When Faced With A Parliament, Act Like A Parliament

Ron Brownstein has been unusually perceptive of late, but this isn't quite right.

America is steadily moving away from the ramshackle coalitions that historically defined our parties and toward a quasi-parliamentary system that demands lockstep partisan loyalty. It is revealing that Obama is facing nearly unanimous Republican opposition on health care just four years after President Bush couldn't persuade a single congressional Democrat to back his comparably ambitious Social Security restructuring.

Bush couldn't persuade many Republicans either. Republicans held the majority in 2005 when he tried to privatize Social Security, and they never even brought a bill through a committee. In this case, votes will be held on the floor of both houses on health care.

The truth is that one side acts like a Parliament while much of the other thinks we still live in the days of bipartisan consensus. Both parties have different visions of how to govern, and despite that giving Villagers the willies, it's OK and expected. But if you have one side bending over backwards to work together, and the other side unyielding, the debate necessarily tips in favor of that unyielding side, as a matter of basic physics.

Brownstein does acknowledge this to an extent:

Today, these centrifugal forces most affect the Republican Party. The Right has more leverage to discipline legislators because conservative voters constitute a larger share of the GOP coalition than liberals do of the Democratic Party. The Right's partisan communications network also remains more ferocious than the Left's.

The GOP's homogenization has been accelerated, moreover, by its losses in swing areas since 2006. Far fewer congressional Republicans than Democrats must worry most about moderate public opinion. Fully 31 of the 40 Republican senators, for example, were elected from the 18 ruby-red states that twice backed Bush and also opposed Obama. Just four Republican senators were elected by states that voted Democratic in at least two of the past three presidential elections. (Not coincidentally, those four include Maine's Olympia Snowe and Susan Collins, Obama's best GOP prospects on health care.) By contrast, 22 of the 59 Democratic senators were elected by states that voted Republican in at least two of the past three presidential elections.

But again, this is truly wrong:

Party-line governing is intrinsically flawed. Any bill that must pass solely with votes from the majority party can't realistically incorporate ideas that divide the party. And that fact of life rules out half the tools in our policy toolbox. Though medical-malpractice reform would advance Obama's cost-control goals, for instance, it's impractical to include it in legislation that must pass solely with Democratic votes. Legislation is more balanced when both parties shape it.

The entire Rube Goldberg formation of health care reform, the likes of which we see in all the Democratic bills, are fundamentally Republican ideas. They basically mirror a bill by Republican Senator John Chafee from 1994. The same on climate change and its market-based cap and trade formation. Democrats have very liberally borrowed from the bipartisan "policy toolbox," often to a fault. They haven't added ideas like privatizing everything (yet) or handing out cash to industry (only in part) or forcing poor people to live on cat food, but those are not what I would call the sharpest tools in the shed.

Because of the rump Southern faction taking over the GOP, and because of... well, people like Ron Brownstein, telling us that bipartisanship conquers all and hippies must be punched in the face repeatedly, the trajectory on all these issues has moved sharply to the right over the past few decades, such that a bill like Max Baucus', a virtual handout to the health industry (who love it), can be described on the right - and taken seriously by the media - as a government takeover of health care.

You need look no further to see how Democrats deal with these issues than Jeffrey Toobin's article in this week's New Yorker on the Obama Administration's judicial nominees:

The Obama Administration wanted to send a message with the President’s first nomination to a federal court. “There was a real conscious decision to use that first appointment to say, ‘This is a new way of doing things. This is a post-partisan choice,’ ” one White House official involved in the process told me. “Our strategy was to show that our judges could get Republican support.” So on March 17th President Obama nominated David Hamilton, the chief federal district-court judge in Indianapolis, to the Seventh Circuit court of appeals. Hamilton had been vetted with care. After fifteen years of service on the trial bench, he had won the highest rating from the American Bar Association; Richard Lugar, the senior senator from Indiana and a leading Republican, was supportive; and Hamilton’s status as a nephew of Lee Hamilton, a well-respected former local congressman, gave him deep connections. The hope was that Hamilton’s appointment would begin a profound and rapid change in the confirmation process and in the federal judiciary itself [...]

