Monday, May 24, 2010

Political Truths

Here are just a few thoughts that popped into my head while reading the news today. I'll most likely expand on these points in future posts:

  • The United States is a big country. With 310,000,000 people, it's the third-biggest nation on the planet. While $1 million, $10 million, or even $10 billion may seem like a lot of money to an individual, it's a very small amount considering that there are a hell of a lot of people in the country.

  • The number one indicator of the incumbent party's fortunes in a federal or state-wide election is the economy--Specifically, the unemployment rate.

  • Generally, the only thing that can trump economic fears in the minds of voters are national security fears.

  • Politicians, like most people, most often act in their own self interest. What policy positions a politician takes is affected by his or her personal convictions, who has given a bribe (campaign donation), and the demands of the voting public. Campaign contributions can trump personal conviction, and constituent demands can trump both.

  • Although what happens in Washington impacts everyone in the nation, most people make the judgement that closely following politics is a waste of their time--time that's better spent on more important things, like taking care of their kids. And that's okay.

  • The Senate rules are ridiculously stupid and can easily be abused.

  • The general public will never understand how cloture, holds, or the filibuster actually work.

  • Congress as a whole has always been unpopular. I don't see that changing any time soon.

  • Most of the frustrations people have with Congress today can be blamed on the Senate rules that allow any one Senator to force any bill or nomination to be on the floor for 3+ days.

  • People in general don't understand why the politicians they elected in a landslide can't bring about the change they promised overnight. The politicians are then seen as being disingenuous or weak, as they promised one thing but couldn't deliver.

  • Given all that, though, some Members of Congress really don't want to pursue their party's platform, and instead use the rules as a shield to explain why they don't enact their promises. This usually doesn't go over too well; People want results, not complicated excuses.

  • Our political discourse in this country is almost as stupid as the Senate rules.


Friday, May 21, 2010

Tell Congress: Televise Wall Street Reform Conference Committee!

The Senate passed their version of Financial Services Reform last night by a vote of 59-39. Hours earlier, they invoked cloture by the slimmest of margins: 60-40.

Now the bill advances to a conference committee with the House, where a handful of Senators and Representatives get to hammer out the differences and come up with one final bill. This final bill must pass both chambers again before Obama can sign it into law.

David Dayen of FDL has a great run-down of the differences between the two bills:

• The Volcker rule. Contrary to some media reports, there is a “Volcker rule” in the Senate bill; it essentially authorizes a study and tells the regulators to come up with something on it. This is but one of the 28 “studies” in the bill. The House bill passed before there was such a thing as the “Volcker rule” in the lexicon, so that’ll probably be the best we can get here. But we should at least get that.

• The Fed. The House bill has a full annual audit of the Federal Reserve; the Senate bill has a one-time audit of emergency lending facilities. In addition, the Senate bill allows a much bigger role for the Fed than the House version; in fact, the Fed gained more power while the Senate bill was on the floor. Some of that could be reeled in if the House language is adopted.

• Derivatives. Everyone expects the 716 provision, which forces the mega-banks to spin off their swaps trading desks, to be excised in conference. But Michael Greenberger believes something like it will be retained. The House’s derivatives piece is a mess and nearly useless, but Barney Frank has admitted a mistake on that front, and wants to preserve strong rules against derivatives, like in the Senate bill.

There’s also the matter of Maria Cantwell’s main complaint, that the mandate of all trades going through clearinghouses is unenforceable. Obama Administration officials appear to think this is a misreading of the legislation, and that Cantwell’s fix could have unintended consequences. So it looks unlikely that this loophole will be closed, if the major players in conference don’t think it’s a loophole.

• The CFPA. The House bill has an independent Consumer Financial Protection Agency with a compromised, exemption-riddled mandate. The Senate bill has a CFPA inside the Federal Reserve but without as many exemptions. Both bills include some pre-emption of state consumer financial protection laws, though the Senate bill preserves a role for the state Attorneys General in enforcement. A mix of both of these would be preferable. The Senate motion to instruct conferees will urge adoption of the auto dealer exemption from the CFPA, which is in the House bill, but given the Administration’s position there is almost no chance that conference will adopt that.

• Capital requirements. The House bill, in its strongest plank, has a hard 15:1 leverage cap for financial institutions. The Senate bill leaves capital requirements and leverage up to the regulators, although the Collins amendment does force bigger banks to have stronger requirements. The more distinct and specific the language is, the better. And the bank lobbyists will work hard to get the opposite, pure discretionary language.

• Credit rating agencies. There were two competing options for the rating agencies: end the conflict of interest by giving government more of a role, or end the rating agency process altogether. The Senate kind of opted for BOTH approaches, with the Franken amendment empowering an SEC bureau to assign initial ratings to qualified agencies, and the LeMieux amendment eliminating the qualified “seal of approval” for the rating agencies. Franken insists they’re compatible. The House has language similar to the LeMieux amendment. If possible, the Franken amendment should be retained.

• Mortgage underwriting. Both bills actually have some pretty good new standards for mortgage lending, banning the premiums for pushing borrowers into riskier loans, and forcing some ability to pay. This is likely to stay in the bill.

• Interchange fees. One of the toughest measures in the Senate bill changes the swipe fees charged to local merchants when their customers use debit cards. The bank lobbyists will have their knives out for this one.
In my opinion, the two most important pieces to preserve are the 15x leverage cap, which ensure that companies will not borrow more than 15x their worth, and the derivative regulations. The companies that got into the most trouble in 2008 were those who borrowed more than 30x their worth and came crashing down when it turned out that their investments were worthless. And the derivatives market must be brought under control. There is no reason to have a largely unregulated market that is worth $600 trillion, ten times the GDP of the entire world.

How can we prevent these provisions from being gutted now that the bills are off the floor?


Should the final act of the financial reform fight be televised? If it is, it would make any efforts--whether Republican or Democrat-led--to weaken the final product a heavier lift. And so there will be significant pressure to cut the final deal in as much darkness as possible. But if that's the route legislators decide to go they'll have to walk back from earlier nods toward the importance of transparency

Several weeks ago, House Financial Services Committee Chairman Barney Frank dared Senate Republicans to oppose Wall Street reform, and warned that, after the Senate passed its legislation, any further efforts to weaken the final product would have to be public: a formal conference committee to iron out the differences between the House and Senate bills, even a C-SPAN camera so the whole world could see where each party stood.

Well, last night, the Senate passed its bill, and on Monday the Senate will take formal steps to begin the conference committee process. And in conversation, key Republicans and Democrats last night say they think inviting the cameras along would be just fine.
If the conference committee is televised, it will become much more difficult for members of Congress to strip out the strongest parts of the bill. The amendment process on the Senate floor strengthened the bill overall once Senators were on camera and told to "put up or shut up" regarding their tough-talk against Wall Street. Furthermore, with a televised conference committee, progressives can better target troublesome members when they work to weaken the bill.

If you'd like to see the conference committee conducted in the open, please call your Senator or Representative. This is especially important if your member is the chair or ranking member of the relevant committees and subcommittees:

Barney Frank (MA)
Spencer Bauchus (AL)
Paul E. Kanjorski (PA)
Scott Garrett (NJ)
Maxine Waters (CA)
Shelley Moore Capito (WV)

Christopher Dodd (CT)
Richard Shelby (AL)
Blanche Lincoln (AR)
Saxby Chambliss (GA)

If your member is on the Senate Banking Committee or the House Financial Services Committee, please give them a call!

The Senate will be acting on this issue on Monday. Action must be taken as soon as possible.

Thanks for your help!

Thursday, May 20, 2010

Forget Obama--Is Schumer the Next LBJ?

In January of 1953, Lyndon Johnson, Democrat from Texas, was chosen by his Senate caucus to be the minority leader. He was the least senior Senator ever elected to this position. The following year, the Democrats recaptured the majority from the Eisenhower-wave Republicans and LBJ became the Senate Majority Leader.

Johnson quickly used his power and connections to shepherd through tough legislation that could be signed by the Republican President. His most impressive accomplishment was breaking southern filibusters and passing the 1957 and 1960 Civil Rights Acts, which were the first civil rights bills signed into law since the election of Rutherford B. Hayes.

