhaust its trust fund in about three decades, but all that is necessary to fix it is some small tweaks – if the assumptions are too pessimistic, maybe not even that. So let’s wait and see how it works out, and in the meantime, let's concentrate on more important matters.”

True at the time, but this position needs to be revised. Why?

First of all, the assumptions don’t look so pessimistic any more. For the 2008 report, the trustees assumed 2.4% GNP growth from 2007 until 2017. We missed that number in 2007, 2008, almost certainly will in 2009, and probably 2010 too. The assumptions are starting to look a little on the rosy side.

Secondly, saying all it needs is some small tweaks was always disingenuous. Yes, the changes necessary aren't large, but in political terms they are monstrously difficult.

But more importantly, there’s this (click to enlarge):


Source: www.zfacts.com

Our debt level as a percentage of GDP is the highest it has been since the Eisenhower administration, when we were paying down the cost of the World War II buildup. Are we at the point when creditors might start wondering about our ability to repay this debt? Are we risking a currency devaluation, massive inflation, a dumping of U.S. debt, the loss of the dollar’s status as the world’s reserve currency, and perhaps in the worst case, a loss of the enormous privilege of servicing our debt in our own currency? We would not be able to fix some of these consequences… they would be a serious and permanent injury to American power, prestige, and well-being.

What is the level of debt where these kinds of risks come into play? People that tell you they know are lying. But informed experts, including Larry Summers, are said to be worrying about such an eventuality.

It’s time to get beyond the liberal orthodoxy and look at a way to reestablish our fiscal credibility –- so that we can afford this stimulus plan and avoid punishment by the debt markets. Social Security is the way to do it. Look at this chart:



Starting around 2035, the difference between outlays and revenues is around 1 percent of GDP. Say we spent $825 billion on the stimulus and did absolutely nothing to pay it off. In three decades it would balloon to $3 or $4 trillion in debt in a $27 trillion economy. It would still probably be cheaper to finance that debt than to make up the Social Security shortfall, which would be around $270BN. By fixing Social Security, we can offset the perceived danger we add to our credit profile by spending on stimulus. And by showing the political will to control our spending, we add even more value to our creditor cred.

Need more reasons? The Democrats will have 58, 59… maybe even 60 seats in the Senate and a very popular President in the White House. When are we going to have more leverage in negotiating a Social Security fix? There is a real possibility we could make this most regressive tax just a little more fair. How to do it? I would favor raising the cap; if that is a non-starter because of the President’s campaign promises, maybe add a surtax for income over $250,000. Ramesh Ponnuru has an interesting suggestion: slow benefit growth to the rate of inflation for those that are well off.

Fixing Social Security would have another significant benefit… it would solidify Obama’s centrist credentials and probably guarantee his re-election. 63% of Americans don’t think they’re going to receive the full benefits they’re entitled to. An electorate that is re-assured on this matter would be enormously grateful.

The Race Card

I've been a supporter of Obama since before the Iowa primary. I haven't volunteered for him (because that's not really me) but I've advocated for him and donated to his cause. Generally speaking, I've been proud of the campaign and its supporters.

However, one of the things that has discomfited me about the behavior of my side is how quickly -- not Obama -- but the supporters of Obama have imputed racist motives on their opponents, whether it be Hillary Clinton's camp or John McCain's.

When we were told that Bill Clinton was a racist because he said Obama's campaign was a "fairy tale" I was confused. I thought 'fairy' was derogative for gays, not blacks. Now, I will admit, not all the protestations about the Clintons were unearned. When Bill pointed out that Jesse Jackson had won in South Carolina too, his meaning was pretty clear: like Jesse, Obama was a marginal black candidate.

Still, over and over, the bloggers supporting Obama have used race as a shield for any criticism of their candidate. Here's one recent example, but it could just as easily be a dozen others:

McCain's latest: claiming that Obama will turn the IRS "into a giant welfare agency." And this even though McCain's rationale for this claim is Obama's support for a refundable tax credit, something McCain himself supports as a centerpiece of his health care plan. Par for the course, really: if you figure in the robocalls and recent ads, McCain's entire campaign is now comprised of innuendo and lies meant to tie Obama to various stereotypes of African-Americans and of course Arab terrorism. His purported foreign policy experience hasn't been part of the campaign's message in weeks. Just black, black, black, terrorist, terrorist, terrorist.

