## Nineteen Things Worth Reading, Mostly Economics for March 31, 2010

1. Roth: "The University of Washington tried to organize a debate on whether the health-care reform bill is constitutional. But it couldn't find a law professor to argue that it isn't, reports the Seattle Times. '"I will say that we tried very hard to get a professor who could come and who thinks this is flat-out unconstitutional," said the moderator. "But there are relatively few of them, and they are in great demand."' Washington's attorney general, Rob McKenna, has joined 12 other state AGs on the lawsuit, filed last week, that argues the bill is unconstitutional. We took a look at the suit's slim chances of success here."
2. Serwer: [You] write... about how... Obama can't win... constrained by the traditional roles of black people.... After he wins... harried op-eds about how he only won because white people felt really guilty... praise then-candidate for RNC Chair Michael Steele as someone with "integrity" who "really stands for something."... Then, when the political winds seem to be blowing misfortune Obama's way, you.... write about how Obama is ineffectua;... because he never had the chops... only elected because he's black. Then... Obama pushes historic health-care... puts him on the same playing field as the most prominent Democratic presidents in American history.... Being... wrong... over and over ... [is] maddening. Steele keeps reassuring his conservative audience that this fop Obama is a pushover.... And those who believe him do so because they want to be reassured that Obama isn't exceptional.... Then they lose, and they scratch their heads and start muttering angrily about teleprompters..."
3. Grim: "Obama:'It's time to move beyond disputes between big biz and enviros.' What other disputes should we 'move beyond'? Can u pls make sense?"
4. Sevugan: "We are told that the RNC press shop sent out a list of expenses we have incurred at the DNC to the press corps... you will notice there are no expenses on here related to sex clubs. The DNC, unlike the RNC, does not conduct business at sex clubs with lesbian bondage themes. We understand that RNC is desperate to change the subject, but... [this] just comes off as desperate. Unlike RNC expenses for redecorating the Chairman's office or table service at a sex club, these expenses were for normal party business.... Respecting and leveraging donor contributions rather than wasting them may be unusual for the RNC, but it's not for us.... perhaps the RNC should spend their time scrutinizing their own books to weed out their Chairman's profligate spending habits. But, if Republicans want to compare our spending to their spending and allow us to say "Michael Steele approved spending money at a Hollywood sex club" a few more times – that’s fine with us."
5. Barr: "In hopes of redirecting incoming fire about its spending habits, the Republican National Committee on Wednesday tried to turn scrutiny to the spending habits of the Democratic National Committee but came up with nothing nearly as risque.... It tallied up, instead, two years worth of catering, luxury hotels and limousine bills. RNC Chairman Michael Steele has been widely criticized for... private jets and car services. An e-mail from RNC Communications Director Doug Heye pulled together DNC expenses dating back to October 2008... not outside the norm.... One RNC staffer — former Young Eagles Director Allison Meyers — has been fired over nearly $2,000 spent at Voyeur West Hollywood, though it remained unclear Wednesday whether she was the one who approved the expense or not. Brad Woodhouse, communications director for the DNC, quickly responded, saying "the DNC, unlike the RNC, does not conduct business while watching women engaged in lesbian bondage scenes."" 6. Binks: "A Tea Party leader acknowledged she supports abolishing Social Security in an appearance this week on "Larry King Live." St. Louis Tea Party co-founder Dana Loesch said she would "absolutely" eliminate the program, which has existed since 1935. Talk show host and Libertarian leader, Wayne Allyn Root agreed: "At best I'd do away with it, because I can find a better way to spend and save my own$15,000.""
7. Emptywheel: "Judge Walker just issued the following ruling in the al-Haramain case: 'The court now determines that plaintiffs have submitted, consistent with FRCP 56(d), sufficient non-classified evidence to establish standing on their FISA claim and to establish the absence of any genuine issue of material fact regarding their allegation of unlawful electronic surveillance; plaintiffs are therefore entitled to summary judgment in their favor on those matters. Defendants’ various legal arguments for dismissal and in opposition to plaintiffs’ summary judgment motion lack merit.... In the absence of a genuine issue of material fact whether plaintiffs were subjected to unlawful electronic surveillance within the purview of FISA and for the reasons fully set forth in the decision that follows, plaintiffs’ motion for summary judgment on the issue of defendants’ liability under FISA is GRANTED..."
8. Wolf: "Yet the asset bubbles and private sector credit expansions in the periphery were also the mirror image of the absence of growth in real demand in the core... This was how the ECB’s monetary policy produced a more or less adequate rate of expansion of overall eurozone demand. So, as soon as we ask what was the underlying cause of the fiscal catastrophes of today, we must realise that they were ultimately the result of reliance on an accommodative monetary policy, employed to offset the feeble growth of demand in the eurozone’s core and, above all, in Germany. Such a discussion of internal eurozone demand and imbalances is not one German policymakers wish to have.... The project of monetary union confronts a huge challenge.... But the bigger issue is that the eurozone will not work as Germany wishes..."
9. Jilani: "Yesterday, the University of Washington held a debate about the constitutionality of the recently passed health care reform bill. The Seattle Times reports that none of the panelists at the debate argued that the bill was unconstitutional because the organizers of the event couldn’t find any law professors who held that view..."
10. TNC: "Brooks is pulling a clever bait and switch. Sandra Bullock was married to a dude who, evidently, repeatedly cheated on her. Perhaps that's what Brooks considers a "happy marriage." I think a lot of people would beg to differ. But that aside, the notion that women who disagree are "crazy" is rather presumptuous.... I haven't seen Brooks' stats, but I strongly suspect that they don't tell us much about some people, they tell us something about most people. But if you're the kind of person who would single-mindedly devote yourself to pursuing an academy award, isn't it possible that you aren't like most people, and that stats like this are less indicative of your life? In which case, are you really crazy? Or is that your life, with all its nuances, and all its specifics, simply can't be folded into the square mind of the average pundit? Sociology is porn for public intellectuals--or rather we seem intent on making it so..."
12. Plumer: "[I]t seems bizarre to fork over this bargaining chip before the bill is even released. What kind of negotiating tactic is that?... Back in January, the White House proposed a massive expansion of the nuclear loan guarantee program without getting anything tangible in return from pro-nuke Republicans. John McCain still wanders around complaining that the administration's not "serious" about nukes. Now, maybe that's the point—offer an olive branch and watch Republicans swat it down and look unreasonable. Right on cue, John Boehner's already whining about Obama's drilling plan. Not sure that strategy makes sense, though. Another possibility... is that this move isn't focused on the climate-bill debate and is geared more toward public opinion... gas prices are expected to go up quite a bit this summer... So this could be more about the midterms than rounding up votes in the Senate. Though, granted, this drilling announcement won't affect summer gas prices in the slightest..."
13. Klein: "When George W. Bush and the Republican Congress passed Medicare Part D in 2003, they... [gave] companies that provide retiree drug benefits get a subsidy of about $1,300 per retiree per year in order to keep companies from ending their retiree drug plans at once and dumping everyone into Medicare. This subsidy is not just tax free but also tax deductible. Let me make sure that's clear: Not only did companies get a subsidy, but they could also deduct that subsidy from their taxes. Sweet deal. This looked a bit nuts in retrospect, so Democrats ended the subsidy's deductibility.... They didn't end the subsidy. And they didn't make it taxable. They just said that it couldn't be used as a tax deduction.... So the Wall Street Journal is terrified that ObamaCare will...end the deductibility of certain federal subsidies that helps perpetuate retiree drug benefits in the employer-based health-care system... free-market conservatism is no match for pro-business lobbying..." 14. Klein: "Steele, it is not even worth considering the possibility that Obama pursued health-care reform -- like a half-dozen or so presidents before him -- because it was important, or even because there was not that much more he could do on jobs. In fact, that is such an absurd suggestion that he does not even feel the need to reject it in his op-ed. He just ignores its possible existence. That makes for a model that has a lot of trouble accounting for Nancy Pelosi and Drew Altman and Atul Gawande and Jonathan Cohn and everyone else who fought for this reform but wasn't named "Barack Obama."..." 15. Bernstein: "The problem for the GOP right now... is that it's not clear that the electoral incentive applies. Important portions of the Republican network appear to have an incentive to be in the minority, because it's good for book sales, TV and radio ratings, and page views. Others may find that its just as lucrative, if not more so, to organize Tea Party protesters than it is to organize winning electoral campaigns... "unity" might well be best seen in the abstract not as a potentially good strategy, but as an effect of a party that is shrinking, especially a party that is shrinking because it has become dangerously divorced from normal electoral incentives. Is that what's actually happening to the Republicans right now? I don't know! I do think, however, that it's rapidly becoming probably the biggest current question worth exploring..." 16. Buetler: "After making huge preemptive concessions on coal, nuclear, I'd guessed Obama'd have, what, like 75 votes for cap and trade by now? Silly me." 17. Johnson: " Speaking today at the Peterson Institute in Washington DC, Mr. Volcker made two broad points (Marketwatch coverage) – both of which we also emphasize in 13 Bankers. 1. The financial sector does not add anywhere near as much social value as its proponents claim.... 2. Too big to fail banks are alive and well – and this poses a major problem to our future prosperity.... The message yesterday and from other statements made by Mr. Volcker is clear. Our biggest banks are out of control and will not be reined in by the measures currently on the table." ## Cartoon of the Day: Tom Tomorrow's "Healthcare Reformageddon" (March 31, 2010) ## If You Are Now Uninsured, the Government Is Doing You a Favor with the PPACA Andrew Sabl: The Affordable Care Act is government paying for your private insurance when your employer doesn’t: If you or your family aren’t getting health insurance through your job, the government will pay to get you private insurance coverage, just as an employer would. You’ll have to contribute something—but the law guarantees, with specific numbers, that it will be no more than you can afford. It’ll be less than three percent of your paycheck if your family makes$33,000 a year, less than ten percent if you make as much as $88,000. Pre-existing conditions won’t matter. The government will still pay for your insurance, with the same affordable contribution from you. The bill has lots more--things that make it even better. But that, it seems to me, is the basic idea.... Under ACA, it’s the government’s job to get you insurance, and to pay for almost all of it if you can’t afford it. Before, you were on your own. ## Widening Term Spreads Would Be Good News Paul Krugman will be pleased, not distressed, by further widening of the U.S. term structure: A Note On The Term Spread: [T]o a first approximation you can think of the long term rate as reflecting an average of expected future short-term rates. Short-term rates, in turn, tend to reflect the state of the economy: if the economy improves, the Fed will raise short-term rates.... If the economy improves, short rates will rise; but if it worsens, well, they’re already zero, so there’s nowhere to go but up. This implies that there has to be a positive term spread. Now, this spread could be fairly small if people expected the economy to remain in the dumps for a long time; see Japan. What the large spread now tells us is that the US economy is in the dumps now, but that investors see a reasonably good chance of a strong recovery in the not-too-distant future. That’s good news, not bad news.... [I]f investors were growing worried about US ability to honor its debts, they would be worrying about a breakout of inflation as well as or instead of default per se. But we can track that by comparing interest rates on ordinary bonds and inflation-protected bonds. What we see is that from 3/17 to 3/30 — the period that inspired all those recent scare stories — the nominal interest rate on 10-year bonds rose by 26 basis points; the real rate rose by 28 basis points. So expected inflation actually declined, marginally. This is not at all what you’d expect to see if markets were pricing in fears about the US ability to repay. It is, on the other hand, exactly what you’d expect to see if markets slightly upgraded their hopes of recovery.... [A]ll that huge spread is telling us is that we’re up against the zero lower bound, but that markets think we may not stay there. Once again, the two rules: 1. Paul Krugman is right. 2. If you think Paul Krugman is wrong, refer to rule #1. ## Retiree Health Benefit Subsidy Accounting: Megan McArdle Says That She Does Not Read the Wall Street Journal Editorial Page Not that I don't understand why she doesn't--I don't read the WSJ editorial page either except under duress. But isn't reading the WSJ editorial page part of her job? McArdle: Excessive Outrage on Retiree Subsidy Accounting: [T]he new health care plan changed the tax treatment of a subsidy for retiree prescription drug benefits, which caused those companies who had received the subsidy to announce a charge against their deferred tax assets. Conservatives gleefully pointed out that this was probably going to change peoples' drug benefits. Liberals leaped into the fray, arguing that all the law had done was 'closed a loophole", and accusing the companies of "double dipping". All this moralizing seems to me to be extremely overwrought. (To be fair, I haven't actually seen any of the conservative moralizing; only liberal blogs claiming it exists. Which is not to say that it doesn't, only that I don't read the frothier bits of the conservative blogosphere or media world where such moralizing might have been done... I do like the description of the WSJ editorial page as one of the "frothier bits of the conservative blogosphere or media world" however: dead-on! What is going on: The Republican Bush administration's 2003 Medicare Part D established both a subsidy and a deduction for retiree health benefits: • A company spends$100 on retiree health
• The government kicks in $28 immediately • The company then gets to deduct its entire$100 as a cost of business on its tax form--so if it is facing a 35% marginal rate its taxes go down by $35. Thus the government is (for a 35% bracket corporation) kicking in$63 and shareholders are kicking in $37 of every$100 spent on retiree health benefits.