Stories of Johnson's time in the Senate are legend in Washington, the most famous of which is the description by Rowland Evans and Bob Novak of LBJ's negotiating tactic, "The Treatment":
The Treatment could last ten minutes or four hours. It came, enveloping its target, at the Johnson Ranch swimming pool, in one of Johnson's offices, in the Senate cloakroom, on the floor of the Senate itself — wherever Johnson might find a fellow Senator within his reach.

Its tone could be supplication, accusation, cajolery, exuberance, scorn, tears, complaint and the hint of threat. It was all of these together. It ran the gamut of human emotions. Its velocity was breathtaking, and it was all in one direction. Interjections from the target were rare. Johnson anticipated them before they could be spoken. He moved in close, his face a scant millimeter from his target, his eyes widening and narrowing, his eyebrows rising and falling. From his pockets poured clippings, memos, statistics. Mimicry, humor, and the genius of analogy made The Treatment an almost hypnotic experience and rendered the target stunned and helpless.
Johnson knew the Senate and its Senators. He both respected the institution and knew how to get what he wanted. So deep was his love for the Legislative branch that a schism was created in the White House when, as Vice President, Johnson was resentful that the young Kennedy team did not put him in charge of pushing the administration's legislative agenda through Congress.

Many people today bemoan the weak Senate leadership that exists in both parties. I am sometimes taken aback when I think of how ineffective Bill Frist was as his job, and how many conservative Republican bills died in the Senate during the Bush years. Now, of course, the Democrats face the same problem, as hundreds of bills have passed the House during the 111th Congress that have not been considered by the Senate, many of which are progressive priorities.

Why don't we have Senate leaders like LBJ anymore? Is a personal style? Or is the Senate so deadlocked by filibusters and unanimous consent agreements that it simply can't get important business done?

Maybe it's both.

Yesterday, Senator Chuck Schumer of New York held a hearing as the chair of the Senate Rules and Administration Committee on how the filibuster can be changed:
We learned in our first hearing that the use of the filibuster has reached unprecedented levels. This chart, prepared from facts supplied by the Congressional Research Service, shows that the use of cloture motions has escalated rapidly in recent Congresses. Cloture motion counts are useful because they represent a response to filibuster tactics – actual filibusters, threats or realistic expectations of them.

During the first period, from 1917 to 1971, there was an average of 1.1 cloture motions filed per year. The next period is from 1971 to 1993, when there was an average of 21 filibusters per year. In the period from 1993-2007, that number increased by almost a third – to an average of 37 cloture motions per year.

Then we come to the 110th and the beginning of the 111th congress. We are now averaging more than 70 cloture motions per year. That’s an average of two per week when we’re in session.
Schumer has come out in favor of reforming the filibuster on the first day of the 112th Congress next year. On that day, the Senate's rules can be rewritten by a simple majority vote. Schumer has not yet decided on what form filibuster reform should take, but he is in favor of changing it.

Why is Schumer's opinion important? Because he may be the next Senate Majority Leader:
Now, with confidant Senate Majority Leader Harry Reid (Nev.) hanging on to his seat by a thread, the Brooklynite is nearing the goal line of his long game. Succeeding Reid would make Schumer the highest-ranking Jewish elected official in American history and, more important for the uber-competitive politician, the first among peers. Schumer has thrust himself into the center of issues ranging from jobs to immigration to Supreme Court hearings, but as that momentum has carried him into a more intimate arena where popularity matters, the grating architect of the current Democratic majority has become noticeably more collegial. Perhaps not coincidentally, his colleagues see him as the front-runner to be their leader.

"It's very much within the realm of possibility," said Chris Dodd of Connecticut, who lost a race for minority leader to South Dakota's Tom Daschle by a vote in 1994. "He's always moving and always talking to people and he has a very good feel for what other people have to put up with. And that's a critical point of that job, understanding the environment your colleague has to operate in."

Schumer declined to be interviewed for this story and betrays an uncharacteristic loss for words whenever the term "majority leader" is uttered. Reid is, after all, still in control, and his closest competitor is Dick Durbin of Illinois, the liberal majority whip with whom Schumer has shared a Washington townhouse for years. Each can boast a strength: Durbin has the pleasant demeanor of a consensus builder; Schumer is the diehard fighter who has never lost an election. The prospect of a Chicago vs. New York majority leader race with echoes of Obama vs. Clinton is tantalizing, but also distracting.

Sen. Mark Begich (D-Alaska) said that the prospective race loomed over Schumer's and Durbin's floor chats with colleagues and said that when Schumer recently approached him about working together on technology or travel legislation, he took the New Yorker's motives at face value. But he's not naive: "Now maybe he wants me on board for other reasons."
Schumer is at largely responsible for getting the Democrats their majority in the Senate. In 2006, he did what many considered to be impossible and ran the table on the Republicans. In a year when more Democrats were up for reelection than Republicans, Schumer, as the chair of the Democratic Senatorial Campaign Committee, managed to win six new Senate seats without losing a single one. In 2008, he added another nine seats to that total.

Because of his work at the DSCC, there are over a dozen young Democrats in the Senate who are indebted to him. Add to that number Senator Kirstin Gillibrand, the junior Senator from NY, and you have a powerful backing that could put Schumer in charge of the Senate if Reid loses his bid for another term.

Furthermore, the newer Senators that form Schumer's base are much more likely to support reforming the filibuster. While senior members like Chris Dodd and Robert Byrd are most reluctant to see the institution of the Senate change, reformers like Democratic Senators Shaheen, Begich, Tom Udall, McCaskill, Sanders, Casey and Sherrod Brown are pushing for change.

But beyond the hopes of reform, Schumer has some other valuable, familiar skills that would be a welcome change from the recent leaders of the Senate:
Schumer's political power in Washington has always rested on the local pillars of voracious fundraising and manic courtship of the media, a cornerstone of which is the Sunday news conference. The idea is that exposure demonstrates hard work to voters and shows colleagues that collaboration will be rewarded with coverage in the New York-based national media.

"It may seem he has a pathological need for attention," said one of more than a dozen former aides interviewed for this article. "But there is a method to the madness. He thinks it's key to his survival."


Schumer often tells staffers that he is a senatorial mix of the brainy Daniel Patrick Moynihan and the hands-on D'Amato. But he is as much his own creation. As he toned down his signature advocacy for gun control, which had become politically poisonous, he chimed in on less partisan issues. He also glommed onto colleagues' legislation or news conferences, a tacky scheme so common it became a verb, as when a colleague "got Schumered."

What he lacked in decorum, he made up for in persistence.

One former staffer recalled that Schumer always carried a narrow white card in his jacket's breast pocket: On one side was a call list covered with dozens of names and on the other, he had scrawled the senators he needed to nab.

"He'd buttonhole the senators," recalled the staffer, who added that Schumer, upon making an agreement, would rush to the cloakroom, relay the news to his staff and instruct them to coordinate a news release with his counterpart's aides, "before they could unwind it," inking any deal at the moment of agreement.
If Reid loses in November, the race to replace him will have consequences--but not only for the 112th Congress. The changes that the Democrats put in place next January will forever change the first branch of Government. Furthermore, we are going to need a Majority Leader who can shepherd legislation through a Senate with a shrinking majority. While both Durbin and Schumer would be improvements over Reid, one will invariably be better than the other at guaranteeing filibuster reform and other progressive priorities.

This is an important aspect to keep in mind as we head closer to November. Once the elections are over, the fight will have only just begun.

Tuesday, May 11, 2010

Obama's Line-Item Power-Grab

When Obama first selected Biden as his running mate, I was initially disappointed. In the heat of the campaign, I thought it was a stupid move. Why would Obama undercut his main message of "change" by bringing on a man who has been a Senator since Obama was in high school? Why would he choose someone who had made such a colossal error in judgement and voted for the war? Why didn't he pick an outsider like Virginia Governor Tim Kaine? Or, if he had to pick a Senator, why not someone like liberal Rhode Island Senator Jack Reed?