But then, as the first White House official put it, “Hamilton blew up.” Conservatives seized on a 2005 case, in which Hamilton ruled to strike down the daily invocation at the Indiana legislature because its repeated references to Jesus Christ violated the establishment clause of the First Amendment. Hamilton had also ruled to invalidate a part of Indiana’s abortion law that required women to make two visits to a doctor before undergoing the procedure. In June, Hamilton was approved by the Judiciary Committee on a straight party-line vote, twelve to seven, but his nomination has not yet been brought to the Senate floor. Some Republicans have already vowed a filibuster. (Republican threats of extended debate on nominees can stop the Democratic majority from bringing any of them up for votes.)

“The reaction to Hamilton certainly has given people pause here,” the second White House official said. “If they are going to stop David Hamilton, then who won’t they stop?”

The answer, of course, is that they will try to stop everyone and everything, if only to gum up the works and force the majority to move more slowly on its priorities. The new Republican Party comes up from the mold of the college Republicans, taught early to use every dirty trick, every strategy, not to govern but to beat your opponent. They may have poisoned American politics and taken it completely away from the high-mindedness where Villagers like to think it has always been (it hasn't), but there's really only one way to deal with that. Brownstein concludes:

But with Republicans operating as a parliamentary party of opposition, Democrats will have to pass health care reform virtually, if not entirely, alone. That leaves them with a binary choice: Democrats can either fragment into stalemate or function as a parliamentary majority party by unifying enough to advance their agenda. The choice would seem straightforward. If one side in a firefight is operating with military cohesion and the other devolves into ragged, undirected units, it's not hard to predict which will suffer more casualties.

That's just an obvious sentiment, though from the looks of things, one with which Democrats have not yet reconciled themselves.

The Interview With Fred Hiatt

I guess the President made more news last night in this interview with Fred Hiatt than at his press conference. Reporters should have been briefed on it.

First, the President basically confirmed that expansion of MedPAC, to have an independent body of experts determine reimbursement rates and reforms to Medicare, would be a component of the House and Senate bills. I was initially skeptical of this idea, but I think the Speaker's addition of Congressional input on appointees makes it a nice compromise, and taking the complicated business of delivery system reform away from parochial interest makes sense as well.

At this point, I am confident that both the House and the Senate bills will contain what we've been calling MedPAC on steroids, the idea that you continually present new ideas to change incentives, change the delivery system, understanding that because this is such a complex system we're not always going to get it exactly right the first time, and that there have to be a series of modifications over the course of a series of years, and we have to take that out of politics and make sure that an independent board of medical experts and health economists are providing packages that are continually improving the system. So I think there's general consensus that that is one of two very powerful levers to bend the cost curve.

Second, the President endorses some modified version of the employer deduction, along with John Kerry's idea of taxing insurance companies' highest-cost benefit plans as a way to get at the same pot of cash:

Obama: Now, the second idea, which is the one that got more attention, even though Elmendorf, I think, has emphasized the benefits of a MedPAC board, as well, was the elimination of the tax exclusion [on employer-provided health insurance]. And I've been very clear on my position that I think to add additional costs to families right now when they're already seeing their premiums doubled is not the kind of health reform that I'd like to see, but I believe that there may be ways of getting at the same principle.

For example, you could conceivably set up an index of some sort that makes sure that health care inflation -- or to make sure that the exclusion only accommodates a certain amount of health care inflation -- as opposed to 8 percent or 9 percent, or what have you -- without burdening current plans, but over time assuming -- if we're assuming that health care inflation is going to continue to be a problem, that you could get at the problem in that way.

Hiatt: A kind of cap, but one that doesn't hurt anybody --

Obama: Currently.

Hiatt: -- at the current level?

Obama: Exactly. You're also seeing, I think, some interesting discussions in the Senate Finance Committee about a variation that goes after the insurance companies, as opposed to directly taxing the benefits.