The "normal" way to do this would be to have simply a subsidy:

• A company spends $100 on retiree health • The government kicks in$28 immediately
• The company then deducts its $72 expenditure as a cost of business on its tax form--so if it is facing a 35% marginal rate its taxes go down by$25.20.

And thus the "normal" way the $28 subsidy would mean that the government is kicking in$53.20 and shareholders are kicking in $46.80 of every$100 spent on retiree health benefits.

This tax treatment is, to my knowledge, unique--I have never seen it before: the HIRE Tax Credit, the Research & Experimentation credit, and everything else I can think of all allows businesses to deduct only the net cost of the credit on their tax forms.

And the 2010 PPACA brings the tax treatment of this subsidy back into line with normal procedure.

Why did the Bush administration and the Republicans in 2003 do it this way? It smells like some last-minute lobbyist-induced slipping of the provision into the bill. It makes it a 40% subsidy, but the bill's managers can truthfully tell congressmen they are trying to get to vote for the thing that it is not a 40% but a 28% subsidy--and hope that they don't ask whether there is anything hinky about the tax treatment. It looks to me like just one of the hinky things done by the Republican Party in what was the hinkyest vote taken in the U.S. Congress ever:

Medicare Prescription Drug, Improvement, and Modernization Act (Part D): Legislative History: The bill was introduced in the House of Representatives early on June 25, 2003 as H.R. 1, sponsored by Speaker Dennis Hastert. All that day and the next the bill was debated, and it was apparent that the bill would be very divisive. In the early morning of June 27, a floor vote was taken. After the initial electronic vote, the count stood at 214 yeas, 218 nays. Three Republican representatives then changed their votes. One opponent of the bill, Ernest J. Istook, Jr. (R-OK-5), changed his vote to "present" upon being told that C.W. Bill Young (R-FL-10), who was absent due to a death in the family, would have voted "aye" if he had been present. Next, Republicans Butch Otter (ID-1) and Jo Ann Emerson (MO-8) switched their vote to "aye" under pressure from the party leadership. The bill passed by one vote, 216-215. On June 26, the Senate passed its version of the bill, 76-21. The bills were unified in conference, and on November 21, the bill came back to the House for approval.

Votes are supposed to be closed after fifteen minutes.

Good for the Democrats in undoing this.

## Figure of the Day: Odds on Obamacare

From Paul Krugman:

## **FLASH** MUST CREDIT DELONG **FLASH**: Horrible Tragedy: Republicans Read Greg Mankiw, Move to North Korea Seeking Low-Tax Country

If you are a Republican, you think a low-tax country is the right place to live, right? And now if you read Greg Mankiw he proves that North Korea is the lowest tax country.

South Korean police have been trying to keep Republican lobbyists from trying to cross the border minefields without success all morning. In other news, Coast Guard vessels with bullhorns have been trying to stop Republican entrepreneurs from embarking for Cuba from Key West in small rubber boats...

Mankiw:

Greg Mankiw's Blog: Taxes per Person: Some pundits, reflecting on the looming U.S. budget deficits, claim that Americans are vastly undertaxed compared with other major nations.  I was wondering, to what extent is that true? The most common metric for answering this question is taxes as a percentage of GDP.  However, high tax rates tend to depress GDP.  Looking at taxes as a percentage of GDP may mislead us into thinking we can increase tax revenue more than we actually can.  For some purposes, a better statistic may be taxes per person, which we can compute using this piece of advanced mathematics:

Taxes/GDP x GDP/Person = Taxes/Person

Here are the results for some of the largest developed nations:

France: .461 x 33,744 = 15,556. Germany: .406 x 34,219 = 13,893. UK: .390 x 35,165 = 13,714> US: .282 x 46,443 = 13,097. Canada: .334 x 38,290 = 12,789. Italy: .426 x 29,290 = 12,478. Spain: .373 x 29,527 = 11,014. Japan: .274 x 32,817 = 8,992

The bottom line: The United States is indeed a low-tax country as judged by taxes as a percentage of GDP, but as judged by taxes per person, the United States is in the middle of the pack.

## The March Payroll Number Is Not Looking So Good...

Private nonfarm payroll employment declined by 23,000 from February to March on a seasonally adjusted basis, according to the ADP National Employment Report™. This is somewhat below consensus expectations for this figure of a 40,000 increase.

## Department of "Huh?": Default Discounts in U.S. Treasury Interest Rates????????? Edition

The term premium on U.S. Treasury debt is low because even though long-term nominal (and real) rates are low, short-term rates are even lower, for we are deep in recession with an enormous fight-to-safety still going on in financial markets populated by spooked investors.

Megan McArdle disagrees, but it is not clear why:

Why is the Term Risk on Long Term US Debt So High?: Perhaps people are worried about future inflation--but while the spread between inflation-indexed bond prices and regular treasuries is rising, it's still rather low.  It's also possible that people are simply anticipating that eventually, a treasury bubble driven by the global "flight to quality" will dissipate, making it harder to unload longer-maturity debt. There's currency risk, too, especially since many of our creditors are foreigners.  And of course, there's the dreaded default risk.  If people stop thinking we're good for the money, they will demand higher interest rates, and tip us into crisis.

It's impossible to say which prevails, but it's not unreasonable to assume that there's at least some default risk pricing in.  Our entitlement problem is about to open a gaping hole in the budget, and so far our solution is... to enact more entitlements. Unless our politicians start outlining some credible plans for getting our demography-driven disaster under control, bond markets would be perfectly rational to demand a discount that reflects a possible future fiscal crisis...

When investors start to fear an increasing chance of default because the government's finances don't make any sense and to price that default into bond yields, it looks like this--for Latvia:

That is not repeat NOT REPEAT NOT!! what we see in the U.S. Not at all. We have $3 trillion more of U.S. government debt held by the public than we did two years ago--and lower long-term interest rates. ## A Few Notes on the "Doux Commerce" Thesis The thesis that market economies would be worth having for their own sake, even if they were inefficient at production and distribution, is held by Tyler Cowen: Who is a first-best economist?: I think of myself as a better-than-first-best economist. On average market solutions have positive Pareto-relevant externalities, if only through supplying experimentation and strengthening social norms in favor of commerce. That's true even for the market in thumbtacks, if you consider it as feeding into a broader social stream.... But I don't mean this as a plea for laissez-faire. Governments must produce public goods, maintain social order, and of course support markets. At the margin, those activities, such as imposing accountability under the law, are also largely underprovided.... An oversimplified version of my view is that anything good is underprovided at the margin. This follows from a belief in strong network and peer effects, and a belief in the relevance of basic sociology... The basic logic is that if the bulk of your social interactions are win-win acts of voluntary mutually-beneficial exchange, you are likely to think that you live in a happy benevolent peaceful world and are less likely to go Mad Max on your fellows. In his The Passions and the Interests and in his Rival Views of Market Society, Albert Hirschman names this the "doux commerce" thesis--and sees it as a "powerful moralizing agent which brings many nonmaterial improvements to society, even though a bit of hypocrisy may have to be accepted into the bargain." As Hirschman quotes Samuel Ricard: Commerce attaches [people] one to another through mutual utility. Through commerce the moral and physical passions are superseded by interest.... Commerce has a special character which distinguishes it from all other professions. It affects the feelings of men so strongly that it makes him who was proud and haughty suddenly turn supple, bending and serviceable. Through commerce, man learns to deliberate, to be honest, to acquire manners, to be prudent and reserved in both talk and action. Sensing the necessity to be wise and honest in order to succeed, he flees vice, or at least his demeanor exhibits decency and seriousness so as not to arouse any adverse judgement on the part of present and future acquaintances; he would not dare make a spectacle of himself for fear of damaging his credit standing, and thus society may well avoid a scandal which it might otherwise have to deplore... Hirschman, The Passions and the Interests: There was much talk, from the late seventeenth century on, about the douceur of commerce... sweetness, softness, calm, and gentleness... the antonym of violence. The first mention of this qualification I have been able to find occurs in Jacques Savary's Le Parfait Negociant, the seventeenth-century textbook for businessmen.... The most influential exponent of the doctrine of the doux commerce was Montesquieu... Adam Smith, Lectures on Jurisprudence: A dealer is afraid of losing his character, and is scrupulous in observing every engagement. When a person makes perhaps 20 contracts in a day, he cannot gain so much by endeavouring to impose on his neighbours, as the very appearance of a cheat would make him lose. Where people seldom deal with one another, we find that they are somewhat disposed to cheat, because they can gain more by a smart trick than they can lose by the injury which it does their character... But even Smith's self-interested and calculating market agents are sociable ones: they exchange, and perhaps they cheat--they don't kill, rape, burn, and steal. Which is odd, given that fifty years before Smith was born not far from his house there were lots of people who saw others not as potential partners in acts of mutually-beneficial commerce but instead as either (i) clan allies, (ii) clan enemies to be killed, or (iii) strangers to be robbed. ## 14 Pieces Worth Reading, Mostly Economics for March 30, 2010 1. Marcotte: "Douthat knows well how to play the “both sides” card while... blaming liberals.... The liberals made them do it! 'In reality, the scandal implicates left and right alike. The permissive sexual culture... the silly season of the ’70s deserves a share of the blame, as does that era’s overemphasis on therapy. (Again and again, bishops relied on psychiatrists rather than common sense in deciding how to handle abusive clerics.) But it was the church’s conservative instincts... that allowed the abuse to spread unpunished.'... [B]laming rape on a “permissive sexual culture” may be the biggest honking lie he’s ever told.... Douthat, like his other patriarchal brethren, rejects the idea that consent is a relevant aspect of sexuality. When your religion is one where a man raping a small child and a consenting couple of adults making love with a condom are basically the same, then it’s a quick jump to this..." 2. Hounshell: "Roger Cohen engages in some egregious rhetorical sleight of hand here: 'Already, there are shifts in Israeli attitudes as a result of the new American clarity. Last year, Netanyahu described Iran’s leaders as “a messianic apocalyptic cult,” which was silly. Of late we’ve had Ehud Barak, the Israeli defense minister, setting things right..." This... ignore[s]... stubborn facts.... Barak's comments predate the recent blowup between the Obama administration and Israel.... Barak has long believed that Iran doesn't pose an existential threat to his country.... Barak and Netanyahu come from different parts of the Israeli political spectrum... have different points of view.... precious little evidence Netanyahu himself has shifted his rhetoric.... Beware pundits who throw around vague language like "of late." It's a sign they're trying to trick you, or at least being sloppy." 3. Quiggin: "It was not surprising that the group recently arrested and charged with plotting to kill police officers, then those mourning at their funeral using IEDs have nowhere in the mainstream media been referred to as “terrorists” or even “terror suspects”. After all, they aren’t Muslims. But, that’s not enough for the political right. Apparently, on the “No True Scotsman” principle, it’s also unfair to refer them as “Christians“. 4. UPI: "Bill Hemrick, a wealthy conservative and founder of the Upper Deck baseball trading card company, filed the suit against Tea Party Nation leader Judson Phillips in Williamson County, Tenn., Fox News reported. The suit, which seeks$500,000 in damages, comes nearly two months after the National Tea Party convention in Nashville. Hemrick had loaned the group $50,000 toward the$100,000 speaking fee for former Alaska governor Sarah Palin, Fox said. Hemrick's attorney, Phillip Jones, told The (Nashville) Tennessean, his client gave the loan to forge a long-term relationship with Phillips' Tea Party Nation. "My client takes politics very seriously," Jones said. "And he thought they were going to be partners. But once he advanced the money, he found out that was not the case." The loan has been repaid, Jones said, Fox reported. The lawsuit alleges Phillips defamed Hemrick in an e-mail to supporters saying he was neither "reputable" nor "trustworthy," The Tennessean said..."
5. Duncan Black: "chuck lane really wants to win the worst wapo columnist award, which is like double marathon or climbing everest http://bit.ly/9e30Y6"
7. Black: "Been trying to resist addressing Father Ross [Douthat]'s latest, but it's just another reminder that conservatives have a very hard time distinguishing between consensual sex, which harms no one and a few people manage to actually enjoy, and rape or statutory rape in which consent is not there or society has deemed consent is not possible..."
8. Moynihan: "So what do the committed democrats in Ecuador do when confronted with a "politically partisan" media opposed to things "that the electorate voted for"? How about a three year stint in the clink for counterrevolutionary opinion editors! (Incidentally, using Weisbrot's rickety logic, Amy Goodman should have been kicked off the air for her partisan criticism of a twice-elected president. Or are Americans more mature consumers of opinion journalism, who can separate truth from fiction, wheat from chaff, unlike those easily manipulated Latin Americans?) Writing at Cato's @Liberty blog, Gabriela Calderon de Burgos explains the case of Emilio Palacio, opinion page editor of Ecuador's largest daily El Universo, who was sentenced to a three year prison stint for an editorial the government claimed was defamatory..."
9. Roe: "Chapter 11 bars bankrupts from immediately repaying their creditors, so that the court can reorganize the debtor without creditors shredding the bankrupt firm’s business. Not so for the bankrupt’s derivatives counterparties, who can seize and liquidate collateral, net out gains and losses, terminate their contracts with the bankrupt, and keep both preferential eve-of-bankruptcy payments and fraudulent conveyances.... Their right to jump to the head of the bankruptcy repayment line... warps their pre-bankruptcy incentives both to monitor the pre-bankruptcy debtor and to adjust their investments to better account for counterparty risk.... Moreover, the policy justification for the super-priorities — reducing financial contagion risk — is difficult to maintain today: contagion is as likely to be propagated by the priorities as it is to be stifled, the priorities did not prevent contagion in the 2007-2008 financial melt-down and may have spread it...:
10. Jake Tapper's Passover joke: "At the same time Jews worldwide commemorate being led out of bondage, RNC struggles with opposite dilemma"
11. ssenberg: "'People often compare his plan to the Massachusetts plan', Romney said in an interview last month. “They’re as different as night and day...' health care policy specialists, Democrats celebrating the bill’s passage, and Republicans condemning it have come to another conclusion. The difference between the two systems, they say, is slim. 'Basically, it’s the same thing', said Jonathan Gruber, an MIT economist who advised the Romney and Obama administrations on their health insurance programs. A national health overhaul would not have happened if Mitt Romney had not made 'the decision in 2005 to go for it. He is in many ways the intellectual father of national health reform'..."
12. Leonard: "what really makes this story messy is the fact that a declining appetite for treasuries can be plausibly interpreted as either a fear of unsustainable deficit spending or a return to economic health or both... today's Wall Street Journal.... 'Investors were awaiting the key event of the week: Friday's nonfarm payrolls report.... Expectations are that the report will show that the economy gained 203,000 jobs in March.... A much larger-than-expected gain in March jobs would likely spark another rout in Treasurys, as expectations that the Fed could start to tighten monetary policy sooner than expected increase...' Let's unpack this. A good job number will be bad for treasuries, because of fears that the Fed will tighten monetary policy by raising interest rates. Bad news for treasuries, theoretically, is bad news for the government, because borrowing costs will rise, thus placing even more pressure on government finances..."