Soon, though, I began to think of the upside: While Biden may not help Obama get elected, he certainly would help Obama govern the country. As someone who was first elected in 1976, Biden had been around for a while. A long while. As such, many people in the Senate must have owed him favors. As the Chair of the Foreign Relations Committee, he was a powerful ally. If the President used him correctly, he could be Obama's Congressional Liaison and help shepherd through his policy priorities.

Once elected, Obama went through Congress while building his staff: Clinton, Salazar, Emanuel, Solis, LaHood, McHugh...the President wasn't afraid of looking to the Capitol for help in running his administration:
The first senator elected directly to the Oval Office since 1960, Obama has an entirely different theory of how to exercise presidential power, and he has consciously designed his administration to avoid Clinton’s fate. After winning the office with the same kind of outsider appeal as his predecessors, he has quietly but methodically assembled the most Congress-centric administration in modern history. Obama’s White House is run by Rahm Emanuel, a former House leader who was generally considered to be on a fast track to the speakership before he resigned to become chief of staff, and it is teeming with aides plucked from the senior ranks of both chambers. Obama seems to think that the dysfunction in Washington isn’t only about the heightened enmity between the parties; it’s also about the longstanding mistrust between the two branches of government that stare each other down from twin peaks on either end of Pennsylvania Avenue.
It seemed that Obama recognized that the President's only constitutional power was to sign or reject legislation. He can set the agenda and make policy proposals, but Congress must take the lead when it comes to drafting specific legislation. The Constitution creates the Legislature and the Executive as two equal partners (and adversaries) in government, and by all accounts Obama has respected that.

Unfortunately, now it appears that Obama is leaving that lesson behind in his pursuit for more power:
President Obama, in his latest effort to signal fiscal responsibility against the rising debt, plans this month to ask Congress to give him and future presidents greater power to try to delete individual items from spending bills.

In doing so, Mr. Obama will join a long line of his predecessors who have sought either line-item veto power or, after the Supreme Court in 1998 ruled such a veto unconstitutional, some other rescission authority that passes muster. Congress once again is unlikely to be receptive, though growing antidebt sentiment could give the proposal life.

Before Congress breaks for its Memorial Day recess, the White House will send it proposed legislation “to give the president a new tool to reduce unnecessary or wasteful spending,” according to an administration official who spoke on condition of anonymity.
Obama is proposing that Congress give him the power to strike out any spending item he would like and turn the bundle of cuts over to Congress. Congress would then be required to take up the package within 25 days and give it an up-or-down vote. Congress would also be barred from amending the spending cut package.

First of all, this proposal is likely unconstitutional. In 1996, the Republican Congress gave Clinton the line-item veto--the power to strike out portions of any passed bill before signing it into law. Cities that did not receive funding sued the President, and sure enough the Supreme Court found the line-item veto unconstitutional in 1998 in the case Clinton v. City of New York.

The Court, in a 6-3 decision, found that the line-item veto violated the Presentment Clause of the Constitution, which states how a bill is to be presented to the President. The Court declared, in short, that the President has two options: Sign it, or veto it. The Constitution's failure to specify other options means that those are indeed the only two choices.

In addition to violating the Presentment Clause, Obama's power grab may also violate the Article I Establishment Clause:
All legislative Powers herein granted shall be vested in a Congress of the United States, which shall consist of a Senate and House of Representatives.
The President can, of course, propose legislation that includes suggested spending cuts, as long as the "proposal" is introduced by a member of Congress. What he cannot do, however, is mandate that Congress take up a specific piece of legislation. That power, like all legislative powers, rests entirely in the hands of Congress. According to the Constitution, Congress cannot give away its powers to decide which bills are brought before it.

If this proposal of Obama's becomes law, I dread the day when the new line-item veto is used for political purposes. What's to stop a Republican President from proposing spending cuts for urban areas? And the proposal being given an up-or-down vote in a Republican Congress? We won't always have a responsible administrator in the White House, much like how we won't always have a responsible Congress. At the risk of sounding melodramatic, much like Clinton's line-item veto, this power would be disastrous in the wrong hands.

Fortunately, with Obama Derangement Syndrome running strong in the Republican Party, it's unlikely that many Republicans will sign on to the possibility of Obama personally cutting funding for their states. And there should be enough old-guard Democrats in the caucus to ensure that this proposal never makes it out of committee.

Still, it's a little surprising to see Obama, a former Senator, make this kind of power-grab. Then again, much like his ever-changing opinions on Executive powers in the modern security state, perhaps being President has changed his outlook on the balance of powers in Washington.


The Abuse Amendment

Something funny I came across while reviewing the proposed amendments to the Financial Reform bill:

SA 3933. Mr. CORKER submitted an the bill S. 3217...; which was
ordered to lie on the table; as follows:

On page 1291, line 15 strike ``, DECEPTIVE, OR ABUSIVE'' and insert ``OR DECEPTIVE''.
On page 1291, line 20, strike ``, deceptive, or abusive'' and insert ``or deceptive''.
On page 1292, line 1, strike ``, deceptive, or abusive'' and insert ``or deceptive''.
On page 1293, strike lines 3 through 20.
On page 1293, line 21, strike ``(e)'' and insert ``(d)''.

The part of the bill that would be changed by this amendment is Section 1031: Prohibiting Unfair, Deceptive, or Abusive Acts or Practices. The amendment strikes the use of the word "abusive" from this section and removes the subsection that bans financial institutions from '"interfer[ing] with the ability of a consumer to understand a term or condition of a consumer financial product or service" or "tak[ing] unreasonable advantage of a lack of understanding on the part of the consumer of the material risks, costs, or conditions of the product or service."

I have no idea why Bob Corker wants to specifically allow abusive practices to continue, but it strikes me as particularly funny that his amendment is designed to strike the ban on banks and credit card companies abusing their customers.


Monday, May 10, 2010

236 Days

In the coming days, Congress will finally pass the long-debated financial services reform bill, S3217. The Republican leadership in Congress is warning Democrats about the peril of moving "too quickly" on the legislation, and are toying with the notion of further delaying action on the bill. In April, the Republicans insisted on holding cloture votes over the question of even bringing the bill up for debate--and they defeated cloture. Twice. Eventually, the Republicans folded and allowed the Senate to debate the consideration of the bill.

Republicans are now threatening to delay the bill further, possibly requiring the Democrats to file for cloture on many of the proposed amendments.

In the House, bills are sometimes brought to the floor under an "Open Rule". This allows any germane amendment to be brought up for a vote. With a quorum present, amendments can be easily knocked out via voice-vote or with quick, 15 minute votes by electronic device.

Because of the cloture rules, however, the Senate can't do this. The Majority Leader (often in conjunction with the Minority Leader) calls the shots and can only allow a fraction of the proposed amendments to have their time on the floor. Normally, when an amendment is brought up, a unanimous consent agreement waves the normal rules and establishes new rules for a short debate and a vote. If there is an objection to this agreement, however, cloture must be invoked for the amendment to be debated. This involves a three-day wait before the cloture vote, and then a 30 hour debate after cloture is agreed upon.

This would be for each individual amendment.

There are currently 189 proposed amendments to the Financial Reform bill.

If each were brought to the floor, and only one Senator objected to each of them, it would take 236 days for the Senate to get through them all.

This is why the Senate can't have nice things. This is why it's said that each Senator carries with them a nuclear bomb.

Ironically enough, the evil, majoritarian House of Representatives can actually have a greater number of amendments considered and therefore have a more inclusive debate over the legislation than the infamously deliberative Senate. Because of the asinine cloture rules, the Senate can only address a handful of amendments on a given bill, while the House can easily address dozens.

It's no wonder that people are clamoring for Senate reform. While thousands of bills are proposed every legislative session, only a small fraction of them can ever be brought to the Senate floor. Time on the floor is the most valuable commodity available, but it can be wasted for days at a time due to objections by one Senator.

This is the same reason why the Democrats can't bring up the dozens and dozens of unconfirmed nominations to various executive branch positions. The Democrats have the votes to confirm the Deputy Undersecretary for Multifamily Housing, but as long as one Senator threatens to require cloture, it would take over a day to get through each nominee. It would take over three months to get through all the delayed nominees.

Something has to give. Either the rules for cloture must be reformed (say, limiting it to only the final passage of legislation, not amendments and executive business) or the filibuster--and thus cloture--must be eliminated.