Because this is Fred Hiatt he was talking to, the conversation was consumed with long-term costs and entitlements. Hiatt is practically the king of the fiscal scolds. The President still wants universal access and lower costs for individuals, which is separate from lower budget costs. But I agree that you can do both at the same time, and that now is a great time to do that. As Obama said in this interview, "I think it's important for us to make sure that 46 million people who don't have health insurance get it. And I think it's important for us to bend the cost curve, separate and apart from coverage issues, just because the system we have right now is unsustainable and hugely inefficient and uncompetitive."

And both go hand in hand. Removing the hidden tax of the uninsured visiting ERs will lower costs, and the mechanism is expanding access. Offering a public plan will expand access, and by forcing competition, in the process lower costs. There's a lot in health care reform that can be symbiotic, just as there's a lot that works at cross-purposes.

On long-term budget issues, I think it's important to recognize this:

Obama: We have a structural gap that has to be closed.

Hiatt: So can I ask you how you think about the timing and politics of closing that structural gap?

Obama: What I think has to happen is if we can show that we have a disciplined health care reform package that is serious about cost savings and is deficit-neutral, you combine that with the pay-go rules that we have been promoting and I believe that we can get through Congress, and you are imposing some discipline on the appropriations process -- and I thought that the F-22 victory yesterday was a good example of us starting to change habits in Washington -- then I think we're in a position to be able to, either at the end of this year or early next year, start laying out a broader picture about how we are going to handle entitlements in a serious way.

It may start with Social Security because that's, frankly, the easier one. And I think that it's possible to also look at tax reform and think about are there ways that we can maybe even lower marginal rates but eliminate all the loopholes and have that a net revenue generator. I think there are going to be a bunch of things that we can take a look at, but I think health care reform combined with pay-go, combined with how we deal with appropriations bills over the next six months will help lay the foundation for us to be able to make some of these broader structural changes.

The challenge I've got, Fred, is that obviously -- our biggest problem right now in terms of short-term deficit is the recession. And nobody -- no economist I've talked to thinks that it would be wise for us to start early, start now, in reducing government outlays, when states are already cutting back drastically, and you'd have a hugely destimulative effect on the economy. But we have to begin to prepare on the midterm and the long term. And that's why I think health care reform is so important.

The House actually passed paygo legislation yesterday. And I get from this that Obama is open to reducing the defense budget over time - he checked himself at one point, saying that non-defense discretionary spending cannot be lowered to bring us in line on the budget. But people might go nuts about his fleeting mention of Social Security. The only way Social Security changes are "easy" is through raising the cap. Anything else will be met with howls of disapproval from Obama's own base. And they won't pass Congress. I think the tax reform idea in the main, lowering rates but broadening the capture by getting rid of loopholes, is a good one as well.

There can be a lot of minefields in talking to Fred Hiatt, but I think the President did well. He held firm against deficit reduction at a time of near-Depression, and he forced Hiatt to live up to his rhetoric and recognize that the main reason our long-term budget outlook is bleak right now is due almost entirely to health care.

America Is Worth Paying For

The Wall Street Journal today takes a look at inequality and produces a startling statistic.

The nation's wealth gap is widening amid an uproar about lofty pay packages in the financial world.

Executives and other highly compensated employees now receive more than one-third of all pay in the U.S., according to a Wall Street Journal analysis of Social Security Administration data -- without counting billions of dollars more in pay that remains off federal radar screens that measure wages and salaries.

Highly paid employees received nearly $2.1 trillion of the $6.4 trillion in total U.S. pay in 2007, the latest figures available.

So much for trickle-down economics. Incidentally, the same people who tell you that the top 1% pay 30% of the taxes won't tell you that they also make 30% of the money, or that the after-tax income, adjusted for inflation, of the top 1% grew 256% over the past 25 years, compared to just 21% for those in the middle. So the rich are doing pretty well, and they can probably pony up so that nobody goes without health care in this country.

This brings us to a larger point about the success of the conservative movement in this country. Despite this extreme inequality, which causes asset bubbles, threatens programs like Social Security that cap payroll deductions at $100,000 a year and invariably destroys national economies, talk about progressive taxation - indeed, any taxation - is considered heresy.