Why go to race? McCain's argument that progressive taxation is akin to socialism is absurd on its face and easily refutable without reliance on unprovable imputations about motives. You see, neither Josh Marshall, nor you, nor I can read minds. So why use an argument that will only be credited by someone who already sees ill will in McCain?

I'm not naive. I have no doubt that Obama's race will cost him among certain voters, and I don't doubt there are people on the Republican side trying to figure out how to maximize that effect. I just don't see the efficacy of calling it out unless it is blisteringly obvious. When you yell "racist!" when someone is just being a run-of-the-mill political heel, you cause a lot of defensive reactions. People develop resentments about their side being falsely accused of an abhorrent trait, and this leads them to be skeptical of any claims for minorities. We pay the cost of heightened divisions without enjoying the benefit of winning over hearts and minds.

Obama has avoided heightening the tensions he spoke of so eloquently in his speech on race. Those of us who support him should follow his lead and do the same.

Skill and luck

Obama surely has some astonishing political skills. But he is also one lucky mother.

He loses the primary against Bobby Rush. If he had won, he probably would have gotten lost in the House of Reps. A Senate run in '04 would seem a little impatient and overly ambitious.

Carol Mosely Braun chooses not to run for Senate. That would have nixed his chances, and he wouldn't have even run. He wins the primary.

His Republican opponent, Jack Ryan implodes with divorce revelations. He is replaced by perennial court jester, Alan Keyes. He trounces him.

He is chosen to give the keynote at the 2004 convention. He would not have risen to prominence without that opportunity.

He has a tight race with Hillary Clinton. This allows him to grow his organization, to become better as a candidate, and to receive lots of free media time. All the unpleasant vetting happens in the spring instead of the fall. In retrospect, that tight race was the best thing that could have happened to him. And it could have gone the other way if he had just scored a couple of extra points in New Hampshire.

And now, in the general he faces someone who's age puts in relief his youthfulness and 'change' message. Moreover, he faces the most desultory Republican campaign in memory.

Obama isn't just good. He's also lucky. It's like a Michael Jordan when he's getting the rolls.

Exclusive Interview With George Will

This Week, August 3, 2008:

GEORGE WILL: Beyond that, an awful lot of the ‘other’ he represents is the windsurfer, it’s John Kerry. The crowning, crashing irony of this year is that the first African-American Presidential candidate nominated by either party has the disadvantage of being too upper crust. That is, he’s Columbia University, he’s Harvard Law School, he’s too–

GEORGE STEPHANOPOLOUS: Arugula!

I was curious about this viewpoint, so I called Mr. Will up. He kindly agreed to a brief interview.

ME: Thanks for talking to me, Mr. Will! Big fan.

WILL: I like to dip my toe in the hoi polloi occasionally.

ME: You said on This Week that Barack Obama was too upper crust. I was wondering how that could be ‘cause I hear his Mom had to rely on food stamps at times.

WILL: Yes. Yours is a common misperception. Dear boy, being upper crust has nothing to do with your origins. And it definitely doesn’t have to do with money. You can come from generations of oil wealth and still be the salt of the earth!

ME: So John McCain could have seven homes and be worth $100 million and still be…

WILL: A man of the people, right. And an American hero too. No, being upper crust is about something else.

ME: Arugula?

WILL: Yes. Not just Arugula, but Arugula. In part.

ME: What else? I mean, other than Arugula?

WILL: Mesclun, Mache, Boston, Bibb, and of course, frisee. All of these are varieties of lettuce consumed by the upper crust.

ME: It seems like it would be hard to get your greens without being upper crust.

WILL: Not at all. Iceberg lettuce is permitted. So is romaine, as long as it is in a Caesar Salad.

ME: Huh. Is it just greens?

WILL: Of course not! Do you think I would be superficial enough to judge a man by the kind of leaf he eats?

ME: Well… I don’t know.

WILL: He also drinks a hard-to-get brand of beverage called Black Forest Berry Honest Tea.

ME: It’s hard to get unsweetened tea.

(Mr. Will frowns. I know it’s a telephone interview, but he frowns right through the phone line.)

WILL: Try Snapple diet.

ME: Artificially sweetened.

(He frowns harder.)

ME: You also mentioned something about windsurfing...

WILL: Right.