We need a new, streamlined Senate to handle the 21st Century needs of the country. With a bigger nation--and a bigger government--the Senate needs to have the tools necessary to deal with the issues of the day. That fact is not open for debate.


Monday, April 19, 2010

Republicans to Accept Bribes to Oppose Wall Street Reform

As you've probably heard, the Republican Senate Caucus is going to the mat to block Wall Street Reform from being passed:
The fate of financial reform in the Senate remains very much in flux tonight, with Democrats facing the stark reality that Senate Minority Leader Mitch McConnell has once again managed to unite his caucus in opposition to the Dems' top legislative initiaive. But Democrats remain determined to bring their bill up for a key test vote as early as Monday, and have statements from a number of Republican senators to point to as evidence that they will prevail sooner rather than later.
This seems like a popular issue. Politicians get to demonize Wall Street, tell their constituents all sorts of stories about Wall Street excess, tell them how irresponsible bankers flushed away millions of jobs and trillions of dollars and caused the greatest economic downturn in over 75 years...It seems like a win-win issue for any politicians who jumps on the regulatory bandwagon! Why in the world would anyone side with Wall Street for such a fight?

About 25 Wall Street executives, many of them hedge fund managers, sat down for a private meeting Thursday afternoon with two of the most powerful Republican lawmakers in Congress: Senate minority leader Mitch McConnell of Kentucky, and John Cornyn, the senior senator from Texas who runs the National Republican Senatorial Committee, one of the primary fundraising arms of the Republican Party.
[The Republican Leaders] also said that they have a shot at taking control of the House by adding 40 additional seats to their current total. In New York State alone, the senators predicted a six-seat pickup.
But in order to assure those gains, and add even more, McConnell and Cornyn made it clear they need Wall Street's help.
Again with the bribes. Republicans meet with bankers, and tell them that it would be a shame if Wall Street Reform were to pass. If only there was some way for these hedge-fund managers to show that they are serious about supporting the Republicans in the upcoming election.

The Democrats are, rightfully, pointing out this conflict:
Since Republicans appear to be conducting backroom negotiations with these same people who took our economy to the brink of collapse, the public deserves to know what secret deals and carve-outs Republicans are offering Wall Street executives in exchange for their support.
For some reason, though, they are reluctant to use the correct terminology here: When an elected official takes money in exchange for a favor, it's called a bribe.

Democrats aren't immune to this, either. Harry Reid and Chris Dodd have collected plenty of cash from Wall Street types over the years. Payments like that can't not have an effect on the legislation that they are now pushing through. Perhaps we need some rules in place to bar people from serving on or chairing committees that oversee the businesses of their biggest contributors.

Or, you know, maybe we should institute sensible campaign finance reform that ends this system of quid-pro-quo.


Sunday, April 11, 2010

Bribing Congress

Politicians, like most every person, act largely in their own self-interest. When they do, it takes the form of them trying to preserve their jobs or set themselves up for election to a higher office. I don't begrudge politicians for acting this way, either. Although it's rarely a conscious thought, I know that one of my top goals at work is to not get fired.

The biggest problem, however, is how politicians can best ensure their reelection. In 93% of all races, the person who raises the most money wins the election. Members of Congress aren't ignorant of this fact, and spend their time accordingly:
One can’t understand the dysfunction of the contemporary Senate, stresses Daschle, without understanding the deranged state of American political fund-raising. It’s a massive, Sisyphean distraction, a slog into which senators pour thousands of hours that could be spent reading, negotiating, or talking to constituents. And some of this time-consuming process has been the direct result of various campaign-finance reforms themselves. Lawmakers can’t make fund-raising phone calls from their Senate offices, for example, “which means you have to uproot yourself, go to your political office, go vote, and then go dial for more dollars again,” says Daschle. “That’s almost a daily occurrence.” He estimates that today’s lawmakers spend at least 10 percent of their time fund-raising. As their elections draw near, he says, the number climbs to 40.
Members of Congress spend so much time raising money because they know that that is their ticket to reelection. They need to raise that money to pay for advertising. As Al Gore aptly put it in The Assault on Reason:
The inherent value or validity of political propositions put forward by candidates for office is now largely irrelevant compared with the image-based advertising campaigns they use to shape the perceptions of voters. And the high cost of these commercials has radically increased the role of money in American politics--and the influence of those who contribute it.
If raising money is the key to getting reelected, then members of Congress are wise to keep those who donate the most money happy. To maximize their chances at keeping their job, they do the logical thing--vote the way their donors pay them to vote. The larger the donation, the greater the chance that the politician will do everything they can to make the donor pleased with their work. If people bundle max donations and also donate to the national, state, and local parties, their influence grows. If donors use a corporation or PAC to run their own ads of support outside of the campaign finance laws they can inject even more money into the campaign system.

This scenario makes campaign donations de facto bribes. What is the difference between someone giving their Congressman money to vote a certain way and giving the money to his political campaign? In either case the member of Congress owes his benefactor a favor in exchange for helping him get paid.

I don't get upset at politicians when they act in a manner that hurts the country but helps their corporate sponsors. They are simply saying what they are paid to say. They are only voting the way they are paid to vote.

There is no doubt that he who pays the piper will always call the tune. In this way, the root of all political problems in this country is campaign finance. Politician who are supported by the health insurance industry will work against real, comprehensive health insurance reform. Those who are paid to support the banking industry will do everything they can to make sure that Wall Street is unregulated and profitable. When a politician is given cash from the defense industry, they are far less likely to support any sort of Defense spending reform.

Given that politicians will always be beholden to those who pay their campaign bills, the question we should ask is "Who do we want them to be indebted to?" The answer, I believe, should be the general public. Influence should not be won based on how much money people can contribute; It should be won based on how many votes are cast.

What we need is a campaign finance system that puts a premium on the number of supporters a candidate has, not on the wealth of the supporters. My dream campaign finance system would involve:

1) A primary season using IRV where top two vote getters, regardless of party, move on to the general election. The top X number of candidates are funded through government grants equal to Y dollars per person in the election district. Political parties are forbidden from spending money on the primary phase of the election. Candidate viability can be determined by petition signatures or by getting a certain number of small-dollar donations. Small-dollar donations can be allowed.

2) In the general election, the top two candidates move on in a traditional, first-past-the-post system. Donations per person are capped at $250 per person per candidate. Donations to and from political parties are similarly limited.

3) Corporations are forbidden from buying advertisements that mention a candidate, party, or election. Issue ads are forbidden within 90 days of a primary or general election.

There are some proposals in Congress that are worth supporting that don't go quite as far. The Fair Election Now Act, for example, would give government grants that match small donations 4:1.

To kick off the next push for campaign finance reform, however, we'd need a Constitutional Amendment that gives Congress the explicit power to regulate campaign finance issues. The Citizens United ruling has thrown Congress's power on this issue into doubt, so only a Constitutional Amendment will suffice. Chris Dodd's proposed amendment is a great start that would give Congress broad powers to take campaign finance reform in a number of directions:
SECTION1. Congress shall have power to regulate the raising and spending of money with respect to Federal elections, including through setting limits on—
(1) the amount of contributions to candidates for nomination for election to, or for election to, Federal office; and
(2) the amount of expenditures that may be made by, in support of, or in opposition to such candidates.

SECTION2. A State shall have power to regulate the raising and spending of money with respect to State elections, including through setting limits on—
(1) the amount of contributions to candidates for nomination for election to, or for election to, State office; and
(2) the amount of expenditures that may be made by, in support of, or in opposition to such candidates.

SECTION3. Congress shall have power to implement and enforce this article by appropriate legislation.
I do realize that this would only be the first step. Making Congress use these powers against the wishes of their corporate sponsors would be difficult, but giving them these powers in the first place is a must.

Our campaign finance system often feels like an old boat that's continually springing a new leak. No matter how much we patch it, we find that we're still taking on water. The solution isn't to keep on plugging up the holes; The solution is to buy a new boat.