One of the bigger, but more under-reported, sea changes in American politics is how any kind of tax increase -- whether in war or peace, good economic times or bad ones -- has become absolutely unacceptable. After all, Ronald Reagan raised taxes. So did every modern American president involved in war, until George W. Bush. But not anymore. Indeed, as one of us pointed out on Nightly News last night, only 29% (or 157) of the 535 and House members and senators serving in Congress were around the last time -- 1993! -- the federal government raised taxes, and that was on gasoline. Think about that for a moment: Congress hasn't really had a TOUGH vote in 16 years, if one defines a "TOUGH" vote as the government asking for a financial sacrifice from the American people. This is the political climate that President Obama faces in trying to pay for health reform. Republicans and some Democrats are opposed to a tax on the wealthy, and unions and Obama's political strategists are against taxing health benefits.

Congress raised the tobacco tax this year to pay for expansion of children's health care, but the point is basically true.

Barack Obama has not been a profile in courage on this front, stressing a tax cut for "95% of all Americans" and failing to act definitively to roll back the Bush tax cuts on the wealthy. Joe Biden made one statement during the campaign about how it's patriotic to pay taxes and he got rapped on the skull for it, and we never heard it again.

But look. If Democrats cannot stand up and say that America is worth paying for, that we have an overclass in this country that's had it very good for a long, long time, that rampant inequality threatens economic stability, and that the way to a sustainable future includes paying for the commons that we all share, we'll really never get anywhere. Republicans have made taxes more of a four-letter word than liberals, to the extent that they threw an entire round of tax "tea parties" despite Obama having cut taxes in the stimulus for practically everyone. Conservatives since the Reagan era have determined that America has an innate selfishness that they can exploit, to claim "the other guy" is getting your tax money, and everyone should resist it. As government has provided little of perceived tangible value since the invention of Medicare in the 1960s, they've been able to get away with this. But it's not a path that can hold.

It starts by making the argument that while nobody likes taxes, nobody builds their own roads, or schools, or police and fire departments, or health care infrastructure, and government needs to act as a provider of services. This is basic stuff that has been pushed aside in our national debate for far too long. In the final analysis, we have a selfish and cruel segment of society that has been allowed to rule the roost for decades, promising their constituents endless services and endlessly low taxes forever. Democrats have the choice of accepting that and permanently nibbling around the edges the few times they get into power, or making the argument that we can have a better society.

And Also, A Budget

Aside from everything else, we could see the FY2010 budget passed this week, in time for the 100 day festivities.

House and Senate Democrats reached a budget deal on Monday night that will allow both chambers to vote on budget resolutions this week.

Budget negotiators, after hours of negotiations on Monday, put finishing touches on the resolution, which Democrats hope to approve by President Obama's 100th day in office Wednesday.

Senate Budget Committee Chairman Kent Conrad (D-N.D.) called the budget "a major accomplishment."

"We are meeting President Obama’s goals of reducing our dependence on foreign energy, striving for excellence in education, reforming our healthcare system, and providing middle-class tax relief – all while still cutting the deficit substantially," he said.

It looks like the price of reconciliation instructions for health care was a codifying of PAYGO rules, which basically mandates that all new spending find an offset in funding. That can be good, because it forces Blue Dogs to pay for spending with taxes on the wealthy, for example, or it could be bad, as it constrains lawmakers from deficit spending, particularly in a recession.

More from the AP. The serious issues of health care and climate change will be put off until later in the year; this budget is more of a framework. Fortunately, conferee Rosa DeLauro says that no deal to tinker with Social Security was offered as an exchange for the reconciliation instruction on health care.

Everybody Reconcile!

While in Sacramento, the big news I never got to report was that the US Senate basically laid down the gauntlet in the fight over health care, by adding a "reconciliation instruction" to the budget conferees for health care.

That means the Democrats can pass health care reform with just fifty votes, instead of the sixty it takes to break a filibuster.

The deal was hatched late afternoon and last night, in a five-hour negotiating session at the office of Senate Majoriy Leader Harry Reid. A trio of White House officials were there: Rahm Emanuel, Peter Orszag, and Phil Schiliro. Also present, along with Reid, were House Budget Chairman John Spratt and Senate Budget Chairman Kent Conrad.