ME: But he doesn’t windsurf. He plays basketball. Pretty good at it too! Did you see him sink that 3-pointer on the first try, boy, that was -

WILL: You do know that John McCain had his arms broken in the Hanoi Hilton? He’d be sinking 3-pointers too if he didn’t love his country so much.

ME: Really? He’s 71 years old.

WILL: Let’s get on with it. Any more questions?

ME: Oh, sorry. Where was I? Windsurfing.

WILL: So upper crust.

ME: Why? It looks cool to me.

WILL: Do you think most people in this wonderful country of ours could afford to windsurf?

ME: Most people can’t afford Pappy Bush’s speedboats, but I never heard the media go on about how it was an upper crust pastime.

WILL: Pork rinds.

ME: Sorry?

WILL: Bush Sr. eats pork rinds. Big man-of-the-people food. It inoculates you against almost any kind of upper crust accusation. Heck, you could probably sprinkle some over your arugula salad and nobody would say a damn word.

ME: And uh… Harvard?

WILL: Surely I don’t have to explain to you why Harvard is upper crust?

ME: Well, no. I get it. But Dubya is supposedly a man of the people and he went to Harvard… right?

WILL: Harvard Business School. Every Fortune 500 CEO I know just refers to it as 'Budweiser U.' The Law School, on the other hand....

ME: You know… thinking about it. It seems like only Democrats are upper crust.

WILL: Really? I’d never noticed. Huh! Come to think, there really aren’t any Republicans who are upper crust, are there?

ME: No, I suppose not. (Pause.) Mr. Will, I’m curious. Would you be a man of the people, or are you upper crust?

WILL: I’m a man of the people, of course.

ME: But… you wear a bowtie!

WILL: I’m hanging up now.

McCain: No Holiday From Pandering

John McCain's proposal for a gasoline tax holiday is getting some harsh reviews, including from some conservative economists.

McCain has admitted to a lack expertise about economic matters, but this proposal betrays something different: either a cynical contempt for the electorate, or an abject economic illiteracy.

It comes down to the basic laws of supply and demand. If the tax from gasoline is removed for three months, the price will go down. Yippee! But as any student of Economics 101 will know, demand will spike in response. And what happens when supply is fixed, as gasoline in the summer is, both because of flat crude oil production and limited refinery capacity? The price goes back up until supply and demand are in balance again.

But suppliers will ramp up production to make up for it, right? No. A temporary tax cut, announced with a few weeks of anticipation, is not going to get new refineries online for the summer.

When Obama says the tax cut will on average only save consumers $30 over three months, he's actually being too generous. The best guess is that it will be less than that, if anything at all. And this comes at the cost of our crumbling highway infrastructure, since that is where the revenue from the gas tax is dedicated.

McCain's tax cut will go straight into the pockets of the oil companies, not into the wallets of our strapped consumers.

Is Hillary Clinton's plan to fund the tax cut with a windfall profits tax on oil companies preferable? Let me hand it over to Leonard Burman, director of the Tax Policy Center:

Burman called this "utterly incoherent," saying that a windfall-profits tax would over the long term only exacerbate the supply problems caused by lifting the gas tax, because it would discourage the exploration for and development of new sources of petroleum. "So a policy intended to lower prices, but which won't do that, will be offset with a policy that's likely to raise prices over the long term," he said.

In his campaign we keep on going back to character issues. Rather than fixate on trivia, we should look at what the candidate's policy proposals tell us about them... both as leaders and as people.

McCain and the Lobbyist

The New York Times reports:

Early in Senator John McCain’s first run for the White House eight years ago, waves of anxiety swept through his small circle of advisers.

A female lobbyist had been turning up with him at fund-raisers, visiting his offices and accompanying him on a client’s corporate jet. Convinced the relationship had become romantic, some of his top advisers intervened to protect the candidate from himself — instructing staff members to block the woman’s access, privately warning her away and repeatedly confronting him, several people involved in the campaign said on the condition of anonymity.

Both the woman, Vicki Iseman, and John McCain deny any romantic relationship. The New York Times piece needed to be published, but not this way. The Washington Post covers the same story in a fairer way; they don't make an insinuation of a romantic relationship based merely on the suspicions of some staffers.

Having said that, McCain's posture here is not going to hold. His statement:

It is a shame that the New York Times has lowered its standards to engage in a hit and run smear campaign. John McCain has a 24-year record of serving our country with honor and integrity. He has never violated the public trust, never done favors for special interests or lobbyists, and he will not allow a smear campaign to distract from the issues at stake in this election.