Wednesday, April 7, 2010

How Income Taxes Work

America has a very peculiar system for the government incentivizing behavior. More often than not, instead of funding programs or giving rebates directly to people, we give tax credits. While it would be simpler to give an $8000 check to first-time homebuyers, the federal government instead gives new homeowners an $8000 tax credit. In the end it's the same $8000, but the former can be classified as a "government hand-out", while the latter is a "tax cut." You can see why one phrasing is preferred over the other.

Needless to say, this makes for a ridiculously complex tax code. There are thousands of possible deductions created from years of Congress wanting to incentivize this or that behavior. One area where the tax code remains simple, however, is the basic income tax.

Take these numbers from the IRS, detailing how much each level of income is taxed:

To take an example, suppose your taxable income (after deductions and exemptions) was exactly $100,000 in 2008 and your status was Married filing separately; then your tax would be calculated like this:

This puts you in the 28% tax bracket, since that's the highest rate applied to any of your income; but as a percentage of the whole $100,000, your tax is about 22.37%.
The problems arise when these mathematical details are not explained properly, giving the impression, for example, that someone making $500,000 is taxed 35% on their entire income, not just on the portion greater than $373,650.

All too often the media and political figures talk about the income tax in terms of how it affects "people", not how it affects "income levels". Take this story from the USA Today:

WASHINGTON — Fresh from raising taxes on upper-income Americans to help expand health insurance coverage, President Obama and Democratic lawmakers are targeting them again.

When Congress takes up Obama's proposed $3.8 trillion budget this year, it will include extending President George W. Bush's tax cuts for middle-income families enacted in 2001 and 2003. Tax cuts for individuals with income above $200,000 and couples above $250,000 would be eliminated.

This story is misleading and the paper should issue a correction. All tax cuts for couples making over a quarter-million will not be eliminated--they will still pay the lower rates on their incomes that fall below $250,000. The only tax hike is on the money they make past $250,000.

This is a pet peeve of mine: Disingenuous (or ignorant) folks who say that our progressive income tax system is unfair because some people are taxed at a different rate than others. That's entirely untrue. Every single person in the country is taxed at the same rates; everyone is covered equally under the tax laws. Everyone has their incomes below $8,375 taxed at a 10% rate. Everyone has their next $25,625 taxed at 15%. And so on.

People who argue for a flat tax are really not arguing that every person should be treated equally; they are really arguing that every dollar should be treated equally. Your first buck should be taxed at the same rate as your 250,001st, they say. I think that's nonsense. Given the costs of universal necessities--clothes, shelter, food--the government should go easy on money needed to cover the basics. And these lower tax rates should (and do!) apply to every person, regardless of their total income. But it's silly to think that an additional $10,000 for a multimillionaire has the same worth as the same amount given to a poor individual. After a certain point, the law of diminishing returns kicks in and additional money is worth less and less. At that point, why shouldn't these additional, almost worthless dollars be taxed at a higher rate?

I wish this point were emphasized more often in the media. And proponents of the progressive tax system should use the proper semantics when discussing this issue.

Friday, April 2, 2010

What's the Matter with Senate Republicans?

Some Democrats in Congress are a stickler for bipartisanship. Rather than having the courage of their convictions, they seek the "political cover" that only bipartisanship can provide. Like I said yesterday, when a bill is truly bipartisan, no one can be blamed if the new policy fails. Politicians find that their careers are longer when they are know for nothing in particular. Faceless members of Congress tend to last longer than those who create a ruckus (and enemies). In the interest of keeping their jobs, most practice a "go-with-the-flow" mentality. Whether you're in the majority or minority, that means not rocking the boat by challenging the status quo.

It's no surprise then that when Democrats propose big policy overhauls--such as the Affordable Care Act, Financial Reform, or the START treaty--they seek Republicans support to help provide political cover just in case the Democrats find their new policy to be unpopular. When everyone is responsible, no one is.

Some Democrats, such as Robert Wexler, Nancy Pelosi, or Al Franken, believe that it doesn't matter what kind of backing their supported policy has--as long as it's enough to get it passed. If a new policy is good for the nation, it doesn't matter whether it has 109 Democrats and 109 Republicans supporting it or just 218 Democrats. At the end of the day, all that matters is that it's passed.

Chris Dodd, Max Baucus, and Barack Obama aren't like that. They pride themselves on getting bipartisan support for their proposals. We saw that last summer, when Max Baucus held long meetings with Republicans on the Senate Finance Committee regarding the Democrats' number one domestic priority:
Mr. Obama, in his news conference last week, praised the three Republicans in the Senate group — Michael B. Enzi of Wyoming, Charles E. Grassley of Iowa and Ms. Snowe. Mr. Grassley, the senior Republican on the Finance Committee, and Mr. Baucus share a history of deal-making, and group members said they share a sense of trust despite the partisan acrimony that pervades the Capitol.

Mr. Enzi, who sits on both the Finance Committee and the health committee, has a long record on health issues but found Democrats on the health panel unwilling to compromise.

And Ms. Snowe, one of two centrist Republicans, often teams with Democrats as she did on the economic stimulus plan this year.

After the group insisted it needed more time, the majority leader, Senator Harry Reid of Nevada, conceded that a floor vote would have to wait until after the summer recess. “If this is the only bill with bipartisan support,” Ms. Snowe said, “that will really resonate. It could be the linchpin for broad bipartisan agreement.”
In the end, only Senator Snowe voted the measure out of committee, but she quickly reversed herself and voted against every other iteration of the bill.

Baucus justified giving up his bipartisan dream because Grassley couldn't bring along extra Republicans to support the very watered-down measure. Even when he gave the Republican caucus half a loaf, they still batted it away. Grassley's word held no sway, and soon he abandoned the legislation he helped craft:
A few months ago, Republican Sen. Chuck Grassley of Iowa positioned himself to be the key GOP player in negotiations to advance President Obama’s top domestic priority — overhauling the nation’s health care system.

As ranking minority member on the Senate Finance Committee, Grassley has been a leading voice in the committee’s bipartisan “Gang of Six” that had been struggling to hammer out a bill before Congress recessed for August.

But Grassley’s evolution — from legislator once complimented by Obama for his willingness to work across the aisle to one of the president’s chief critics on health care — is a sign that the chances for passing a bipartisan health care bill have all but disintegrated. And as Grassley has pivoted from defending bipartisan work on a Senate bill to criticizing a competing House bill, he has increasingly sown confusion over just where he stands in negotiations to overhaul health care.
Senator Dodd has been following a similar pattern recently regarding financial reform. The House has already passed a moderately strong financial reform bill. Dodd has crafted a bill of his own and, ignoring the lessons learned during the health care fight, and did everything he could to get Republican support:
Dodd and Corker had spent weeks trying to hammer out an agreement on financial regulations, including new consumer protections for financial products.

"We have made significant progress and resolved many of the items, but a few outstanding issues remain," Dodd said in a statement.

President Barack Obama supports a standalone Consumer Financial Protection Agency (CFPA). But the proposal ran into stiff resistance in the Senate and fervent opposition from financial industry lobbyists and the U.S. Chamber of Commerce.

In addition to consumer protections, Corker said another key sticking point remains regulation of financial derivatives.

Dodd said that he continues to pursue a bipartisan "consensus" package, but he believes pushing forward to committee debate is "the best course of action to achieve that end."

“I have been fortunate to have a strong partner in Sen. Corker, and my new proposal will reflect his input and the good work done by many of our colleagues as well," Dodd said. “Our talks will continue, and it is still our hope to come to agreement on a strong bill all of the Senate can be proud to support very soon."
Dodd worked over Senator Bob Corker, making concessions in the futile attempt to get his support. While Corker says he was close to supporting the bill, Dodd walked away from negotiations because Corker was unable to bring a single other Republicans on board. Corker could not promise Dodd that his weaker legislation would receive any Republican votes. Corker even attacked the Republican caucus for not supporting his efforts at crafting a bipartisan bill:
"We had an opportunity to pass out a bill out of our committee in a bipartisan way, and then stand on the Senate floor and hold hands and say that we would keep amendments that were unnecessary and improper from coming onto this bill," Corker said. "Instead of that, it's been decided that we are going to try to negotiate now ...

"I think it's going to be far more difficult now that this has passed out of committee ... I think we have made a very, very large mistake, and I regret that."