## Jonathan Chait's Romney Death Watch Doesn't Go Far Enough

Chait writes:

Romney Death Watch: Republicans believe that the Affordable Care Act is socialist tyranny. Romney's position is basically that socialist tyranny is okay as long as it's imposed on a state-by-state basis. I don't see this argument winning over the GOP base. This is why I've been skeptical for a while now about Romney's 2012 prospects. The Atlantic Monthly's Marc Ambinder takes issue.... Ambinder has this backwards. Right now, Romney looks fine -- he has money, name recognition, decent polling, and the like.... Republican leaders... trying to demonize the Affordable Care Act... have little incentive to point out that it's basically Romneycare plus cost controls. But in... 2012... lots of Republicans [will be] playing up the comparisons between Romneycare and Obamacare. Romney appears political viable right now because most Republican voters have not been exposed to the Romneycare-Obamacare comparison.... When the attacks come, Romney just has no convincing reply. Indeed, you're going to see more quotes like this, from the economist who helped devise the basis of both programs:

“Basically, it’s the same thing,’’ said Jonathan Gruber, an MIT economist who advised the Romney and Obama administrations on their health insurance programs. A national health overhaul would not have happened if Mitt Romney had not made “the decision in 2005 to go for it. He is in many ways the intellectual father of national health reform.’’

This is going to be the basis for a devastating attack, and I don't see how Romney answers it. I'd like to see Romney win the nomination, because he's intelligent, competent, and has some decent moral instincts buried somewhere beneath a thick coat of pandering demagoguery. I just don't see it happening.

Indeed, IMHO there was one and only one way that Romney had a chance to win the Republican nomination in 2012, an that was to start running in 2009 as the moderate in the hope (i) that everyone else would go after the wingnut vote and cancel each other out in the early primaries, and (ii) that once he is the front-runner the natural Republican tendency to give your primary vote to last time's runner-up dominates.

But that would have required that Romney stand up on his hind legs and be a man last October and say what he really believes--that RomneyCare is a pretty good health plan, that the problem with ObamaCare is that its funding is a bit too progressive, and that the Congressional Republicans are making a big mistake in not offering Obama 70-30 Senate passage with 20 Republicans on board in return for moving the bill to the right.

But Romney did not tack to the left and say what he believed back last October. So now I would be very surprised if he has any future at all in American politics. The press narrative of him as a soulless pandering zombie will in all likelihood be impossible to overcome is set--and justly so.

## Hoisted from the Archives: Economist of Mass Destruction Kevin "Dow 36000" Hassett Update...

Was this part of the "Stupidest Man Alive" series or of the "Republican War on Science" series or of the "American Enterprise Institute Quality Research" series? Silly question! It was part of all three. It was when Kevin Hassett called for the USAF to attack France and Switzerland to stop CERN's Large Hadron Collider from going into action.

Business Week should still hide itself from the sun in shame:

American Enterprise Institute "Economist" of Mass Destruction Kevin Hassett Strikes Again (Republican War on Science Department): Atom Smasher Exposes Hole in Earth’s Defenses: The Large Hadron Collider... consumes about the same amount of energy as a large city... could provide evidence of the existence of the Higgs boson, a hypothesized particle that has become known as the God particle.... [T]he collider’s energy could induce a catastrophic event. A brilliant review of the risks associated with the experiment by University of North Dakota law professor Eric Johnson.... LHC’s high-energy collisions might create a microscopic black hole that would, perhaps over a few years, swallow the Earth.... Oxford University’s Toby Ord, a philosopher by training, adds... [i]t may be that the models that we use to make predictions about the possibility of catastrophe are themselves flawed.... Ord estimates that the odds of the LHC producing a disaster are between one in 1,000 and one in 1 million... the likely benefits from this experiment... [cannot]... justify accepting a cost that includes a real risk of the Earth’s destruction.... Right now... [if] the U.S. wanted to stop the LHC experiment, it would have no recourse short of military action...

This did indeed carry the Republican War on Science to previously unplumbed depths of human stupidity. Let me just say that, IIRC, Leon Lederman named the hypothesized Higgs boson the "God particle" as a joke, because its effects were everywhere yet nobody had ever seen it in the flesh--not because it was in any way powerful or dangerous or numinous or terrifying.

Worth revisiting because of Roger Ebert, who tweets:

And there is an LHC webcam!

## Meaning of Passover Blogging: Jennifer Rubin of Commentary vs. YHWH

Via Matthew Yglesias, Jennifer Rubin of Commentary blogs that Passover is not about social justice but about the right to build settlements on the West Bank:

Passover Mush: Obama... released a Passover message... typical Obama--off-key, hyper-political, and condescending. The core of the message is this: "The enduring story of the Exodus teaches us that, wherever we live, there is oppression to be fought and freedom to be won. In retelling this story from generation to generation, we are reminded of our ongoing responsibility to fight against all forms of suffering and discrimination, and we reaffirm the ties that bind us all..." No, he didn’t have the nerve to recite the emphatic exhortation “Next year in Jerusalem.” And frankly, it sounds like Eric Holder and his civil rights lawyers drafted it. Is Passover really about discrimination? Or is it about the deliverance of God’s Chosen People by God from bondage to the land of Israel?...

The ONE WHO WAS, AND IS, AND IS YET TO COME blogs... somewhat differently:

Deuteronomy 15:7: If there be among you a poor man of one of thy brethren within any of thy gates in thy land which the LORD thy God giveth thee, thou shalt not harden thine heart, nor shut thine hand from thy poor brother: But thou shalt open thine hand wide unto him, and shalt surely lend him sufficient for his need, in that which he wanteth. Beware that there be not a thought in thy wicked heart, saying, The seventh year, the year of release, is at hand; and thine eye be evil against thy poor brother, and thou givest him nought; and he cry unto the LORD against thee, and it be sin unto thee. Thou shalt surely give him, and thine heart shall not be grieved when thou givest unto him: because that for this thing the LORD thy God shall bless thee in all thy works, and in all that thou puttest thine hand unto. For the poor shall never cease out of the land: therefore I command thee, saying, Thou shalt open thine hand wide unto thy brother, to thy poor, and to thy needy, in thy land. And if thy brother, an Hebrew man, or an Hebrew woman, be sold unto thee, and serve thee six years; then in the seventh year thou shalt let him go free from thee. And when thou sendest him out free from thee, thou shalt not let him go away empty: Thou shalt furnish him liberally out of thy flock, and out of thy floor, and out of thy winepress: of that wherewith the LORD thy God hath blessed thee thou shalt give unto him. And thou shalt remember that thou wast a bondman in the land of Egypt, and the LORD thy God redeemed thee: therefore I command thee this thing to day...

Deuteronomy 24:6: No man shall take the nether or the upper millstone to pledge: for he taketh a man's life to pledge. If a man be found stealing any of his brethren of the children of Israel, and maketh merchandise of him, or selleth him; then that thief shall die; and thou shalt put evil away from among you. Take heed in the plague of leprosy, that thou observe diligently, and do according to all that the priests the Levites shall teach you: as I commanded them, so ye shall observe to do. Remember what the LORD thy God did unto Miriam by the way, after that ye were come forth out of Egypt. When thou dost lend thy brother any thing, thou shalt not go into his house to fetch his pledge. Thou shalt stand abroad, and the man to whom thou dost lend shall bring out the pledge abroad unto thee. And if the man be poor, thou shalt not sleep with his pledge: In any case thou shalt deliver him the pledge again when the sun goeth down, that he may sleep in his own raiment, and bless thee: and it shall be righteousness unto thee before the LORD thy God. Thou shalt not oppress an hired servant that is poor and needy, whether he be of thy brethren, or of thy strangers that are in thy land within thy gates: At his day thou shalt give him his hire, neither shall the sun go down upon it; for he is poor, and setteth his heart upon it: lest he cry against thee unto the LORD, and it be sin unto thee. The fathers shall not be put to death for the children, neither shall the children be put to death for the fathers: every man shall be put to death for his own sin. Thou shalt not pervert the judgment of the stranger, nor of the fatherless; nor take a widow's raiment to pledge: But thou shalt remember that thou wast a bondman in Egypt, and the LORD thy God redeemed thee thence: therefore I command thee to do this thing...