Americans are sick and tired of this kind of gutter politics, and there is nothing in this story to suggest that John McCain has ever violated the principles that have guided his career.

He's going to have to answer legitimate questions: what was the nature and extent of their relationship? Did he discuss legislative matters with her? Did he intervene with regulators at her request? The straight-talker is not going to be able to pull off a stonewall.

Plagiarize This

Barack Obama has run an excellent campaign, but he does make mistakes sometimes. The recent kerfuffle regarding his supposed plagiarism is one. Instead of saying this:

During a news conference here, Mr. Obama said he and Mr. Patrick “trade ideas all the time.” Asked if he should have given credit to Mr. Patrick, he said, “I’m sure I should have,” but he said he doubted that voters were concerned by the dust-up.

What he should have said is this: "You can't steal what is offered to you. Deval suggested these words to me. Deval is part of my team. Lots of people on my team have ideas or suggest phrases... I can't credit all of them."

Unfortunately, this smarmy column by Dana Milbank seems to suggest that this sort of nonsense could be stretched like taffy to cover a lot of unsuspecting surfaces.

Obama: The Most Liberal Senator?

David Brooks was on the Chris Matthews show today once again saying how Barack Obama is the most liberal senator. Does this guy believe everything he reads in the National Journal?

While Barack Obama opposed the authorization of the Iraq war, he has voted to fund it. Other Democrats did not.

Barack Obama favors a universal health care plan that does not include individual mandates. There are Senators (like self-professed Socialist Bernie Sanders) who favor single-payor.

So how is this guy the most liberal senator? A visit to the National Journal clarifies the question. Apparently the services of the unimpeachable Brookings Institute were used perform something called principal-components analysis. From the description it sounds like they're plotting the degree to which there is a lack of variance with other senators on the left side of an issue. It seems to me that extremely liberal votes would exhibit greater not lesser variance. This seems more like a test for who is at the center of the Democratic Party, which is where casual observation would place Barack Obama.

Can we put this silly meme to bed? Barack Obama is not more liberal than Ted Kennedy, Bernie Sanders and Russ Feingold. (Oh, that it were so!)

Gonna Be Wars

I saw this a second time, and I still laughed out loud:

An Open Letter to Al Gore

Will the Democratic nominee this year be chosen by superdelegates instead of voters? There's something Al Gore could do to prevent that.

February 10, 2008
The Honorable Al Gore
2100 West End Avenue
Suite 620
Nashville, TN 37203

Dear Mr. Vice-President:

As you know, the party you and I belong to is involved in a very tight nomination race. News accounts tell us that the difference in pledged delegates between our candidates is small, and that by the end of the primary season on June 7 the votes of super-delegates may be necessary for either candidate to reach the 2,025 threshold necessary for nomination.

This raises some frightening possibilities: that our party will be bickering and divided during our convention this summer; that the favor of these super-delegates might be bought with promises of jobs and legislation; that the losing side will be left feeling bitter and ill-treated; and worst of all, that the political will of the voters of our party will be overridden by political operatives.

So far this election cycle you have withheld your endorsement from either candidate. This dignified and statesman-like stance, combined with your moral standing and political support in the Democratic Party, put you in a unique position as a party elder. That is why I urge you to pledge your vote as a super-delegate to the candidate who wins the most delegates through primaries and caucuses. Furthermore, I hope you will ask other super-delegates to join you in this pledge.

When our prospects for victory in November 2008 are so bright, it would be terrible for our party and country if crass political gamesmanship decided the outcome. Let’s keep the Democratic Party democratic. Let’s let the people decide the outcome, as – tragically - they were disallowed from doing in November of 2000.

Sincerely,

Yes, I am an Obama supporter. But I reject the conventional wisdom that the superdelegates will necessarily break in favor of Hillary Clinton. I think these are people whose livelihood depends on the strength of the Democratic ticket; they read the same polls we do. Many are likely to swing in Barack's direction in coming weeks.

So I don't write this letter from factional interest. In fact, if Barack Obama loses the pledged delegate count, I don't want him as our nominee.

Obama and Experience

It took me a while to get off the fence, but Obama's Jefferson-Jackson dinner speech finally closed the deal for me. I'm on board with Barack. Here is the speech in its entirety:



I'm sure I'll make a case for Obama irregularly, infrequently and erratically in the weeks ahead. Where I want to start is by addressing what is perceived to be his biggest weakness: that he is inexperienced.