Banking committee Chairman Christopher Dodd (D-Conn.) told HuffPost that "what [Corker] said was his Republican leadership abandoned him."

"They decided they wanted to say 'No' again," Dodd said. "So we went ahead ... If you don't even want to offer yours, I couldn't -- if anyone wanted to offer amendments, I would have been there. They made a decision not to. That was their call. Not mine. And listen, I understand why they wanted to do it."
This is beginning to be a familiar tale: Democrats want to compromise, but they are unable to find a single Republican to take that up on their offer. And if there is one Republican interested, they are never able to bring along a large portion of their caucus.

Despite this treaty having extensive bi-partisan support among senior foreign policy officials – such as George Schultz, Henry Kissinger, Richard Lugar (R-IN), Colin Powell –ratification is far from assured. There are real questions over whether the Senate GOP will seek to obstruct the ratification of the treaty. Treaties require a two-thirds majority, therefore eight or nine Republican votes are needed to ratify this treaty. If the Senate GOP wants to kill it they can. Therefore if ratification becomes a fight – it will not be a fight between Republicans and Obama, it will be a fight within the Republican caucus – between moderates and the far right.

In a sign of how extreme the GOP Senate leadership has become, Bloomberg reported, following word the treaty was done, that “Senate Republicans would object to linkages similar to the one in the 1991 treaty.” In other words, what was acceptable to Ronald Reagan and George H.W. Bush, would not be acceptable to Senator Jon Kyl (R-AZ).
Even Dick Lugar, the most senior Republican in the Senate, can't bring support on board for a treaty that seems entirely reasonable.

I think this shows exactly how strong a hold the far-right has on the Republican party. Rather than evaluate legislation on its merits, it's being judged based on its sponsors. While bipartisanship for bipartisanship's sake can be a damaging thing, blind partisanship can be just as bad, if not worse. Policy between the two parties are to be expected and can be a great thing, but reflexive revulsion to anything your political opponents propose, no matter how mainstream the idea, is ultimately damaging to the country. If anything that is proposed by the Democrats has 41 members of the Senate instantly opposed to it, it's very difficult to get anything done.

Of course, this strategy can seriously backfire on the clueless Republicans when the Democrats practically beg them to let them compromise:
Barack Obama badly wanted Republican votes for his plan. Could we have leveraged his desire to align the plan more closely with conservative views? To finance it without redistributive taxes on productive enterprise – without weighing so heavily on small business – without expanding Medicaid? Too late now. They are all the law.

No illusions please: This bill will not be repealed. Even if Republicans scored a 1994 style landslide in November, how many votes could we muster to re-open the “doughnut hole” and charge seniors more for prescription drugs? How many votes to re-allow insurers to rescind policies when they discover a pre-existing condition? How many votes to banish 25 year olds from their parents’ insurance coverage? And even if the votes were there – would President Obama sign such a repeal?

We followed the most radical voices in the party and the movement, and they led us to abject and irreversible defeat.
This can be damaging for the Republicans for two reasons:

1) The law is the law. The Affordable Care Act, and soon financial services reform, will not be repealed. Republicans let the possibility of a weaker bill slip through their fingers.

2) If the new laws becomes popular, they will never be able to take credit. The voters will know exactly who to reward (or blame).

If the Democrats can learn their lesson that negotiating with this batch of Republicans is a futile exercise that will never yield meaningful results, they stand to reap great rewards. They should learn their lesson well...because it's obvious that the Republicans never will.


Wednesday, March 31, 2010

The Case for Partisanship

Today, when unveiling the Administration's new plan for opening hunderds of miles of coastline for oil drilling, President Obama justified the new policy by saying:

So the answer is not drilling everywhere all the time. But the answer is not, also, for us to ignore the fact that we are going to need vital energy sources to maintain our economic growth and our security. Ultimately, we need to move beyond the tired debates of the left and the right, between business leaders and environmentalists, between those who would claim drilling is a cure all and those who would claim it has no place. Because this issue is just too important to allow our progress to languish while we fight the same old battles over and over again.
This is a common tactic for Obama, and one that he's used during his entire time on the national scene. He describes a position on the "left" (drilling "has no place"), a position on the "right" ("drilling is a cure all"), and emphasizes that his position falls somewhere in the middle. His approach, he says, is the pragmatic, centrist approach that rejects the extremes of both sides. By following a cross-ideological, if not bipartisan approach, Obama hopes to convince people that he's found the real solutions to our problems.

This tactic (some call it "Hippie-punching", where Obama attacks a strawman caracture of a traditionally liberal position) pops up in many of the President's policy addresses:’s absolutely true this is a middle-of-the-road bill. This isn’t single-payer, which some people wanted. It’s also not what the Republicans were looking for, which was basically to deregulate the insurance industry, arguing that somehow this would cut down costs -- something that defies the experience of everybody who’s dealt with an insurance company out there.
Even back in 2004, during his epic DNC speech, Obama was echoing this theme:

Go into the collar counties around Chicago, and people will tell you: They don't want their tax money wasted by a welfare agency or by the Pentagon.
The message here being that conservatives would like to waste your tax money on the Pentagon, while liberals would like to waste it on welfare. The correct approach--Obama's approach--is to do neither; He will instead make a conscious decision to always use tax dollars responsibly.

One positive aspect this rhetorical tactic has is that Obama, as the de facto leader of the Democratic Party, paints the entire party in this flattering light. While individual policy proposals, such as single-payer, may be thrown overboard, the entire party is spoken of as pragmatists, not partisans. It's no wonder that the Democrats still have a large advantage in party ID and their ideological coalition spans the spectrum from progressive to center-right, from Russ Feingold to Ben Nelson:

Fortunately, the Democrats are now pursuing an active, if not progressive agenda in Congress and have many accomplishments to their name. From the Lilly Ledbetter Act to the Affordable Care Act, the Democrats in Washington have gotten plenty done over the past 14 months. Many of these achievements have been with centrist ideas that would have gained vast bipartisan support if the Republicans in Congress were intellectually honest and weren't paid to vote otherwise.

In a way, I'm glad that the Republicans in Congress have rejected the "pragmatic" approach of Obama and have voted as a block against nearly everything supported by the President. It's very healthy for our democratic republic to have clear and understandable differences between our political parties.

Take, for example, the issue of Civil Rights in the 1960 Presidential election. On the one hand, John F. Kennedy, a junior Senator with few legislative accomplishments, was running for President alongside Lyndon Johnson, the Senate Majority Leader who passed the Civil Rights Acts of 1957 and 1960, which had the goals of protecting voting rights in the southern states. On the Republican ticket, there was Richard Nixon, who had previously met with civil rights leader Martin Luther King Jr. at the White House and was the Vice President to Ike Eisenhower, who enthusiastically supported Brown v. Board and used federal troops in Little Rock to integrate public schools.

On a national level, there was little difference between the two parties when it came to civil rights matters. MLK himself refused to endorse either candidate, at least until the Kennedys, late in the campaign, became personally involved in trying to free him from jail. While there were large differences between the liberals and conservatives in the country over civil rights matters, there was no way to vote on a national level on that issue. Civil rights advocates around the country couldn't vote on their signature issue. Due to the fact that both parties contained liberal and conservative wings, it was impossible to distinguish between the two. Kennedy and Nixon, on this issue as well as many others, were almost identical, in both their records and their accomplishments.

The more the two parties have in common, the harder it is for low-information voters to make a decision in an election. Shortcuts, such as party ID or a candidate's personal background, help voters decide which candidate would best represent their interests. This increases their chances of choosing correctly. But if we don't want people using those shortcuts, then we must have clear divides between the two parties.

Partisanship also helps with accountability. If one party is in charge and can unabashedly push through their legislative agenda, then the voters know exactly who to reward or punish come the next election. When you have muddled legislation with a hundred parents from both parties, it's next to impossible for the voting public to decide who gets the credit and who gets the blame. While this may be a feature for members of Congress, it certainly does no favor for our democracy.

Today, Obama and the Democrats in Congress are passing legislation that they repeatedly claim takes ideas from both parties, from both sides of the ideological divide. If the Republicans were to actually support their own proposals, the Federal Government would be made up of one giant governing coalition where all legislators would be able to take credit when things go well and deflect blame when they fail. When there is no difference between the parties, people can't be expected to make intelligent choices at the ballot box, and therefore there can be no accountability.