Deuteronomy 24:19: When thou cuttest down thine harvest in thy field, and hast forgot a sheaf in the field, thou shalt not go again to fetch it: it shall be for the stranger, for the fatherless, and for the widow: that the LORD thy God may bless thee in all the work of thine hands. When thou beatest thine olive tree, thou shalt not go over the boughs again: it shall be for the stranger, for the fatherless, and for the widow. When thou gatherest the grapes of thy vineyard, thou shalt not glean it afterward: it shall be for the stranger, for the fatherless, and for the widow. And thou shalt remember that thou wast a bondman in the land of Egypt: therefore I command thee to do this thing...

## Randy Barnett: Stupidest Man Alive for March 30, 2010

Second Congress, Session I:

1. Be it enacted by the Senate and House of Representatives of the United States of America, in Congress assembled, That each and every free able-bodied white male citizen of the respective States, resident therein, who is or shall be of age of eighteen years, and under the age of forty-five years (except as is herein after excepted) shall severally and respectively be enrolled in the militia.... That every citizen, so enrolled and notified, shall, within six months thereafter, provide himself with a good musket or firelock, a sufficient bayonet and belt, two spare flints, and a knapsack, a pouch, with a box therein, to contain not less than twenty four cartridges, suited to the bore of his musket or firelock, each cartridge to contain a proper quantity of powder and ball; or with a good rifle, knapsack, shot-pouch, and powder-horn, twenty balls suited to the bore of his rifle, and a quarter of a pound of powder; and shall appear so armed, accoutred and provided, when called out to exercise or into service...

Randy Barnett, Carmack Waterhouse "Professor" of Legal Theory:

Is the Health Care Law Unconstitutional?: Exceeding Congress’s Authority: The smart money is always on the Supreme Court upholding an act of Congress. And the smart money is right until the day it is wrong — as when constitutional law professors confidently predicted the court would uphold the Gun Free School Zones Act in 1995 and the Violence Against Women Act in 2000. The professoriate was shocked when both laws were held unconstitutional because they exceeded Congress’s power under the Commerce Clause.... The individual mandate goes far beyond these previous acts. Congress has never before mandated that a citizen enter into an economic transaction with a private company, so there can be no judicial precedent for such a law. Telling someone how they must do something is one thing; commanding that they must do something is entirely different. Imagine if Congress ordered the majority of American households without a firearm to buy a handgun from a private company, and punished their failure to do so with an escalating monetary fine, which it labeled a “tax.” Would the supporters of the health insurance mandate feel the same about the constitutionality of such a measure?.... Does the text of the Constitution authorize this exercise of power? No, it doesn’t. Has the Court ever before upheld this claim of power? No, it hasn’t. Can the challengers get this mandate invalidated? Yes, they can.

## Nightly Business Report: The Politics of Health Care Reform (March 29, 2010)

Monday, March 29, 2010

SUSIE GHARIB: With historic health care reforms now the law, tonight's commentator says the long debate was pure politics. He's Brad Delong, professor of economics at the University of California Berkeley.

BRAD DELONG, ECONOMICS PROF., UNIV. OF CALIFORNIA BERKELEY: Last week, President Obama signed health care reform -- the patient protection and affordable care act -- the biggest change in how our health care financing system works since the establishment of Medicare and Medicaid in the 1960s. When the provisions of this new law are fully phased in, individuals and small businesses will no longer have to bargain with HMOs and health insurance companies from positions of weakness relative to big firms and their employees. Everybody will be able to use the equivalent of a big firm's benefit department to do their bargaining for them. People who switch jobs will no longer have to worry they won't be able to get or afford coverage in their new job. And people will no longer have to worry about being dropped by their insurance companies either because they are sick and so expensive to cover or because somebody made a mistake on a form 10 years ago. Why then, is there so much political excitement and division? Aren't these things pretty much everyone can agree on? The answer is yes, they are things pretty much everyone can agree on. In fact one of Republican presidential hopeful Tim Pawlenty's strategists told the "Atlantic Monthly's" Marc Ambinder last week that Obamacare is Romneycare, that Obamacare is in its essence the plan Republican Mitt Romney proposed back in 2004 and persuaded the Massachusetts state legislature to pass in 2006. Why then, is everybody so excited and divided? Because the people making the excitement and division are politicians -- and politicians hope that there are votes in the issue for them somewhere. I'm Brad Delong.

## Is Michael Steele the Best Possible Chairman for the Republican National Committee?

A question Sydelle Moore asks me this morning.

Quite possibly yes--although it does depend on what "possible" means. In my view, Steele is likely to be a better leader for the Republican National Committee than anybody else who might win the job.

To understand the Republican Party today, you have to recognize that right now it is bespelled by three curses:

• The curse of Ronald Reagan: it believes that over the long haul somehow America can tax like Calvin Coolidge and spend like Lyndon Johnson and everything will come out fine because it is morning in America.

• The curse of Richard Nixon: it believes that the purpose of politics is to win high-paid jobs with no heavy lifting involved and to humiliate your political adversaries, rather than to make a better country and a better world, and so anything goes.

• The curse of Barry Goldwater: it believes that the big threat to liberty comes from government attempts to enhance equality of opportunity, and so the Republican Party must abandon its historic commitment to equality of opportunity.

The Republican Party may never again have a legitimate place in American civil life. But if it does, it will only be because brave men and women working within it lift these three curses.

Given his career and his life experience, Michael Steele is more likely to be a positive curse-lifting force than anybody else I can think of who might win his job.

## Hoisted From the Archives: John Robbins: Open Letter To Lew Rockwell (January 12, 2008)

Ah. I see that George Mason's History News Network http://hnn.us/ is eager to climb into bed with Lew Rockwell http://hnn.us/blogs/entries/124678.html--somebody who has no place in American academic or political discourse:

Here is Ron Paul acolyte John Robbins to explain why:

Open Letter To Lew Rockwell: You have now had three opportunities –1996, 2001, and 2008 — to prove that you are a friend of Ron Paul and freedom, and you have failed to do so each time. This week, for the third time, the puerile, racist, and completely un-Pauline comments that all informed people say you have caused to appear in Ron’s newsletters over the course of several years have become an issue in his campaign. This time the stakes are even higher than before. He is seeking nationwide office, the Republican nomination for President, and his campaign is attracting millions of supporters, not tens of thousands. Three times you have failed to come forward and admit responsibility for and complicity in the scandals. You have allowed Ron to twist slowly in the wind. Because of your silence, Ron has been forced to issue repeated statements of denial, to answer repeated questions in multiple interviews, and to be embarrassed on national television. Your callous disregard for both Ron and his millions of supporters is unconscionable.

If you were Dr. Paul’s friend, or a friend of freedom, as you pretend to be, by now you would have stepped forward, assumed responsibility for those asinine and harmful comments, resigned from any connection to Ron or his campaign, and relieved Ron of the burden of having to repeatedly deny the charges of racism. But you have not done so, and so the scandal continues to detract from Ron’s message. You know as well as I do that Ron does not have a racist bone in his body, yet those racist remarks went out under his name, not yours. Pretty clever. But now it’s time to man up, Lew. Admit your role, and exonerate Ron. You should have done it years ago.

John Robbins, Ph.D. Chief of Staff, Dr. Ron Paul, 1981-1985

Seriously: Just as William F. Buckley decided that it would be a bad mistake for National Review to stay in bed with the John Birch Society or the Ku Klux Klan, Dan Cohen of HNN is making a really bad mistake by allowing C.J. Maloney to post at all, and thus by failing to exercise any quality control here...

## Special Passover Edition: Republicans in Bondage to Michael Steele at Voyeur West Hollywood

Chip Hanlon:

One Little Bar Tab Should Put Michael Steele at Risk: “Take us to the hottest nightclub in town.” Those were the instructions given to Orange County’s Erik Brown by RNC staffers and in L.A., that’s one heavy-duty request. On Grammy weekend, it’s an even taller order, one which led to the now-infamous night at Voyeur in February, 2009 which was first reported on by the Daily Caller yesterday. After a follow-up Red County post reported exclusively on some of the details missing from that original DC piece, for the rest of the day I found myself in contact with a number of that night’s key attendees, some of whom I know personally. After speaking with multiple sources I understand how the whole night went down but for the sake of putting the focus back where it belongs—the RNC—in my opinion there is only one moment from that night that matters.

Those charges ended up on Brown’s card for just one reason: because the RNC staffer’s credit card was declined at the end of the night.

Think about that for a second: you now know Brown’s name, and his business has been literally decimated (more on that in a minute), because he happened to be nearby when the bill came due. “Please help me out and I’ll be sure you are reimbursed right away by the RNC,” was the request--one most others in Brown’s spot would have answered--and there exists a follow-up email chain to prove it. And it’s a good thing for him that there is such an email exchange because if not, the RNC might still be demanding that it be reimbursed for those charges, as it thundered in its first reply yesterday morning.

Now think about that one for even more than a second, because it represents the type of thing people hate about politicians in general: CYA and throw underlings to the wolves to protect the boss at all costs. In this case, the first “underling” to be thrown under the bus was going to be an activist and donor, one who had merely gone to the trouble not only of contributing substantially to Republican causes himself, but of recruiting numerous other potential members of the RNC’s “Young Eagles” donor wing. But what’s one little donor thrown to the wolves when you’re protecting the Chairman of the RNC, right? If you’ll notice, though, as the RNC realized it was pinned down by facts, the committee’s narrative evolved throughout the day: first, it was demanding to be reimbursed. Later, it had a “commitment that the money would be returned,” with the returnee unspecified. Only very late in the day—after 9pm EDT—did the RNC finally issue an updated statement which finally gave some color to what I’ve written about above. It included the following:

It is unfortunate that a loyal GOP donor who has recruited other donors became involved in this incident while merely trying to help what turned out to be the improper request of a staffer who is no longer with the committee.

Erik Brown must be thinking, ‘Gee, thanks.’ So, too, must the staffer who ended up getting axed last night after RNC brass figured out Brown’s head couldn’t be cut off (a fact they had to be convinced of, reportedly, partly with that email string I referenced earlier). Now, I have no problem with that staffer firing; by all accounts, she was a nice enough person (I’m not including her name here so as not to further damage her new job hunt) but if a house cleaning is in order at the RNC, fine. Question is: how high up should that housecleaning reach? Obviously, a free-spending culture under Michael Steele has been the norm, as this staffer had no qualms about running this ridiculous charge through the committee. But get beyond the excitement of this nightclub story and re-read those articles, taking a close look at the dollars being spent by the RNC; on the surface, those charges seem simply stunning. At a minimum, they call for deep scrutiny....

For Erik Brown, he has his own troubles now. I mentioned earlier this upheaval he’s already feeling in his business; indeed, he’s been on the receiving end of releases like these from campaigns who used to make use of his company's printing services:

This is a quick note to let you know that (campaign’s name redacted) has severed all ties with Erik Brown's Dynamic Marketing, Inc (DMI). This is relevant news in light of recent revelations in the media. The history of the campaign's engagement with DMI is brief and straightforward: we had them print some campaign letterhead, trifold signs, and stickers. That engagement ended some weeks ago when we contracted with a different printer, and will not resume. This is a non-story in itself, but as (redacted) is being noted in some media outlets as a Brown client, it's important to provide proper context for the relationship, and to publicly state that there is no present relationship with DMI....

But let me be clear here: I’m not suggesting readers shed a tear for Brown. Some folks will conclude that anyone who was there that night is automatically damned straight to Hell--fine. Most others won’t be too upset to learn that not only has he been getting bombarded with media calls, but Erik Brown is already receiving hate mail from unknowns, people torching him with in-depth messages about what a depraved and awful person he is. Those most charitable might think, ‘man, what an awful break,’ which it also was, undoubtedly. But still, the situation is partly of his own making; he attended, partied, and now has work to do cleaning up the mess. But should Brown suffer the worst fallout from all of this? Should his business be put literally in jeopardy over this nightclub outing--an evening, by the way, which counted two RNC national committeemen in attendance at Voyeur--while Michael Steele skates yet again? Until now, I’ve had virtually no opinion on the ongoing internal GOP debate over Steele’s leadership of the RNC, but I’ve gone from 0-60 on that one...

