Bailout plan fails

The House failed to pass the bailout plan today. There's a lot of finger pointing going on, but the political problem is pretty simple. This plan is massively, massively unpopular with the public. No one wants to take the blame for passing it, for fear that the number "$700 billion" will appear prominently in their opponent's campaign ads. At the same time, no one wants to take the blame for killing the economy by doing nothing. The only way this measure can pass is if it's a bipartisan effort, so neither side can use it as a weapon against the other in future campaigns.

Now, the Democrats are in absolutely no mood to stick their necks out for a plan originated by the Bush administration, so they will not pass this unless a majority of Republicans will vote for it. The Republican party, however, is deeply divided; the conservative wing thinks this plan smells like socialism and has no stomach for it. So while both sides are taking some hits over the failure of this plan, ultimately it's up to the Republicans to get their act together if they want to see it pass.

While the failure to quickly pass this bill sent stock traders running for their fainting couches, it's not entirely a bad thing. The original bill was hastily drafted and no doubt deeply flawed. Panic is never a good state of mind to be in when passing legislation. Whatever does end up passing is quite likely to be a better bill overall.

Something to keep an eye on

When the $700 billion financial bailout plan was first proposed, conservative pundits were up in arms about it. They hated it, they found it socialistic, and they were angry at the Bush administration for proposing it. In the last few days, though, they seem to have found a way around their cognitive dissonance. I've heard right-wing talk show hosts referring to it as "the Democrat bailout plan."

Keep an eye on this talking point. They're going to try to pin the blame for this expensive, unpopular bailout on tax-and-spend Democrats, even though it's a more restrained version of the bill the Bush Administration originally proposed.

Marker candidates

Drawn today in an idle moment, with no references.

National Review columnist says Palin should step down

Kathleen Parker has changed her mind.

It was fun while it lasted.

Palin’s recent interviews with Charles Gibson, Sean Hannity, and now Katie Couric have all revealed an attractive, earnest, confident candidate. Who Is Clearly Out Of Her League...

Palin filibusters. She repeats words, filling space with deadwood. Cut the verbiage and there’s not much content there...

If BS were currency, Palin could bail out Wall Street herself.

McCain is in a bit of a bind. According to Ed Schultz, the inside word from the campaign is that they're terrified of her going in front of a camera toe to toe with Joe Biden, or having a legitimate press conference.

If he replaces her with someone else, the hardcore evangelical base will be furious and will abandon him, and the public perception will be that he has no idea what he's doing. This is even if she "voluntarily" quits "to spend more time with her family." The perception will be that she was pushed out, pure and simple.

If he doesn't, he risks alienating more moderates and independents, and making a bigger joke out of his campaign than it already is. There's no doubt that Palin won't be able to compete with Biden in a debate. Even with the bar set so low for her, botched Republican boilerplate and "I can see Russia from my house" won't compete with Biden's firm grasp of the matter. Only the hardcore wingnuts will think that Biden is just being unchivalrous in all his responses, as if that was all that mattered.

The debate flip-flop already has caused criticism to come from his own side, and his embarrassment of a running mate is only making things worse. By this time, I'm expecting McCain's solution to putting out a fire is going in there personally, pushing firefighters aside, and whizzing on it.

Two explanations for what went wrong

A fair number of you are probably sitting around wondering, "How did this all happen? Did anyone get the license number of the truck that hit the economy?" Here are a couple of accessible explanations.

Kiplinger recently had an article called 15 Things You Need to Know About the Panic of 2008. If you only have 10 minutes to spend on understanding what the heck happened, read this two-page article. It's a quick summary of how we got here that won't drown you in financial jargon.

The radio show This American Life did an episode earlier this year called The Giant Pool of Money that does a great job explaining, in layman's terms, what caused the housing market's problems. It doesn't just explain the crisis, it personifies it and makes it interesting. It also has the clearest explanations you're likely to find of mortgage-backed securities and collateralized debt obligations. This report was written in May, before the current round of investment bank failures started, but it gives insight into the roots of the crisis.

I don't have a political moral for you today. Read, listen, learn, and draw your own conclusions.

Friday cat blogging

Scapegoat of the month: minorities

Conservatives have finally figured out just who to blame for the current financial mess. Now, I guess I'm kind of naïve. I had assumed it had something to do with banks taking in loan origination fees and then reselling the loans, giving them no incentive to make sure people could actually make the payments. And I figured banking deregulation, a flawed understanding of the risks involved in "innovative" mortgage-backed securities, and overall greed might have something to do with it, too.