I suppose we should thank the Republicans. By holding their breath and stomping their feet, they are the true guardians of democracy.

Tuesday, March 30, 2010

The Tea Party and Fiscal Fauxhawks

I've heard defenders of the "Tea Party" movement argue that a handful of racist or homophobic comments shouldn't tar the entire group. There are people with legitimate concerns that go to those rallies who are outraged at government spending, regardless of who is in power.

And I don't doubt that. I'm sure there are plenty of folks out there who thought Medicare Part D was just as wasteful as the American Recovery and Reinvestment Act. The main issue is that those people are very easily drowned out by louder voices.

Ta-Nehisi Coates wrote an excellent piece on this topic last week:

I hear GOP folks and Tea Partiers bemoaning the fact that media and Democrats are using the extremes of their movement for ratings and to score points. This is like Drew Brees complaining that Dwight Freeney keeps trying to sack him. If that were Martin Luther King's response to media coverage, the South might still be segregated. I exaggerate, but my point is that the whining reflects a basic misunderstanding of the rules of protest. When you lead a protest you lead it, you own it, and your opponents, and the media, will hold you responsible for whatever happens in the course of that protest. This isn't left-wing bias, it's the nature of the threat.

The main issue I have with people complaining about people complaining about the Tea Party Protests (whew!) is that the "Tea Party" has no set beliefs. It has no platform. It has no founding document. It's a collection of people who range from small-government libertarians to borrow-and-spend Republicans. You have people at the protests demanding that the government be cut in half, and people demanding that there be no cuts to Medicare. You have policy folks and you have people screaming "Where's the birth certificate?!" People who loved Bush's unfunded programs, but hate Obama's deficit neutral proposals...and people who hate both.

The fact that these protests didn't exist (or, if they did, they were much, much smaller) when Bush and the Republicans in Congress were spending untold billions on Iraq, tax cuts, and Medicare Part D puts the entire Tea Party movement in a deep credibility hole from the start.

Heck, I'm not even arguing that the government necessarily should move to a balanced budget; I think it's a worthy target, and getting health care costs under control is a very important first step, but it shouldn't be the country's number one priority right now. But it is economically doable--politically difficult, but entirely possible.

Nor am I ragging on the Republicans for spending money on medicine for seniors. While I can think of a dozen better uses for most of the money Bush squandered, and there are some improvements that could have been made to the policy, I understand the importance of Bush addressing one of the top issues from the 2000 campaign. I just can't take people seriously when they flip-flop on their political beliefs depending on who is in power. These Fiscal Fauxhawks who loved Bush's tax cuts, war, and social spending but rag on Obama have no credibility. And unfortunately, these people are by-and-large the leaders of the Republican party and the faces of the Tea Party movement.

I'm sure there are some credible Tea Party folks--the kind who go on Larry King and stun him when they earnestly say that they want to eliminate Social Security--but they just don't get the most screen time.

TNC is right that the crazies tend to attract attention. I remember anti-war rallies where tens of thousands of people would show up, but the 20 year old anarchists would get the media attention. Or the folks with giant puppets. Nothing kills a message faster than a few outlandish people unintentionally subverting the message.

Perhaps the fact that the Tea Party folks are not emulating the more successful protests from history (Gandhi and MLK for starters) shows us that they, too, are not very serious about succeeding. But I doubt the "movement" could even agree on what "success" looks like.


Monday, March 29, 2010

The Budget is Going to be Okay

Paul Krugman of the New York Times writes:
I get a lot of worried mail along the lines of “how on earth will we ever be able to pay off our debt”? Look, there are real worries — but the math per se isn’t very hard.

The Obama administration’s budget (pdf) predicts that by 2020 we’ll have net federal debt of around 70% of GDP and a budget deficit of around 4 percent of GDP. Now, you don’t have to go to a zero budget deficit to make headway on the debt — a budget deficit of 2-3 percent of GDP would imply a steadily declining debt/GDP ratio. So if you believe the administration’s budget estimates, we’ll need to find another 1-2 percent of GDP in revenue or cost savings.


That’s not, in economic terms, a huge number. We could raise taxes that much and still be one of the lowest-tax nations in the advanced world. Or we could save a significant share of that total by not being totally prepared for the day when Soviet tanks sweep across the North German plain.

The only reason to doubt our ability to get things under control a decade from now is politics: if we’re still deadlocked, if sane Republicans are cowed by the Tea Party, then sure, we can have a fiscal crisis. And longer term, we’ll be in a mess unless we get health care costs under control — which is exactly what we’re trying to do, in the face of cries about death panels.

Politics complicates the budgeting process because so many people simply don't know how much the country spends on its many priorities. People often over-estimate how much is spent on foreign aid and domestic programs (education, transportation, housing, etc), while they underestimate how much is spent on entitlement programs (Social Security, Medicaid, Medicare, etc). Numbers are changed around the margins, but roughly speaking, how much as a percentage we spend on each item has largely remained the same.

Getting the public to understand the budget is also complicated by lying politicians. One of my biggest pet-peeves is politicians who misrepresent our spending priorities to sell the story that hundreds of billions of dollars are spent every year on waste, fraud, and abuse. We hear stories from ignorant pols who rail against "millions" spent on frivolous things like a middle-of-nowhere museum in Montana or a study on bear mating patterns. (Never mind that $2 million spent on a scientific study breaks down to less than a penny per person.)

(click for larger)

And here is the breakdown for the $481 billion in discretionary domestic spending:

(click for larger)

If this budget proposal were enacted unchanged, it would increase the overall deficit by $1.2 trillion--that's how much the Administration predicts we'll be short in FY2011. Due to the inevitable economic recovery, the Administration is predicting that the annual budget deficit will level-off in the $700-800 billion range over the next few years. As Krugman says, it's okay to not have a balanced budget. Due to increasing GDP, we can make headway on the debt by simply keeping the deficit low.

A balanced budget is doable, however. All it would take is some modest tax increases and modest budget cuts. It's widely known that the area of the budget that receives the least amount of scrutiny is the Defense budget. Obama insisted on a partial spending freeze, meaning that domestic discretionary spending will not increase from FY10 to FY11. The least the government can do is apply the same standard to the bloated Defense budget.

The biggest budgetary scare is the ballooning costs of health services. That's why you might hear of doomsday stories about the debt being out-of-control within ten years. To me, the biggest selling point of the Affordable Care Act was the CBO reporting that it would lessen the burden on the budget of government-provided health care (Medicare and Medicaid).

So policies are now in place to try to skyrocketing medical costs down. Any problems that arise from Social Security can be dealt with by utilizing modest tax increases or small cuts in benefits. The annual budget deficit is very manageable. Once it's taken care of, we can start paying down the national debt and stop throwing away $250 billion every year.

All in all, as long as the adults remain in charge, things are going to be okay!


Sunday, March 28, 2010

Nelson '64

Matt Yglesias says:

In ‘64, the GOP establishment felt that Goldwater was too radical. They said that nominating a hard-rightist like Goldwater would be counterproductive. But conservative activists worked hard, and they did it. Goldwater got the nod. And, just as the establishment predicted, Goldwater got crushed. And just as the established predicted, it proved to be counterproductive. The 1964 landslide led directly to Medicare, Medicaid, Title I education spending, and the “war on poverty.” In the 45 years since that fateful campaign, the conservative movement managed to gain total control over the Republican Party and to sporadically govern the country. But it’s only very partially rolled back one aspect of the Johnson administration’s domestic policy.

Which is just to say that the conservative movement from 1964-2009 was a giant failure. By nominating Goldwater, it invited a massive progressive win that all the subsequent conservative wins were unable to undue. But the orthodox conservative tradition of ‘64 is that it was a great success that laid the groundwork for the triumphs to come.

The basis of the conservative movement has always been to keep the power-centers of society in the same place. Those who have power today should keep it--sometimes add to it, but never lose it. Wall Street traders, titans of industry, heirs to fortunes, and media moguls should never be set back by societal demands that they pay more in taxes. They should never be burdened by more government regulations that make it more difficult for them to make and keep their money.