David Weigel:

Young Eagles Director Fired Over Voyeur Scandal; Erik Brown’s Name Is Cleared: Reid Wilson breaks the news:

## Worth Reading, Mostly Economics, for March 29, 2010

• Pappas: "A Republican National Committee staffer was fired after The Daily Caller reported Monday that the committee paid a bar tab of nearly $2,000 for young GOP donors at the risqué, bondage-themed Voyeur West Hollywood nightclub.... Erik Brown — a California political operative who FEC filings show was reimbursed by the committee for the Voyeur outing and who several Republicans have told The Daily Caller feels like he’s been thrown under the bus by the RNC following the event — was asked by the terminated staff member to charge the bar tab on his credit card..." • Drum: "From French President Nicolas Sarkozy, speaking today at Columbia University: 'Welcome to the club of states who don't turn their back on the sick and the poor.... The very fact that there should have been such a violent debate simply on the fact that the poorest of Americans should not be left out in the streets without a cent to look after them... is something astonishing to us.' Sarkozy was something of a darling of the right when he was first elected, thanks to his support of laissez-faire economics and general embrace of American values. But the financial collapse of 2008 turned him into something of a regulatory hawk, and now there's this. I'll bet the American right doesn't think much of him anymore." • Chait; There's a certain species of center-right fiscal hawk who views covering the uninsured as a luxury ... they... express this view through metaphor... because it's hard to make this case explicitly without sounding like a moral monster. Robert Samuelson offers another good example.... Self-indulgent" ... The Bush tax cuts, which massively enriched George W. Bush and Dick Cheney, could be described as self-indulgent. Samuelson supported those.... Obama and the Democrats... all have insurance. Even if you consider providing basic medical care to people who lack it an "indulgence," they are not in.... Samuelson calls Obama and the Democrats "shortsighted and self-centered -- though their quest was for political glory, not financial gain."... [H]e literally cannot imagine that it might be spring from an altruistic motive.... And surely the easiest path to this glory is to shift resources from rich or politically-powerful groups to a politically demobilized sector of the electorate. • Schmitt: "Frum's ouster is a sad day not only for conservatism but for political discourse generally. I don't say that because Frum and I agree on anything. I don't say it because I think he's a nice guy to have a beer with -- I've never had that pleasure -- or because he seems "reasonable," like David Brooks or some fifth-generation "Rockefeller Republican." I say it specifically because I disagree with him, because he's often unreasonable, because he represents a fierce, principled, engaged conservatism, one that participates in arguments in the real world, and sometimes comes back with those arguments modified, and probably improved. That's been my sense of him ever since reading his first major book, Dead Right in the mid-1990s. It's always risky to pass judgment on any organization's personnel decisions, but from the outside it certainly seems that it was that engagement itself which led to Frum's ousting..." • Avent: "hOver the weekend, Steve Waldman tweeted at me: 'iphones & public transit: i’ve found smartphones increase the opportunity cost of driving, tilt toward public trans. just me?' Smart, internet connected devices of all sorts have significantly reduced the pain of what were previously dead times — sitting on the train, waiting in the airport terminal... and so on. But sitting behind the wheel of a car is not a dead time, however much it might feel like one. You’re constantly assessing road conditions, the behavior of the cars around you, and the behavior of your own car, while you use arms and legs to operate the vehicle. This is why it’s so dangerous to do other stuff while driving; you’re actually very busy. And so the relative cost of time in transit across modes is almost certainly shifting, as devices become better and faster, and as online activity becomes richer and more flexible... • Gizmodo: "The iPad doesn't run Flash. If your website uses Flash, it won't play well on the iPad. Turns out, a lot of people want their sites to look pretty on the iPad. So the internet's already starting to look different.... YouTube, of course, has been playing with HTML5 for a bit , as has Vimeo, and both have served up iPhone OS-tailored video for a while. Brightcove, another big video service, used a by lot of magazine sites ( Wired , Slate , Time and NYT), is is making its HTML5 powers more widely known , with the "Brightcove Experience for HTML5," specifically in response to the iPad, with the NYT and Time listed as customers using Brightcove HTML5 edition , meaning they'll have iPad-ready video at the get-go. Not to mention sites like TED now offering Flashless renditions for iPhone OS devices.... It's interesting, to say the least, that a device promising to be the best browsing experience--cue Scott Forestall crazy eyes-- is in fact reshaping the internet.... • Greenwald: "All of that is crucial background for understanding just how pernicious and deceitful is the Op-Ed published this weekend by The Washington Post and authored by McConnell. The overarching theme is all-too-familiar: we face a grave threat from Terrorists and other Very Bad People ("cyber wars"), and our only hope for protection is to vest the Government with massive new powers.... In one sense, this is just typical fear-mongering of the type the National Security State has used for decades to beat frightened Americans into virtually full-scale submission: you are in grave danger and you can be safe only by vesting in us far greater power, which we'll operate in secret: here, allowing us to "reengineer" the Internet so we can control it.... It's not an exaggeration to say that the "cyber-war" policies for which McConnell is shilling is the top priority of the industry he serves.... Readers of The Washington Post, exposed to McConnell's Op-Ed, would know none of this..." • Drum: "Rep. Bart Stupak (D–Mich.), who opposed healthcare reform up until the last second because of his doubts about its abortion language, took his cues largely from Richard Doerflinger, associate director of the United States Conference of Catholic Bishops' Secretariat of Pro-Life Activities. Plenty of other Catholic groups eventually agreed that the bill's language was actually pretty restrictive, but the bishops never did.... Stupak's had a change of heart about the bishops.... 'Last week, Stupak attacked the bishops and other anti-abortion groups for "great hypocrisy" in opposing Obama's executive order after having supported former President George W. Bush's executive order banning stem cell research in 2007. He told the Daily Caller he believed the bishops and the groups they were allied with were "just using the life issue to try to bring down health-care reform."...'" • Frakt: "Some have asserted that the individual mandate penalties under the Affordable Care Act (ACA) are lower than those imposed in Massachusetts.... This is an empirical question... the ACA penalty will be$674 for an average U.S. resident while the Massachusetts penalty would be $537 on average.... About 40% of the population would have a higher penalty under Massachusetts rules than under ACA rules. However, nearly half of those who would have a higher Massachusetts than ACA penalty are exempt from ACA penalties due to low income. Many such individuals are eligible for premium and cost sharing subsidies under ACA. Thus, the incentive for gaming is lower for this subset. So, I don’t think it is fair to say the ACA penalties are lower than Massachusetts’ penalties. On average they’re higher..." • Tumulty: "The Daily Caller examines the Republican National Committee's FEC filings, and discovers a few things that are not likely to go over well with GOP donors. Such as: 'Once on the ground, FEC filings suggest, Steele travels in style. A February RNC trip to California, for example, included a$9,099 stop at the Beverly Hills Hotel, $6,596 dropped at the nearby Four Seasons, and$1,620.71 spent at Voyeur West Hollywood, a bondage-themed nightclub featuring topless women dancers imitating lesbian sex'..."
• Waldman: "Remember during the 2008 primary campaign how Obama supporters argued that one reason not to elect Hillary Clinton was that she would unite Republicans against her? And that since they hated her so much, they'd wage a scorched-earth campaign against everything she tried to do...>... Good thing we dodged that one. I bring this up not as a criticism of Obama’s ceaseless efforts to reach across the aisle... this outcome shows that some time ago, conservatives stopped believing that any Democratic president could possibly be legitimate.... This idea... is a poison running through our national political bloodstream. And before anyone responds, "But wait – some guy once left a comment on Daily Kos comparing George W. Bush to Hitler!", we have to understand the clear difference between the right and the left... [which] lies in what the leaders do. The venom on the right goes all the way to the top..."
• At the risk of being branded one of those liberal haters of American exceptionalism, sign me up for the blunt rules approach. It's not that blunt rules are any kind of panacea. Wall Street bankers dedicate their lives to figuring out clever ways to circumvent regulations, and they'll keep doing that.... But that's the whole point of blunt rules... they don't require Congress to anything more than set them in the first place. You still have to trust regulators to act reasonably, but even if they don't you at least have the backstop of statutory limits that are hard to get around.... The big question, of course, is that even if you support this approach, just what should those blunt rules look like?...
• Krugman: "From 1980 or so onward, however, that system gradually broke down, partly because of bank deregulation, but mainly because of the rise of “shadow banking”... the risks of old-fashioned banking but weren’t covered either by guarantees or by regulation. The result, by 2007, was a financial system as vulnerable to severe crisis as the system of 1930. And the crisis came.... We have already, in effect, recreated New Deal-type guarantees... debts of shadow banks, like deposits at conventional banks, now have a government guarantee. The only question now is whether the financial industry will pay a price for this privilege, whether Wall Street will be obliged to behave responsibly in return for government backing. And who could be against that? Well, how about John Boehner, the House minority leader?
• Reich: "Banks fear genuine financial reform would cost them a bundle.... So even as Wall Street sheds crocodile tears about the terrible things it's done, it is throwing money at Capitol Hill to thwart reforms that would prevent it from continuing to do terrible things. The political payoffs seem to be working. Proposed legislation from Treasury and the House (at this writing, the Senate Banking Committee hasn't reported out) has loopholes big enough to allow bankers to drive their Ferraris through them. Specifically, they permit secret derivative trading in foreign-exchange swaps (similar to what Goldman used to help Greece hide its debt) and in transactions between big banks and many of their corporate clients (as with AIG). Before you wallow in hopeless cynicism, though, it's worth noting that we already have a law against this. It's called the Sarbanes Oxley Act of 2002. It just needs to be enforced..."
• Yves Smith: "[T]he report does have one intriguing, and well documented finding: that the plutonomies have low savings rates. Consider an fictional pep rally chant: 'We’re from Greenwich. We’re invincible. Living off our income. Never touch the principal." Think about that. If you are rich, you can afford to spend all your income. You don’t need to save, because your existing wealth provides you with a more than sufficient cushion. The ramifications when you have a high wealth concentration are profound. From the October 2005 report: 'In a plutonomy, the rich drop their savings rate, consume a larger fraction of their bloated, very large share of the economy. This behavior overshadows the decisions of everybody else. The behavior of the exceptionally rich drives the national numbers – the “appallingly low” overall savings rates, the “over-extended consumer”, and the “unsustainable” current accounts that accompany this phenomenon…'"

## Does Thinking of New Luxuries Make Us Unhappy?

George Stigler wrote somewhere that the purpose of economic growth is to make us not think of necessities, to turn what were once extravagant luxuries into necessities, and to allow us to invent new luxuries to aspire to.

Watching the Black Eyed Peas has now made me bitterly regret that I am so poor that I will never ride an elephant across one of the moons of Jupiter. Am I made poorer thereby?

## Julian Sanchez Wins for All Time...

I bow before my master:

Grasping Reality With Our Gelatinous Meatsacks: Will Wilkinson is a little snarky about it, but basically right: Freddie DeBoer’s post on naturalism and the skeptical conclusions that follow from it is fuzzy philosophy. (The Sam Harris TED talk he’s riffing on is worse, but that’s another story.)  Regular readers will recognize this as one of my minor obsessions, an instance of theorizing “in the shadow of God.” I’ve applied the phrase in the past to describe worries that a naturalistic worldview—lacking space for deities or radically autonomous immaterial selves—creates all sorts of dire problems for morality or meaning. In most cases, I argue, the apparent problem actually stems from some hand-me-down conceptual furniture left over from the theological worldview.  And usually the way to untangle the knot is to make a Euthyphro move.  That is, you might worry that morality is in trouble without God until you grok that morality with God isn’t in any better shape: The deity turns out to be a black box that rather looks like it might do some heavy lifting on a tough philosophical problem, but on closer inspection it turns out not to make any difference...

## The Maturity Transformation (and Liquidity Transformation, and Safety Transformation) Industtry

Paul Krugman writes:

Don’t Be Narrow-Minded: I see that Greg Mankiw seems to favor narrow banking: require banks to hold all their deposits in liquid, short-term assets, thus obviating the risk of financial crises.... I’d argue that this is all wrong, on two levels: if it were possible, it would do away with the main purpose of banks, and anyway, it’s not possible....

I think of the whole bank regulation issue in terms of Diamond-Dybvig, which sees banks as institutions that allow individuals ready access to their money, while at the same time allowing most of that money to be invested in illiquid assets. That’s a productive activity, because it allows the economy to have its cake and eat it too, providing liquidity without foregoing long-term, illiquid investments. If you were to enforce narrow banking, you would be denying the economy one of the main ways we manage to reconcile the need to be ready for short-term contingencies with the payoff to making long-term commitments...