It turns out I'm completely wrong. According to conservative pundits, the real culprits are those pesky minorities.

Fox News host Neil Cavuto seems to have been one of the first to put forward this particular talking point. On September 18, while talking to Rep. Xavier Becerra about the problems encountered by Fannie Mae and Freddie Mac, he said, "loaning to minorities and risky folks is a disaster." WorldNetDaily soon picked up the same theme, writing that a forthcoming book by Stan J. Liebowitz "contends that the federal government over the last 20 years pushed the mortgage industry so hard to get minority homeownership up, that it undermined the country's financial foundation to achieve its goal." The same day, the Wall Street Journal printed a letter to the editor that made the same point, asked rhetorically if we're "willing to crash our economy over some misplaced idealism," and called for Congress to rescind the Community Reinvestment Act of 1977. This letter was picked up by a few conservative bloggers, none of whom bothered to ask why, if the CRA were the problem, the bubble in the housing market didn't start until over two decades later. On Monday the National Review's editorial page weighed in, blaming the CRA and "political extortion" by community organizers for the financial collapse — a nice bit of sleight of hand that let them bash Sen. Obama, who used to work as a community organizer. Finally, Monday night on The Savage Nation, Rick Roberts jumped on the bandwagon by asking that the government give "...a full accounting of how many of these mortgages that were defaulted on were made to people who shouldn't have even been in this country in the first place."

As Jon Stewart once put it, "Who knew this deck even had a race card?"

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Note: This post has been edited to correct ambiguity over which episode of The Savage Nation was being referenced.

The $700,000,000,000 question

I feel like I should write something about the proposed $700 billion government bailout of bad debt. (I was originally going to say "bad mortgage debt," but after lobbying from financial firms, the Bush Administration has apparently widened the proposal to include unsecured consumer debt as well.) Frankly, I don't like it. I'm not sure if we have any choice but to bail out these companies, but I still don't like it. To me this seems like yet another example of companies keeping the profits when things go well, then expecting taxpayers to pick up the tab when things go badly. For all that Republicans talk about wanting a hands-off free market, what they really work for is an environment where profits are privatized but downside risks are absorbed by the government.

I remain hopeful that the plan will be altered by Congress to provide more oversight, to enhance regulation to prevent this from happening again, and to ensure that CEOs don't get golden parachutes at taxpayer expense. Personally, I would also like to see limitations on how large financial firms are allowed to become. They shouldn't be allowed to grow to a size where failure would be so catastrophic that the government has no choice to bail them out.

Why the hell is it close?

We're coming off eight years of a disastrous Republican administration, an administration that lied us into an expensive and ruinous war, spied on Americans, tortured prisoners, turned surpluses into record debt, destroyed our ability to respond to natural disasters (and seemed not to care until that fact became politically damaging), tried to dismantle the core of the New Deal, staffed every level of government with unqualified cronies and right-wing ideologues, continued the long march of deregulation that's destroyed our financial system, and ruined our international reputation, probably for decades to come.

The Republican party has nominated a potential successor who voted with that now-hated incumbent president over 90 percent of the time, would basically continue most or all of the policies people say they hate, is an offputting and uninspiring public speaker, and is really damn old. His running mate is an inexperienced, scandal-ridden far-right ideologue.

The Democrats, meanwhile, have nominated a young, dynamic, inspiring, brilliant candidate whose policies people say they would like much better.

This should be a blowout.

And yet, the election is a nailbiter and will go down to the wire. The Republican might actually manage to pull it off. The Democrats are ahead in every poll, but that wasn't true a week ago, and their current lead is single-digit.

Why? I honestly have no idea, I can only speculate. My theory: People don't vote for president based on issues.

They should, but they don't. They vote based on silly criteria like who they'd "rather have a beer with," or who they "trust" in some incomprehensibly abstract sense that apparently has nothing at all to do with policy.

In other words, they make the single most important political decision there is with their gut, not their brain.

And people have been conditioned to "trust" John McCain. They think he's this noble straight-talking maverick ex-POW. Not stupid like Bush or crazy like Cheney. And, more comfortable and familiar than a black guy they'd never heard of until two or three years ago, with a scary foreign-sounding name.