It's no surprise that these folks are, generally speaking, the monied base of the Republican party. Whoever benefits most from the status quo has a vested interest in not changing anything. When wages stagnate, social programs are cut, and profit margins increase, the monied conservatives in this country win. It's no surprise that they largely consider the past 30 years of free trade, welfare reform, and deregulation to be one big, fat "W".

The biggest problem with this governing coalition is that while it has the money, it lacks the numbers. While money can have a very large effect on elections, a majority of people in this country side against the wealthy conservative interests in this country. When the majority of people are able to vote in a progressive government, we get new programs and better wealth distribution that are ridiculously difficult to repeal.

Yglesias is right that the conservative movement can be seen as a failure as it has never even come close to repealing the biggest progressive reforms and programs put into place by LBJ. However, if the wealthy conservatives in this country are a minority, it's inevitable that progress will be made towards a more equitable society. The conservative movement isn't a failure because 2010 doesn't look like 1963. It's a success because progress has been slower than it otherwise would have been if the Republican party leadership had remained in the hands of the liberal/moderate faction.

If Nelson Rockefeller were seen as the Godfather of the modern Republican party, we would have seen political power in Washington flipping between the moderate Republican party and the liberal Democratic party. That would have been objectively worse for conservatives than the current right-wing/centrist two-party system we have today.


Saturday, March 27, 2010

Fewer Political Appointees, More Bureaucrats Please

Today, President Obama made fifteen "recess appointments", largely to help fill administrative spots that have been vacant since he was inaugurated. Even though these nominees had majority support in Congress and many of them passed through the appropriate committees with ease, Republicans placed "holds" on them which prevented them from being voted on.

While this does speak to the need for Senate reform to allow majority votes on all things not required by the Constitution to be super-majority votes, it also shines a light on another problem.

Look at where these nominees are going:
Rafael Borras: Nominee for Under Secretary for Management , Department of Homeland Security

P. David Lopez: Nominee for General Counsel, Equal Employment Opportunity Commission

Francisco "Frank" J. Sánchez: Nominee for Under Secretary for International Trade, Department of Commerce

Eric L. Hirschhorn: Nominee for Under Secretary of Commerce for Export Administration and head of the Bureau of Industry and Security, Department of Commerce
There are currently 77 of Obama nominees pending on the floor, being held up by Republican procedural tactics. There have been hundreds of nominees that have moved through the Senate over the past 14 months.

Why are so many of these offices filled by Presidential appointment, rather than by career civil servants? In each Department (Defense, Treasury, HUD, etc) we have the Secretary and many Deputy Secretaries, Assistant Secretaries, and Under Secretaries. Not to mention many more Deputy Assistant Secretaries, Deputy Under Secretaries, General Counsels, Administrators, Deputy Administrators...

All these positions must be filled for each division within each executive department. And many of these divisions have oversight and review boards that are also filled with Presidential appointees.

It is important for the President to be able to execute the laws in the manner he sees fit. For example, the Justice Department under a Republican President focuses more on restricting access to the ballot box (strictly enforcing laws against voter fraud), while Democratic Presidents focus on increasing access (loosely enforcing those same laws). I think the President should have the power to appoint people who can enforce those overarching directives.

But with over 2 million people in the civil service I find it hard to believe that so many lower-level leadership positions can only be filled by Presidential appointments. Congress should look into converting 25% of these political-apppointee positions into civil servant jobs. By filling more slots with permanent civil servants, the government would operate more smoothly during an Administration turn-over and prevent small divisions from being leaderless while Congressional obstruction keeps the top position from being filled.

Is Sen. Corker Afraid of Spurring Filibuster Reform?

According to Republican leaders, the best course of action for stopping the Democratic agenda and regaining power for themselves is to "just say no" to whatever the Democrats propose. Don't negotiate, don't bargain, don't contribute--just stand in the way and always vote "no".

Given that the Democrats had a filibuster-proof majority in the Senate when they passed Health Care Reform, however, there was nothing the Republicans could do to stop the bill. But as conservative David Frum said earlier this week, the Republicans could have negotiated with the Democrats during their darkest hour--right after Scott Brown's victory in Massachusetts--and gotten at least half a loaf out of a bill that was probably going to pass anyway. If legislation is going to become law no matter what you do, why not get everything you can out of it, even if you are the minority party? The Rahm Emmanuels of the world would have jumped at the chance to push through a much smaller reform package if they could get Republican support. If the Republicans cared at all about policy (and--given that the issue seems to be becoming electoral winner for the Dems--politics), they could have stopped the CommieNazi legislation by replacing it with something so minuscule that even Tom Coburn could vote for.

Fortunately for the nation, the Republicans dropped the ball. Nancy Pelosi and the Democrats were able to push through comprehensive Health Care Reform.

Now the Senate is considering comprehensive Financial Services Reform. Hopeful that the Republicans would abandon their failed "Just Say No" approach to governing, Banking Committee Chair Chris Dodd reached out to Ranking Member Richard Shelby and then Senator Bob Corker in the hopes that they could work together to create a piece of legislation that would get the approval of both Democrats and a majority of Republicans.

The negotiations fell apart. For all their on-screen comity, Dodd and Shelby rarely see eye-to-eye. First-term Senator Corker, however, was eager to negotiate with Dodd, but he was unable to guarantee Dodd the votes of any other Republican members of Congress--a prerequisite for Dodd to give up key pieces of the legislation.

The Senate Banking Committee this week passed Dodd's Financial Reform bill on a 13-10 party-line vote. The bill will be hitting the Senate floor next week. And Bob Corker is sounding the alarm.

He isn't going on about socialism, tyranny, or liberty. He isn't warning the majority party that they are overreaching and will feel the wrath of the voters. For a change, he is warning the Republicans that they better get in line:

"I find it very difficult to see a scenario where financial regulation doesn't pass the Senate," Corker told reporters after a speech at the U.S. Chamber of Commerce.

"This is so unlike the health care debate," said Corker, noting that some of his Republican colleagues have made misjudgments on that point over the last month. "I don't think people realize that this is an issue that almost every American wants to see passed. There'll be a lot of pressure on every senator and every House member to pass financial regulation."

Corker is worried that if the 41 Senate Republicans hang together and vote against cloture, they will hear from their constituents who will not be happy to see their Representatives siding with Wall Street and the Bankers, against the Democrats and the folks of Main Street. According to Pew:

59% of voters felt Congress and the administration should support financial reform now, over other priorities.

This is the perfect time for the Dems to press their advantage. This is an issue where they have a clear opinion advantage. They are coming off a great victory in Health Care Reform. They can explain this issue in easy-to-understand language (ie: "The Bankers caused the financial crisis, now we need more regulation to keep them in line"). If the Republicans filibuster this reform package, the Dems should go on an all-out offensive and go to the mat for this bill.

And that's exactly what Corker is afraid of. He's worried that the Republican leadership doesn't see this coming. Chris Dodd said of the Republican leadership:

"They decided they wanted to say 'No' again," Dodd said. "So we went ahead ... If you don't even want to offer yours, I couldn't -- if anyone wanted to offer amendments, I would have been there. They made a decision not to. That was their call. Not mine. And listen, I understand why they wanted to do it."

But could Corker also be worried that this issue may lead to the death of the filibuster?

The top three Senators in the Democratic Leadership--Harry Reid, Dick Durbin, and Chuck Schumer--all favor filibuster reform. The odds are good that the first order of business in the 112th Congress will be to eliminate the filibuster. But Financial Services Reform could be to the Democrats was Bush's Judges were to the Republicans; it could be a great reason to bring out the "Nuclear Option" and threaten to do away with the filibuster for good.

I believe that is what Bob Corker is really afraid of. He's not afraid of damaging the Republican image--after all, it's nearly impossible for the Republicans in Congress to be seen is a worse light. Instead, he could be afraid of the Democrats pushing the advantage and taking away the Republicans' favorite procedural roadblock.

On the one hand, I would like to see Financial Services Reform pass without a problem. On the other, it would be nice to see all 41 Republicans filibuster such a popular piece of legislation and hand the Democrats the perfect excuse for nuking the filibuster once and for all.