Let me focus on Krugman's first objection to narrow banking. It helps, I think, to ask the economist's question: What is the market failure? What is the market failure that would justify narrow banking--which means using the fist of Leviathan to shut down the maturity-transformation industry? Why not let those who promise that they can turn long-term illiquid risky sow's-ear investments into short-term safe liquid silk purses carry out their trade?

The answer, I think, is that two things are going on, both rooted in saver psychology. The first is herding in financial markets, which means that savers' and financiers' demand for safe, liquid, short-term assets fluctuates wildly and unpredictably. The second is that there is a strong demand for safe assets which is a demand for safe assets--and that means that the price of safe assets with respect to consumption goods cannot fluctuate, for if it did fluctuate then they would not be safe assets, would they?

Back before the industrial revolution this was not a problem, for the capital stock of the economy was overwhelmingly composed of consumption goods of one sort or another. If Antonio, Renaisssance-era merchant of Venice, faces a sudden shift in his investors' portfolio preferences as they want more safety and liquidity, with a sigh he unloads the silks of China, the spices of Indonesia, and the perfumes of Arabia from his ships and distributes them to his investors. But once you get canals, railroads, and cotton mills on a large scale you cannot do that anymore--you cannot deleverage the economy as a whole rapidly by consuming your existing capital. That is why it is no accident that the modern market-driven financial crisis and the industrial business cycle start in 1825, as the British Industrial Revolution enters its heyday.

So once the Industrial Revolution has come we have a problem. We can solve this problem through narrow banking--through shutting down the maturity-transformation market by saying, "sorry, we simply cannot create safe assets to meet your demand." Or we can solve this problem by having the government--that is, taxpayers in general--act as lender-of-last-resort, that is provide insurance against their own unstable psychology to savers and financiers. The second--if it can be done--seems to me to be better: it offers higher utility, for it responds to a market failure not by shutting down a market and throwing all the utility it generates away but rather by using the government to repair the consequences of the market failure.

Or, to quote from chapter 17 of John Maynard Keynes's General Theory of Employment, Interest and Money:

Unemployment develops, that is to say, because people want the moon;--men cannot be employed when the object of desire (i.e. money) is something which cannot be produced and the demand for which cannot be readily choked off. There is no remedy but to persuade the public that green cheese is practically the same thing and to have a green cheese factory (i.e. a central bank) under public control.

I do hope, someday, to have an important and valid insight that is original--that was not anticipated by Smith, Ricardo, Keynes, or Akerlof. But even I can see that my chances are not good...

## FinReg Optimal Financial System Design: Mankiw vs. Bagehot

David Wessel reports that Greg Mankiw has declared himself in favor of narrow banking:

MHow Much Leverage Do Banks Need to Be Useful?: The conversation between Alan Greenspan and some of then nation’s most prominent economists at  the Brookings Panel on Economic Activity on Friday was deemed “not for attribution” by the organizers. But Greg Mankiw, the Harvard economist, has posted his response to Greenspan on his web site. You can read it here. He largely agrees with Greenspan, but differs on one key point:

The issue concerns the importance of leverage to the viability of a financial intermediary.... Alan proposes raising capital requirements and reducing leverage, but he suggests that there are limits to how much we can do so. If we reduce leverage too much, he argues, financial intermediaries will be not be sufficiently profitable to remain viable. He offers some back-of-the-envelope calculations that purport to show how much leverage the financial system needs to stay afloat. I think it is possible to imagine a bank with almost no leverage at all. Suppose we were to require banks to hold 100 percent reserves against demand deposits. And suppose that all bank loans had to be financed 100 percent with bank capital. A bank would, in essence, be a marriage of a super-safe money market mutual fund with an unlevered finance company. (This system is, I believe, similar to what is sometimes called “narrow banking.”) It seems to me that a banking system operating under such strict regulations could well perform the crucial economic function of financial intermediation. No leverage would be required. One thing such a system would do is forgo the “maturity transformation” function of the current financial system. That is, many banks and other intermediaries now borrow short and lend long. The issue I am wrestling with is whether this maturity transformation is a crucial feature of a successful financial system. The resulting maturity mismatch seems to be a central element of banking panics and financial crises. The open question in my mind is what value it has and whether the benefits of our current highly leveraged financial system exceed the all-too-obvious costs.

Daniel Davies reminds us that Walter Bagehot wrote what is still nearly the last word on small banking proposals 137 years ago:

I know it will be said that in this work I have pointed out a deep malady, and only suggested a superficial remedy. I have tediously insisted that the natural system of banking is that of many banks keeping their own cash reserve, with the penalty of failure before them if they neglect it. I have shown that our system is that of a single bank keeping the whole reserve under no effectual penalty of failure. And yet I propose to retain that system, and only attempt to mend and palliate it. I can only reply that I propose to retain this system because I am quite sure that it is of no manner of use proposing to alter it. A system of credit which has slowly grown up as years went on, which has suited itself to the course of business, which has forced itself on the habits of men, will not be altered because theorists disapprove of it, or because books are written against it. You might as well, or better, try to alter the English monarchy and substitute a republic, as to alter the present constitution of the English money market, founded on the Bank of England, and substitute for it a system in which each bank shall keep its own reserve. There is no force to be found adequate to so vast a reconstruction, and so vast a destructions and therefore it is useless proposing them.

IMHO, the answers to Greg Mankiw's explicit and implicit questions appear to be:

• All successful banking systems involve maturity transformation--that enormous value is created for savers by offering them short-term and safe claims wo what are in reality long-term and risky investments.
• Throwing away the maturity transformation thus involves throwing away something of very great value to savers.
• And for what gain? The maturity transformation runs into trouble--banks cannot deliver--only when there is an enormous flight to quality--a huge spike in demand for short-term safe assets.
• Individual private banks, no matter how large, are then highly unlikely to be able to deal with such a spike in demand--after all, they can't print money.
• The government, however, can print money.

The major complaint Bagehot would have over the past two years is that the U.S. government has lent but it has not lent at a penalty rate--that it should have, as a price for its aid, have taken such large equity stakes in America's banks to make its interventions big and obvious money-makers for the Treasury, and the necessity of private banks' resorting to borrowing from the lender of last resort big and obvious money-losers for bank executives and shareholders.

## Please Shut the Washington Post Down Right Now Watch

Why oh why can't we have a better press corps?

Menzie Chinn reads Robert Samuelson so we do not have to. Thank you, Menzie:

Econbrowser: Robert Samuelson on Economics: And on unavoidable spending, and debt crises, and on budget accounting... From the Washington Post: comes this headline:

With health bill, Obama has sown the seeds of a budget crisis

Here's a choice excerpt:

Should the United States someday suffer a budget crisis, it will be hard not to conclude that Obama and his allies sowed the seeds, because they ignored conspicuous warnings. A further irony will not escape historians. For two years, Obama and members of Congress have angrily blamed the shortsightedness and selfishness of bankers and rating agencies for causing the recent financial crisis. The president and his supporters, historians will note, were equally shortsighted and self-centered -- though their quest was for political glory, not financial gain.

Kinda wierd -- I thought that Obama was inaugurated in January 20, 2009, which is somewhat less than two years ago.... I thought it interesting that Mr. Samuelson neglected to mention how much of the upward jump in the debt-to-GDP ratio occurred before January 2009.... Here is where Mr. Samuelson dismisses the entire budgeting process in Washington:

But the CBO estimate is misleading, because it must embody the law's many unrealistic assumptions and gimmicks. Benefits are phased in "so that the first 10 years of [higher] revenue would be used to pay for only six years of spending" increases, a former CBO director, Douglas Holtz-Eakin, wrote in the New York Times on March 20. Holtz-Eakin also noted the $70 billion of premiums for a new program of long-term care that reduce present deficits but will be paid out in benefits later. Then there's the "doc fix" -- higher Medicare reimbursements under separate legislation that would cost about$200 billion over a decade...

I also like how Mr. Samuelson conveniently lumps certain spending as avoidable, and some unavoidable. I find in particular this passage from a 2006 WaPo article highly amusing (to say the least): "Some of Bush's spending increases (defense, homeland security) were unavoidable."... [A] simple question. Why do we ascribe any credibility to a person with an undergraduate degree in political science (what is called Government at Harvard) in the area of economics (let alone accounting)?

The fact is that the health care reform bill is a very larage lung-run deficit reducer unless none of the changes in Medicare reimbursement stick. And they will stick--unless, that is, Roberts and Scalia decide somehow to make sure that they don't.

## Mark Thoma Comments on: "Taking Hope in the Long View"

He does not want to calm down:

When nearly 10% of the people are unemployed and government is looking the other way hoping it will somehow fix itself, I have no intention of calming down no matter how rosy the long view might be. It's nice that all these wonderful things are happening, and I also hope they will continue, or even accelerate, but that doesn't change the immediate needs one bit. Calm down while people are struggling to make ends meet? I don't think so...