If Barack Obama becomes President in January 2009 he will have spent 12 years in elective office. I have to suspect that a longer experience than that might actually be detrimental.

Perhaps it's that Obama spent 8 years as a State Senator, and the Illinois State Senate is seen as a sort of minor league. Was he not seeing major league fastballs over there? Illinois is a pretty big state... if it were a country, its GDP would be bigger than Sweden's.

Perhaps the craft of drafting legislation is easier in the Illinois Senate than in the U.S. Senate? I can't imagine so. Are alliances and compromises easier to come by in Illinois, where perhaps politicians are not risk-averse, not particularly ambitious, and are unswayed by lobbyists? Again, I don't think so. If anything, from what I hear politics in Illinois -- and particularly in Chicago where Obama is from -- is hairier than what it is in most other places.

Perhaps we look to experience not to sharpen political skills (which Obama seems to have aplenty) but to give a candidate familiarity with the issues. There is overlap, but state issues are often different than federal issues. States don't deal with foreign policy, immigration, and a spate of other areas. If this is true and an important consideration, it should cut against the Governors and Mayors in the race more than it cuts against Obama, who after all would arrive to his inauguration with four years as a U.S. Senator as well.

Obama was ridiculed by the Clinton camp for citing living overseas as a child as a foreign policy qualification. Others may scoff, but as one who grew up overseas, I will not. A child under ten sucks up culture like a sponge. As wonderful as it is for Chris Dodd, for instance, to have been a Peace Corp volunteer in the Dominican Republic in his youth, the experience of being a child in a different culture is far more potent than that. One who experiences that will always have an eye for cultural difference and an ear for human commonality. He will have a firm foothold on the rest of the world.

Obama continued his multicultural upbringing in Hawaii, a cultural petri dish if ever there was one. As a young man, he would live in Los Angeles and New York before settling in Chicago, where he became a community organizer. Reading his fine memoir, Dreams of My Father, you realize what a political training ground that must have been: trying to reconcile the disparate agendas of radical black Muslims with conservative Christian churchgoers, and finding common ground between them. You see him learning to lead from behind, giving people the tools to succeed on their own rather than trying to hog the spotlight.

From there Obama goes to Harvard Law School, where he was the first African-American to be President of the Harvard Law Review. This is a political as well as intellectual achievement. Tellingly, his victory in the voting came from his ability to listen to the concerns of the conservative faction.

Out of Harvard, he could have gone to New York and instantly be earning a 6-figure income at any white shoe firm he chose. He could have gone to Washington and clerked for a Supreme Court judge, as is traditional for a President of the Law Review. Instead he went right back to community organizing. Eventually, he also taught constitutional law.

The first African-American President would come to office far better equipped for his duties than the President who freed blacks from slavery. After all, Abraham Lincoln only served for two years in the House of Representatives. Luckily, that was enough experience to bring change.

Krugman: Fighting the Last War

Paul Krugman bops Obama on the head today in a column titled Played for a Sucker:

Lately, Barack Obama has been saying that major action is needed to avert what he keeps calling a “crisis” in Social Security — most recently in an interview with The National Journal. Progressives who fought hard and successfully against the Bush administration’s attempt to panic America into privatizing the New Deal’s crown jewel are outraged, and rightly so.

The fear, expressed by others in the Lefty blogosphere, is that accepting the Right's framing of a Social Security crisis puts the program in mortal peril.

I know, Social Security -- even with growth projections well below the historical norm -- is going to be solvent for another couple of decades. I get it. But can we get real? Privatization failed. It didn't even get out of committee. It didn't come close to getting out of committee, and that was before the 2006 election. Liberals are so traumatized, so used to being abused, that they would rather keep clutching the orthodoxies they're used to rather than grabbing the advantage. And that is precisely what Obama is doing!

He has proposed raising the cap on Social Security income, making our most regressive tax a little more progressive. Is Hillary Clinton really being a better liberal because she punts on the issue and leaves it for a blue ribbon bipartisan committee to work out later? Is there a more progressive solution this committee might come up with? Raising the retirement age? Lowering benefits? Are those more progressive solutions?

We've got to stop acting like scared children about this. We won. Privatization is dead. Now... can we talk to people about our solutions to their problems?