People have worked out that Bush has been a disaster, but they don't seem to have put together that it's because his policies have been bad, and that electing somebody who will basically continue those policies would continue the disaster.

People vote like policy doesn't matter, then act all surprised when they get policies they don't like.

That's my theory, anyway.

The offshore drilling ban is dead; Long live the offshore drilling ban

A lot of liberal pundits, including Rachel Maddow, have been aghast at the passage of H.R.6899, a bill that would lift the ban on offshore drilling. While I hate to disagree with Rachel, she's wrong on this one. It's political theater, and it's not going to result in drilling happening anywhere.

The bill contains a lot of provisions that are anathema to Republicans. It eliminates $18 billion in oil industry tax breaks. It has subsidies for renewable energy, energy efficiency, and public transit. It would require the release of 70 million barrels of oil from the Strategic Petroleum Reserve. It would require utilities to generate 15% of their energy from clean sources by 2020. And it requires additional royalty payments for companies currently operating in the Gulf of Mexico. The bill faces a tough time in the Senate, and Bush has promised a veto.

Even in the unlikely event the bill becomes law, it still would put most of the known offshore oil reserves off limits. Drilling within 50 miles of shore would still be banned, and drilling within 100 miles of shore would require the adjacent states to opt in. This would be a tough fight in most costal states. The profitability of drilling that far out is probably questionable, so I can't see the oil companies jumping at the chance.

Offshore drilling is currently supported by a majority of Americans, and Republicans have picked this up as a campaign issue with their "drill, baby, drill" chant. By bringing up a bill like this for a vote, then making the Republicans kill it, the Democrats have made a brilliant, if cynical, play to defuse the issue.

This time there really is a wolf!

Eric Boehlert writes in Media Matters about a phenomenon I've also been wondering about: the press seems to have noticed, and begun pointing out, that McCain and Palin are lying a lot.

So why hasn't the public responded much to it?

Maybe because the press has no credibility after spending the last...well, several years at least, obsessing about trivialities. As Boehlert puts it:

When the press wants to inform voters about outrageous campaign conduct (like the Bridge to Nowhere, McCain's untrue claim that Obama plans to raise "your" taxes, or even in the margins the lipstick fiasco), the press no longer wields the same authority, in part because the political press has consciously folded its work into the larger entertainment culture.

These are the consequences of shallowness over the long term. If you spend months or years obsessing over fake controversies and shallow details--who's an "elitist" because of their haircut or what they order instead of coffee, whose voice is annoying, what type of lettuce or cheese someone favors, who looks silly bowling or windsurfing--you don't get to suddenly pivot and call people out on actual issues. Or if you do, you can't expect the public to accept that you're suddenly being serious.

You fixate on drivel, and people will just assume you're talking drivel. Let's just all hope that doesn't end up immunizing McCain from the consequences of his remarkable dishonesty in the final phase of this rather important campaign.

McCain's poison pill

The online journal Health Affairs published an article Tuesday that explored the implications of McCain's health care plan. (In order to provide balance, they also included a critique of Obama's plan; unfortunately it was co-authored by one of McCain's advisers, making its analysis questionable.) McCain's plan has gotten little attention so far, probably because it sounds simple. However, its simplicity belies its far-reaching implications.

To understand McCain's plan, you have to understand a little about how the U.S. health insurance system works. I'll give a quick, somewhat simplified description for those of you who may not be completely familiar with it.

Health insurance plans in the U.S. can be broadly divided into two categories, group and nongroup.

• Group coverage is usually purchased by employers for their employees. The premiums are tax-deductible; often they're completely or partially paid by the employer as part of the job's benefit package. These plans usually provide automatic coverage for all of a company's full-time employees. No medical exam is required to qualify, but by taking in all the employees of a company they ensure the premiums paid by healthy workers will tend to offset the costs incurred by sick ones.
• Nongroup coverage is bought on the open market by individuals. These plans face a problem known as "adverse selection" — sick people are more likely to want to sign up for insurance than healthy people. For that reason, a medical exam is usually required to qualify. People who have a preexisting condition (for example, diabetes, pregnancy, or a history of depression) face higher premiums or outright exclusion. These plans also have higher administrative costs and generally offer less generous coverage than group plans.