## If You Can't Take Their Money, Spend It on Liquor, and Do So at a West Hollywood Dominatrix Lesbian Strip Club, You Don't Belong in Politics: Republican National Committee Expenditures of $1,900 One January Night at Voyeur West Hollywood... The legwork is not mine, but Financial Disclosure Forms are wonderful things. Give to the Republican National Commitee, and you may well wind up funding someone's night out at Voyeur West Hollywood: Schedule B for Line #21B: ITEMIZED DISBURSEMENTS Line #: 21B. Committee: REPUBLICAN NATIONAL COMMITTEE: Steele's RNC seems to have reimbursed the strip club expenditure twice--cut one check to the strip club to pay the bill, and a second check to Erik Brown to reimburse him for paying the bill. Sloppy accounting errors that lead to double reimbursements are bad. Having people working for you who take advantage of double reimbursements are bad as well... Was RNC Chair Michael Steele in town? Put it this way. He swung through LA in late January and the reimbursement check was apparently cut on February 4. It would be very odd if the RNC's big January event and afterparty was held when he was not in town. Who is Erik Brown? Perhaps: Political Director of Orange County Young Republicans: Profile: Erik Brown is Chief Executive Officer of DMI, Dynamic Marketing Inc. a direct marketing/media production company with offices in California and Washington DC... UPDATE: Via Wonkette, Rebecca Schoenkopf says that she believes that Erik Brown is the fall guy in this one... ## RomneyCare Is the BiPartisan Center Greg Sargent: The Plum Line: Some interesting numbers on “repeal” from CNN just landed in the old in-box: Thinking about the health care bill that Congress passed this week, which of the following statements best describes your view of what Congress should do in the future? • Congress should make additional changes to increase the government’s involvement in the nation’s health care system: 27% • Congress should leave the bill as it is: 23% • Congress should repeal most of the major provisions in that bill and replace them with a completely different set of proposals: 47% • No opinion: 3% For Dems, there’s no denying that the repeal number of 47%, nearly half, is uncomfortably high. That said, a total of 50% don’t want repeal, and more than one-fourth, 27%, want more reform.... No matter how realistic repeal is in the real world, these numbers suggest that the battle over the promise of repeal will continue to occupy a central place in the 2010 midterms, and could be every bit as polarizing as the previous 12 months. No rest for the weary... Where CNN fell down on the job is in not specifying what the "completely different set of proposals" would be. As far as I know, the Republican Party is still at: Republicans’ plan for common-sense health care reform our nation can afford without a government takeover of our nation’s health care system that kills jobs, raises taxes on small businesses, or cuts Medicare for seniors: • Number one: let families and businesses buy health insurance across state lines. • Number two: allow individuals, small businesses, and trade associations to pool together and acquire health insurance at lower prices, the same way large corporations and labor unions do. • Number three: give states the tools to create their own innovative reforms that lower health care costs. • Number four: end junk lawsuits that contribute to higher health care costs by increasing the number of tests and procedures that physicians sometimes order not because they think it's good medicine, but because they are afraid of being sued. I suspect that CNN's numbers would have been quite different had their question been: "Congress should repeal most of the major provisions in that bill and restore insurers' power to deny coverage based on pre-existing conditions..." Yet once you set as a goal eliminating coverage denials, the next resting point is RomneyCare--or something very close to it. ## The New York Times Comes Out in Favor of a Genetic Elite Wow. Just wow: Apology: In 1994, Philip Bowring, a contributor to the International Herald Tribune’s op-ed page, agreed as part of an undertaking with the leaders of the government of Singapore that he would not say or imply that Prime Minister Lee Hsien Loong had attained his position through nepotism practiced by his father Lee Kuan Yew. In a February 15, 2010, article, Mr. Bowring nonetheless included these two men in a list of Asian political dynasties, which may have been understood by readers to infer that the younger Mr. Lee did not achieve his position through merit. We wish to state clearly that this inference was not intended. We apologize to Prime Minister Lee Hsien Loong, Minister Mentor Lee Kuan Yew and former Prime Minister Goh Chok Tong for any distress or embarrassment caused by any breach of the undertaking and the article. ## Figure of the Day: Vulnerable Democrats From FiveThirtyEight.com: ## Duncan Black on the Extraordinary Unpopularity of Arnold Schwarzenegger Duncan Black: Eschaton: Heckuva Job: Voters in California played their role, of course, but another thing we can thank our awesome news media for is the governator. More Californians disapprove of the job performance of Gov. Arnold Schwarzenegger than any governor in modern state history including Gray Davis, who was ousted by Schwarzenegger in a popular uprising, according to a Field Poll released today. Seventy-one percent of California voters surveyed said they disapprove of Schwarzenegger's handling of the job, while 23 percent approve. The low ratings are shared across all demographics including party affiliation, region of the state, age and race or ethnicity. ## 16 More Items Worth Reading, Mostly Economics for March 28, 2010 1. Sardine: "From Media Matters: 'Erickson tried to come off as contrite throughout the interview, and after Kurtz noted that Erickson had called Michelle Obama a "Marxist harpy," Erickson had this to say: "Since that time I've really learned, headed into, frankly, the David Souter comment, that I don't have to get personal in blogging to make my point. I definitely evolved over time." I, for one, am glad that he cleared that up. It happens to the best of us. Just last week I tripped an elderly man who was crossing the street. But, I've evolved. I would never do that in public again. I'm a different person now.' 2. Houghton: 'Re: "I myself always want to read smart conservatives, who in recent years have been few and far between. Aside from Frum, only a handful of names come to mind: Christopher Caldwell, Andrew Coyne, Scott McConnell, Gertrude Himmelfarb, John Lukacs, Andrew Bacevich, and Joseph Epstein." If that's [Jeet Heer's] list of smart conservatives, the movement really is running on fumes. Even if we ignore that Himmelfarb has been a parody of herself for years, the list includes only two people under the age of 50--Caldwell and, iirc, Coyne. Everyone else is at least Social Security-eligible. When the best you can come up with are Bob Novak's son-in-law and two Canadians, that age-old claim about the "ideas" that make American Conservatives strong starts to look, er, bedraggled. 3. I've seen things you people wouldn't believe. Attack ships on fire off the shoulder of Orion. I watched c-beams glitter in the dark near the Tanhauser Gate. All those moments will be lost in time, like tears in rain.... Time to die. 4. Will Wilkinson writes: "It is true that this planet revolves around a star at the edge of the Milky Way. It is true that we humans are descended from apes. It is true that we really do know that, and a whole lot more." I am more skeptical. It certainly looks like we are jumped-up apes living on a planet revolving around a star at the edge of the Milky Way. But I'm just a jumped-up monkey with a brain that looks like it evolved to decide whether it's safe to leap to the next branch, and not to plumb the secrets of the universe. So what do I know? 5. Chait writes: "Just now on CNN, the hosts will reading... an e-mail attacking the new law. If health care reform is so good, the writer wanted to know, why are politicians exempting themselves from it? I've heard critics of the bill, from Republican senators to random internet writers, say this many times. And it's frustrating, because it's not true... members of Congress and their staffs must enroll in the new insurance exchanges. Those are the exact same exchanges through which millions of other individuals will be buying their coverage.... the members themselves and the people who work directly for them are all covered. And, far from pointing out the problems of reform, it demonstrates its virtues: The politicians believe in it enough to entrust their own lives, and those of their families, to the new system..." 6. Chait writes: "I had an item yesterday about Republicans who once supported the individual mandate now declaring it unconstitutional. CNN asked Orrin Hatch how he could make this claim when he supported an individual mandate in 1993. His response: 'In 1993, we were trying to kill Hillarycare, and I didn't pay any attention to that, because that was part of the bill that I just hadn't centered on.' It's a hilarious response. He's being accused of taking a cynical partisan position that contradicts a previous stance, and Hatch's response is that his old stance was a cynical partisan position. Well, I guess we should believe him then." 7. Only 17 words out of 890 words in the column have *any* reference at all to the substance of U.S. government policy. They are: Crook: "The reform he and his allies have enacted, though flawed, is a real advance for the country." That is all. 8. Maher: "Berwick stands at the center of a healthcare movement that would reform the system from within. In 2005, Modern Healthcare, a leading industry publication, named him the third most powerful person in American health care.... Berwick is... “an extraordinary leader when it comes to inspiring people and creating the will to move forward,” Dartmouth’s Dr. Elliot Fisher told me.... IHI’s website (www.ihi.org) offers an abundance of resources. a team of health care professionals can sign up online courses.... Alternatively, readers who visit the website and scroll down to “How Did They Do That?” and discover that Models of Low-Cost, High-Quality Health Care Do Exist in the U.S...." 9. Chait: "David Mizner at Firedoglake says I'm "incoherent" for arguing that health care reform is both a great progressive achievement and a piece of legislation in the traditional moderate Republican mold. I suppose it could look that way at first blush, but not if you really think about the issue.... The outstanding fact of the American health care system is that it's uniquely awful -- among advanced countries it's both the most expensive by far and the least humane by far. Moving from that to a system that provides universal coverage and cost control through means congenial to moderate Republicans is extremely progressive. It is an enormous advance in American social policy. The status quo is so awful that it can be reformed in such a way as to constitute a major improvement from both the moderate Republican and progressive perspective." 10. Frum has faithfully adhered to even the most esoteric of the 613 commandments of conservatism.... Because of his... ultra-orthodoxy, Frum’s firing from his cushy sinecure at the American Enterprise Institute has provoked a tremendous amont of chatter... a few thoughts.... AEI has embarrassed itself.... A conservative worth reading... Frum is... [who] John Stuart Mill was always on the look out for, a conservative... intellectually challenging enough... when there are 20 million Americans unemployed it doesn’t make much sense to worry about David Frum.... Frum is worth reading on domestic policy but not on foreign policy.... Charles Murray weighs in. When he was a high school senior, Charles Murray took part in a cross burning. He freely admits to the act but says he didn’t understand the racial implications of cross burning.... Now Murray is a “scholar” at the AEI, where he writes extensively on racial matters, often to argue for the inherent genetic inferiority of black people... 11. Biggs: "I also watched the Crist-Rubio debate.... Rubio said that on Social Security reform we’re going to have to look at the tough choices like raising the retirement age for younger people, changing COLA payments, etc. If we don’t want to raise taxes, simple math says those are about the only things we can look at. Crist, by contrast, said he’d focus on eliminating “waste and fraud” in the program — a clear sign of non-seriousness. If there’s anything you can say for Social Security it’s that there’s not a ton of waste and fraud in it — we take money from working age people and give it to old people who qualify based on their earnings and years on the workforce. To think that waste and fraud will get you past first base on Social Security reform is absurd, but seems on par with the rest of Crist’s arguments." 12. Matthew Yglesias: 'Possible Worlds Glenn Reynolds says: “Possibly Obama just hates Israel and hates Jews. That’s plausible — certainly nothing in his actions suggests otherwise, really.”... if you read the rest of Reynolds’ post it’s clear that he’s so far through the looking glass that he regards the fact that he doesn’t think this is the only plausible explanation for Obama’s policies as constituting a pro-Obama post. Which is to say that Reynolds is extremely out of touch with reality. I’ll say for my part that I think a great many of Obama’s actions throughout the years—most notably his many social and professional relationships with Jewish people—suggest that he is not motivated by hatred of Jews. What’s more, his ability to persuade the overwhelming majority of American Jews to vote him is likewise an indication that the people most likely to be concerned with detecting Jew-hatred do not find this charge to be plausible. ...' 13. Advocation for congestion pricing instantly generates complaints about regressivity. I find this argument to be extremely short-sighted. No one would benefit more from congestion-priced streets and highways than bus riders.... With increased demand for bus services, you might even be able to reduce bus fares — perfectly justifiable given the reduction in congestion produced by a shift from driving to bus-riding. Some very small subset of poor commuters would find themselves in a situation in which they might not be able to find a transit option to their destination and would be forced to pay the congestion toll. Even then, they’d be getting something for their money — more time to spend with family or at work thanks to reduced congestion and less dough spent on gas burnt while idling in traffic. But it’s not inconceivable that some would wind up a little worse off. For this, we’d sink the whole enterprise? 14. If Congressional Republicans want to maintain a politburo-like homogeneity in opposition... replay the petulant Gingrich government shutdown... refusing to cooperate... that’s their right..... But they can’t emulate the 1995 G.O.P. by remaining silent as mass hysteria, some of it encompassing armed militias, runs amok.... We know the end of that story. And they can’t pretend that we’re talking about “isolated incidents” or a “fringe” utterly divorced from the G.O.P. A Quinnipiac poll last week found that 74 percent of Tea Party members identify themselves as Republicans or Republican-leaning independents.... Yet no Republican... leader of stature has taken on Palin, Perry, Boehner or any of the others.... Last week McCain even endorsed Palin’s “reload” rhetoric. Are these politicians so frightened of offending anyone in the Tea Party-Glenn Beck base that they would rather fall silent than call out its extremist elements and their enablers? 15. If Obama’s first legislative priority had been immigration or financial reform or climate change, we would have seen the same.... The conjunction of a black president and a female speaker of the House — topped off by a wise Latina on the Supreme Court and a powerful gay Congressional committee chairman — would sow fears of disenfranchisement among a dwindling and threatened minority.... It’s not happenstance that Frank, Lewis and Cleaver — none of them major Democratic players in the health care push — received a major share of last weekend’s abuse. When you hear demonstrators chant the slogan “Take our country back!,” these are the people they want to take the country back from. They can’t. Demographics are avatars of a change bigger than any bill.... The Tea Party movement is virtually all white. The Republicans haven’t had a single African-American in the Senate or the House since 2003.... Their anxieties about a rapidly changing America are well-grounded... ## The Political Economy of Mandated Health Benefits Paul J. O'Rourke reads us the news: News: President Signs Health Care Insurance Mandate: A Lesson in American History, Healthcare and the Constitution for 14 State Attorneys General: Let’s begin today’s history lesson with the following news: (CNN) -- Officials from 14 states have gone to court to block the historic overhaul of the U.S. health care system that President Obama signed into law Tuesday, arguing the law's requirement that individuals buy health insurance violates the Constitution. Thirteen of those officials filed suit in a federal court in Pensacola, Florida, minutes after Obama signed the Patient Protection and Affordable Care Act. The complaint calls the act an "unprecedented encroachment on the sovereignty of the states" and asks a judge to block its enforcement. "The Constitution nowhere authorizes the United States to mandate, either directly or under threat of penalty, that all citizens and legal residents have qualifying health care coverage," the lawsuit states. The history lesson In July, 1798, Congress passed, and President John Adams signed into law “An Act for the Relief of Sick and Disabled Seamen,” authorizing the creation of a marine hospital service, and mandating privately employed sailors to purchase healthcare insurance. This legislation also created America’s first payroll tax, as a ship’s owner was required to deduct 20 cents from each sailor’s monthly pay and forward those receipts to the service, which in turn provided injured sailors hospital care. Failure to pay or account properly was discouraged by requiring a law violating owner or ship's captain to pay a 100 dollar fine.... Perhaps these somewhat incompetent attorneys general might wish to amend their lawsuits to conform to the 1798 precedent, and demand that the mandate and fines be linked to implementing a federal single payer healthcare insurance plan. The other option is to name Presidents John Adams, Thomas Jefferson, James Madison et al. in the lawsuits. However, it might be difficult to convince a judge, or the public, that those men didn't know the limits of the Constitution.... I’m providing a copy of the 5th Congress’ 1798 legislation. CHAP. LXXVII – An Act for the Relief of Sick and Disabled Seamen Section 1. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled - That from and after the first day of September next, the master or owner of every ship or vessel of the United States, arriving from a foreign port into any port of the United States, shall, before such ship or vessel shall be admitted to an entry, render to the collector a true account of the number of seamen, that shall have been employed on board such vessel since she was last entered at any port in the United States,-and shall pay to the said collector, at the rate of twenty cents per month for every seaman so employed; which sum he is hereby authorized to retain out of the wages of such seamen... ## Tom Matzzie: No More Enthusiasm Gap! RT @fivethirtyeight: No more enthusiasm gap! 76% of Dem registered voters enthusiastic to vote in November, as are 75% of GOPers. ## Jeet Heer on AEI and the David Frum Firing Fiasco Jeet Heer: The Frum Firing Fiasco: AEI has embarrassed itself. Although allegedly a “think tank” with “scholars” AEI in fact a haven for highly partisan political actors, many of who have been disgraced by their time in government. Current “scholars” at the think tank include Lynne Cheney (who has written some cheesy novels), Newt Gingrich (another writer of schlock fiction), John R. Bolton, Charles Murray, Richard Perle (also a terrible novelist), Michael Rubin, Paul Wolfowitz and John (“torture memos” ) Yoo. These are not, to be as polite as humanly possible, figures that command respect for their scholarly achievements. There are a few worthwhile people at AEI: Norman J. Ornstein always merits attention if you want to know about the ins-and-outs of congressional politics and Roger Scruton (when he’s not working as a shill for the tobacco industry) has written some fine essays on aesthetics. On domestic policy at least, Frum stood out from the partisan hacks who dominate AEI by trying to grapple with actual policy issues in an innovative way (however wrong-headed his solutions might be).... At his best Frum is the type of figure that John Stuart Mill was always on the look out for, a conservative who is intellectually challenging enough to make liberalism stronger. Following Millsian principals, I myself always want to read smart conservatives, who in recent years have been few and far between. Aside from Frum, only a handful of names come to mind: Christopher Caldwell, Andrew Coyne, Scott McConnell, Gertrude Himmelfarb, John Lukacs, Andrew Bacevich, and Joseph Epstein. Frum was an ornament to the AEI and his firing disgraces them... ## Mark Thoma: Health Care Reform and Labor Mobility Maybe we should all ask Alan Krueger and Ceci Rouse for some updated paper on the magnitude of this: I was surprised that arguments about the impact of health care reform on labor mobility got so little attention during the debate over the legislation. It's an important benefit to include in the evaluation of health care reform (I made this argument several times, and there were many others who made this point as well, but it never seemed to resonate).... One of the things that Republicans say they care about the most -- economic growth through the innovation that comes from small businesses -- will be helped substantially by the health care reform legislation Republicans did everything they could do to stop.... It's difficult to put a dollar value on mobility, but having observed people stuck in jobs they hate -- really hate -- just to keep health insurance, I'd guess it's worth a lot.... When you hear about the net cost of health care reform in terms of what it will do to the deficit and the accumulated government debt, those are just the costs and revenues that the government must bear, it does not net out all the implicit and explicit benefits to the private sector that come from the legislation (implicit and explicit costs to the private sector should also be added in, but I'd argue that the benefits to the private sector very clearly exceed the costs). When the benefits accruing to individuals and small businesses are included, the gains from reform are evident. via economistsview.typepad.com ## Worth Reading #3: Felix Salmon vs. Henry Blodget on Twitter (March 28, 2010) @hblodget's business model: Take a story about M&A fees associated with AIG. Illustrate with 2 hot babes kissing. http://bit.ly/dexECw ## Worth Reading #2: What Is (and Isn't) in the Health-Care Bill (March 28, 2010) (Lost the link to this): What’s in the Bill: • The health-care bill covers 32 million uninsured—1 million more people than the Senate version of the bill would have, but 4 million fewer than the House’s original bill. While reform will cost$940 billion over the next 10 years, the Congressional Budget Office reports that it will reduce the deficit by $130 billion over the next decade, and by$1.2 trillion in the decade after that.