McCain's health care proposal is quite straightforward. It attempts to level the playing field between these two types of plans by eliminating the tax deduction for employer-provided insurance, and replacing it with a tax credit of $2,500 for individuals and $5,000 for families. Unfortunately, this removes the incentive for employers to offer group plans, and increases the incentive for healthy individuals to opt out where possible. Many employers would likely respond by dropping group coverage altogether, forcing employees into the nongroup market. The healthiest would be cherry-picked by plans, while sicker individuals would find coverage unavailable or prohibitively expensive. The Health Affairs study estimates that initially the number of insured Americans would remain about the same, but with higher out-of-pocket costs due to nongroup polices' lesser coverage and higher deductibles. They predict that the number of uninsured individuals would climb quickly over time due to the declining value of the tax credit, which is not indexed to inflation. Two-thirds of people with chronic medical conditions might find that no affordable coverage is available to them at all.

Conservatives who support this plan should be careful what they wish for. While it creates the appearance of increasing choice and competition in the current private insurance market, it could easily break the current system so completely that people turn to the government for a solution.

I'm Liberal Seagull, and I approve this message

The Museum of the Moving Image has a beautiful website, The Living Room Candidate, that features presidential campaign ads from 1952 through 2008. The ads range from the simple and innocent, like Eisenhower's bouncy, animated "Ike For President" ad and Kennedy's campaign jingle ad (which will stick in your head for hours after viewing), to the downright nasty, like a 1980 Reagan ad suggesting Ayatollah Khomeini wanted Carter to win. Some are, in hindsight, unintentionally ironic, like a 1952 ad featuring Nixon lecturing about corruption in Washington and promising he and Eisenhower will "kick out the crooks." And some show the genesis of modern techniques, like this 1956 Adlai Stevenson ad that uses what we'd now refer to as a "sound byte" from the opposing candidate.

The site is more than just a collection of video clips. It also puts each race in historical context, talks about each candidate's approach to advertising, and discusses how campaign ads affected the outcome of the race. Finally, there's an electoral map of each race's final results.

Thoughts on immigration

Hurricane Ike is bearing down on the Texas coast as I write this, and Texas emergency officials are trying to reassure illegal immigrants that Immigration and Customs Enforcement (ICE) will not be operating checkpoints during the evacuation. The concern is that illegal immigrants may fear deportation more than they fear the hurricane. This is clearly the right decision from a humanitarian standpoint, but I suspect ICE will catch some undeserved flak for it.

Now, I'm generally not a fan of ICE. They often manage to come across as both oppressive and ineffectual, and their practice of setting up traffic checkpoints as far as 100 miles from the border in order to demand people's papers seems more than a little Soviet. But they're also trying to do an impossible job while caught in the middle of an intractable debate.

Like many political debates in the U.S., the one over immigration has been simplified and ossified by extremists. The loudest noises on the issue come from xenophobes like Lou Dobbs, who fears immigrants will spread disease and cause financial instability, and Pat Buchanan, who fears immigrants will dilute Western culture to the point of extinction. Both call for closing the borders and deporting all illegal immigrants, a solution that has an appealing simplicity. But the issue is far too complex for that to work, even if it were possible to implement it.

Illegal immigration isn't a problem created only by employers and immigrants. Whole industries now rely on immigrant labor, a situation that's allowed to persist partly because the U.S. government has a strong, but unstated, policy of encouraging cheap food prices.

Some politicians, McCain among them, favor a guest worker program. But this has its own problems. There are ethical and social problems with having an underclass that has fewer rights than the rest of the population, is paid less, and has no path to citizenship. The 2005 riots in France are an example of what can happen when that sort of subclass begins to feel too alienated from the rest of the country it's in. But a path to citizenship is a non-starter with Lou Dobbs's followers.

Complex problems require complex and thoughtful solutions. Unfortunately, the debate on immigration is almost entirely counterproductive; it focuses on the wrong issues and precludes any nuanced response. Immigration is rapidly joining abortion and gay marriage in the catalog of intractable, ritualized, bumper-sticker-slogan debates.

Polls and partisan identification / Election overtime

I just wanted to put in a quick plug for today's post on Electoral Vote, because it's particularly interesting. The Votemaster explains disagreements in the polling field about how (or whether) to adjust for partisan identification. This is good stuff to know, because it explains why national polls from different organizations can vary so wildly. He also does a "what if?" about what could happen if the electoral college ties, 269-269. It turns out it could go either way — and one possible scenario might have Joe Biden as acting President. Check it out.

Small town values

Some of you may be wondering why so much dirt on Sarah Palin has come out so quickly. John Kelso of the Austin-American Statesman answers that question in an amusing piece called The small-town values Palin didn't mention.

I grew up in a small town; every word of that article is true. One of the defining features of small town life is that gossip travels quickly and everyone knows everyone else's business. They especially know the business of their politicians. In a way this makes the McCain campaign's minimal vetting of Palin even more surprising; it seems they could have greatly expanded their knowledge of her with half an hour in a local diner. Of course, that also might have blown the surprise — small town residents also know who isn't from around there, and it doesn't take them long to figure out what's up.

What choosing Palin says about John McCain

Short answer: nothing good. McCain has managed the bizarre feat of being both stupidly rash and coldly cynical at the same time.

Greg Sargent at TPM has a pretty thorough rundown of just how completely disastrous the choice is starting to be for McCain, and that's what happens when you don't vet your VP before you pick her, but I think even more important than how terrible she turned out to be is what it says about McCain that he made that choice.

This is a man who's running on experience and judgment. Pick me, not that other guy, he's saying, because that other guy doesn't know what he's doing. With me you'll get steady, sober, experienced leadership.

Not so much. This seems to have been a last-minute decision, made without all (or even more than a few) of the facts. One of McCain's own advisers said this:

"This was really kind of rushed at the end, because John didn't get what he wanted. He wanted to do Joe [Lieberman] or [Tom] Ridge."

John didn't get what he wanted. He was, apparently, finally persuaded, days before he had to make a decision, that if he picked Lieberman or Ridge, who are pro-choice, his base would revolt.

So, instead of picking someone he had thoroughly vetted, like Tim Pawlenty or Mitt Romney, who would have been acceptable to his base but also reasonably qualified, or pushing the decision back a week so he could really investigate Palin, he just picked her, having spoken to her twice in his life. He has literally known her for fewer months than he has houses.

Some people voted for George W. Bush in 2004 based on reasoning like this: 'Well, I don't agree with him, but I know where I stand with him.' It seemed poorly reasoned to me, but apparently a lot of people found it compelling. Bush would be wrong, but he would be wrong predictably. Apparently a lot of people find that reassuring.

Those people should be very worried about John McCain. Choosing Palin says that McCain, when he can't get exactly what he wants, is inclined to make important decisions rashly and without seeking out any of the relevant facts. He lacks even Bush's sense of political self-interest. He's liable to do a lot of inexplicable and random things as president, many of which will be as disastrous for the country as Palin is shaping up to be for his campaign.

As Matthew Yglesias observed:

One is reminded that one of the principal powers of the presidency is the power to appoint people — federal judges, ambassadors, cabinet secretaries, subcabinet officials, FEC members, the Amtrak board, all kinds of things. Presidents don’t always put the best people in these positions, but normally they give the matter some thought. Even an unqualified crony gets his job because somebody knew him. Is McCain going to just pick people at random in order to “shake things up?” Not bother to do any vetting in order to preserve the element of surprise?

McCain has achieved the strange feat of making Barack Obama simultaneously the "change" candidate and the "safe" choice.

Tax Plan Comparison

Back in June, the Washington Post ran an interesting chart comparing the Obama and McCain tax proposals. It recently came to my attention when it was referenced in the Dr. Housing Bubble blog. First I'll give you the chart, then I'd like to talk a little bit about the misleading ways tax debates are often framed.



One of the biggest problems with tax debates is they're often framed only in terms of income tax. This is misleading for a couple of reasons:

First, families in the upper brackets often get much of their income from investments. Long-term capital gains aren't taxed as ordinary income — they're taxed at a flat 15% for the income levels we're talking about. This means wealthy taxpayers never really feel the full impact of tax rate changes.

Secondly, Social Security payroll taxes are only paid on income below $102,000. This means the tax system as a whole is considerably less progressive* than it first appears, since these taxes are paid at a flat 15.3%**.

Of course, the biggest caveat of all is that these plans would no doubt look very different by the time they got through Congress. Obama's proposal to raise the $102,000 cap on Social Security taxes would probably face a tough fight, for example.


* I use "progressive" here in the tax accounting sense — meaning a tax rate that increases with increasing income.

** This is a slight oversimplification. Self-employed persons pay 15.3%; everyone else pays half of that, with their employer paying the other half for them.