• The bill will take effect in stages, and some of the most popular measures take effect within the first six months of its passage. Within six months, insurers will no longer be allowed to refuse coverage to kids because of pre-existing conditions. Nor will they be allowed to dump customers because they got sick. And they will be prohibited from capping how much coverage one person can get in a lifetime. Another provision that will become active within six months: Young people can continue to be covered under their parents’ health insurance until they’re 26.

• By 2014, insurers will not be allowed to refuse coverage to anyone of any age because of pre-existing conditions. The year 2014 will also see the opening of state insurance exchanges, in which people can "comparison-shop" to buy health coverage. These plans would have to meet a minimum standard of benefits and would face new, stricter limitations on how much they could vary their premiums based on age. For instance, premiums for the elderly could cost no more than three times the price of plans for young people.

• Compared to the Senate bill, the subsidies for buying insurance are bigger for families making between 2.5 and four times the federal poverty level. Aid will be offered on a sliding scale—families making less would pay less. A family of four making $44,000 would have insurance premiums limited to about 6 percent of the household’s income. • House Speaker Nancy Pelosi says the “Cadillac” tax becomes the “platinum Rolls-Royce” tax under the new plan. This excise tax on premium insurance policies—the cushy policies that cover much more care than average ones—has been tailored to affect fewer people and will go into effect later. Now, plans valued at$10,200 for individuals and $27,500 for families will be taxed starting in 2018. Those numbers will be indexed to the rate of inflation, meaning, the point where these plans begin to be taxed will inch upward as the same amount of money, because of inflation, gradually buys less stuff. • The bill imposes new taxes on wealthier people. Individuals making more than$200,000, and families making more than $250,000, will have to give up more of their paycheck to the Hospital Insurance payroll tax. Instead of paying 1.45 percent like most workers, they’ll pay 2.35 percent. And a new 3.8 percent tax will be added to income from interest, dividends, annuities, royalties, and rents. • The bill also imposes penalties on people who opt not to have health insurance. If you don’t buy insurance, starting in 2014 you will have to pay an annual fine of$95 or 1 percent of your income, whichever is greater. By 2016, that fine will rise to $695 or 2.5 percent of your income. For an insurance-free family, the fee is$2,085 or 2.5 percent of household income.

• Employers who don’t offer their employees insurance will also pay a penalty: $2,000 per employee. Tax credits will help small businesses offer coverage (and those with less than 100 employers can join insurance exchanges), and businesses with less than 50 workers are exempt. Employers will have to say how much a worker’s health plan costs on their W-2 tax form. • Several measures intended to create incentives to lower Medicare costs are part of the bill. The Centers for Medicare and Medicaid Services will monitor hospital readmission rates and create cash incentives to encourage hospitals to lower return visits that are preventable. Doctors will be encouraged to form groups that work on improving quality of care, and a pilot program will bundle Medicare payments to urge hospitals to coordinate better. Five years from now, the method for paying doctors will begin rewarding those who provide the best care, rather than the most. • The bill fills the Medicare prescription-drug benefit’s “doughnut hole.” People who fell within it because their drugs cost more than$2,700 but less than $6,154 will get a$250 rebate in 2010. Next year, they’ll get a 50 percent discount on brand-name prescriptions. The hole will be completely closed within 10 years.

• For the next four years, a temporary reinsurance program will cover people who retired early (ages 55 and up) but who aren’t eligible for Medicare yet (under 64).

• Next year, primary-care doctors and surgeons will get a 10 percent bonus from Medicare. As part of a push toward more preventative care, Medicare beneficiaries will get a free yearly consultation that will craft a plan to help keep them from getting sick. Preventative care will be very cheap under new plans.

## Worth Reading #7: Igor Volsky: Orrin Hatch: I Supported The Unconstitutional Individual Mandate In 1993 To Derail HillaryCare (March 27, 2010)

Igor Volsky:

Think Progress: Hatch: I Supported The Unconstitutional Individual Mandate In 1993 To Derail HillaryCare: Yesterday, Sen. Chuck Grassley (R-IA) admitted that he supported the individual mandate before he realized it was unconstitutional and now, Sen. Orrin Hatch (R-UT) has conceded that he too endorsed a policy that would have allowed the government “to tell you what you have to buy, even if you don’t want to buy it.” In 1993, Hatch, along with 20 other GOP senators — including Grassley, Bennett, and Bond — introduced a health care plan that would have required everyone to buy coverage, capped awards for medical malpractice lawsuits, established minimum benefit packages and invested in comparative effectiveness research. It was, in other words, a plan to “erode liberty.”

Last night, and then again this afternoon, Hatch was pressed on his past support for the 1993 proposal. What’s changed, CNN’s Campbell Brown and MSNBC’s Andrea Mitchell both wanted to know. Like Grassley, Hatch couldn’t come up with a very good answer. In 1993, Republicans hastily proposed the unconstitutional measure to fend off HillaryCare; nobody even understood the implications of the alternative policy, Hatch explained:

HATCH: Well, it really wasn’t. We were fighting Hillarycare at that time. And I don’t think anyone centered on it, I certainly didn’t. That was 17 years ago. But since then, and with the advent of this particular bill, really seeing how much they’re depending on an unconstitutional approach to it, yea, naturally I got into it, got into it on this issue.

## Worth Reading #6: Billmon: Why Oh Why Don't We Have a Competent Press Corps? (March 27, 2010)

Billmon:

Daily Kos: Spock with a Beard: The Sequel: For some years now, I’ve been morbidly fascinated by the political dark arts -- especially the very dark art of disinformation: the systematic creation and dissemination of false narratives designed to discredit your opponents and/or drive undecided audiences away from their cause. The difference between disinformation and just plain lying is in the scope of the enterprise: A lie is intended to conceal a specific truth (e.g. "I did not have sex with that woman"). Disinformation, on the other hand, is aimed at constructing an entire alternative reality -- one in which the truth can find no foothold because it conflicts just not with a specific falsehood, but with the entire fabric of the false reality that has been created.  It puts the "big" in big lie, in other words.

These basic disinformation techniques were first pioneered by the totalitarian movements of the 1930s, such as the [GODWIN REDACTION] and the Soviet KGB, but they’ve been brought to their full fruition by the modern advertising, public relations and political consulting industries. Proving once again that what communism can do, capitalism can do better. One of the things that’s always impressed me about the modern conservative movement -- going back to when Newt Gringrich drew up his list of buzz words to be relentlessly associated with liberals ("corrupt," "degenerate," "depraved," etc.) -- has been the movement’s enthusiastic embrace of propaganda techniques developed by the same political regimes it claims to oppose with its life’s breath.

I guess they’re trying to proving that what totalitarians can do, modern conservatives can also do better. Karl Rove’s White House was, in many ways, the Olympian ideal of a disinformation operation -- a propaganda achievement that will probably never be topped, at least in American politics (God willing). But it looks as if the House Republicans are giving it the old college try. Thus the rather amazing press conference Minority Whip Eric Cantor held earlier today, in which the Virginia Republican in effect accused the Democrats of inciting violence against all those innocent teabaggers out there who are simply expressing their sacred constitutional right to spit on black people and fax pictures of hangman’s nooses to their elected representatives.... The specific disinformation technique in play is one I call "mirror image" (or, when I’m in a Star Trek mood, "Spock with a beard"). It consists of charging the opposing side (i.e. the enemies of the people) with doing exactly what you yourself have been accused of doing, typically with a hell of a lot more justification....

Will the ploy work this time? I don’t think so, or if so, only to a limited degree. The material may have been brilliant, but the performance sucked –- even Cantor couldn’t make himself sound like he actually believed it. Sure, Fox News is ready (as always) to take the baton and run with it, but I think the mainstream corporate media deadheads, brain dead as they may be, have finally picked up on the scam.

On the other hand, the headline from that Atlantic blogpost I linked to earlier suggests I may be the one who's brain dead here:

[Chris Good] Cantor Accuses Democrats of Using Threats, Violence to Score Points

Perhaps that was written strictly tongue in cheek, but I doubt it...