The reonciliation instruction specifies a date. That date, according to one congressional staffer, is October 15. (The original House reconciliation instruction had a late September deadline.)

In other words, the House and Senate each have until that day to pass health care legislation.

If they haven't, then both houses will consider health care under the reconciliation process, which is relevant primarily for the way it affects the Senate. There will be a limit on the time of debate. Republicans won't be able to filibuster it.

This really changes the dynamic of the health care debate, from one where the Republicans can simply sit back and oppose, to one where they have to engage in the debate or risk getting shut out entirely. The President's changing perspective with regards to bipartisanship reflects the fact that he knew he had to change this dynamic. And emboldened by it, the Senate Majority leader can now apply the pressure.

In order for this bipartisan process to take root, Republicans must demonstrate a sincere interest in legislating. Rather than just saying no, you must be willing to offer concrete and constructive proposals. We cannot afford more of the obstructionist tactics that have denied or delayed Congress' efforts to address so many of the critical challenges facing this nation....

Make no mistake - we are determined to reform health care this year. Our strong preference is to do so by working alongside you and your caucus. The health of our citizens and our economy are at stake; neither will be able to recover if we do not....

We look forward to hearing your ideas and working with you. The budget we will vote on this week gives us nearly six months to work together toward a comprehensive reform bill. Let's use that time to work together in our common interest rather than against each other and against the interests of the American people.... There is a seat for you at the table; we hope you take it.

This doesn't completely ensure health care reform; there's the question of how you pay for all this, for starters. But it does force compliance in a way that was not possible before. And with Republicans flailing about, I'd say reform is much more likely.

However, there had to be some sort of bargain to Conservadems like Kent Conrad and Blue Dogs like Allen Boyd, both members of the budget conference committee, in exchange for the reconciliation instruction. Jon Cohn speculated that PAYGO rules would become law, which you can see as good or bad. I'm much more concerned that Social Security reform was put on the table as part of the deal.

One outstanding question is what Conrad may get in exchange for not standing in the way of reconciliation provisions.

“Would I want things? Yeah,” Conrad said.

Conrad and Judd Gregg of New Hampshire, the ranking Republican on the Senate Budget Committee, have long pushed for creating a task force that would write policy prescriptions for the government’s long-term budget problems that Congress would have to vote on.

When asked if this proposal could in some way be part of a potential deal on the budget resolution, Conrad only would say that many things have been discussed.

Obviously, we cannot allow Social Security, a successful program, to be altered in any way that cuts its already meager benefit. So we'll have to see how this plays out.

...I should note that ending the privatization of the student loan process was also tagged for reconciliation, and that should go through much more smoothly, because it closely reflects the spirit of reconciliation, which is used for cost-cutting and deficit reduction. Great decision.

Food Stamp Increases Can Give California's Economy A Boost

The rollout of the American Recovery and Reinvestment Act continues with this very good piece of public policy.

California food stamp recipients will receive 13.6% more benefits thanks to the federal economic stimulus package, the state Department of Social Services announced Wednesday.

The increase, effective immediately, was included in the American Recovery and Reinvestment Act, approved by Congress and signed by President Obama in February.

John Wagner, the state social services director, said in a statement that the increase "will dramatically help families, while also boosting California's economy in ways that benefit grocers, food manufacturers and growers."

The average monthly food stamp benefit received by about 2.5 million Californians will increase from $300 to $341 per household. State food stamp rolls are expected to increase by 300,000 this year, officials said.

The federal stimulus package also provided $22 million in administrative funding for the state food stamp program, and 10 million pounds of food for food banks and pantries that serve low-income Californians through the federal Emergency Food Assistance Program.

Food stamp money is almost immediately spent. It's among the most effective forms of stimulus there is, with each dollar generating $1.73 in economic activity. Combined with the one-time $250 payment to anyone in the Social Security system, which is also very likely to get spent, these actions will provide a short-term boost to the economy, especially in California, which has an older population than other states.

Gloria Molina is trying to extend the benefit to those who have lost their jobs:

Earlier this week, in an effort to help unemployed middle-class workers who do not qualify for government aid, L.A. County Supervisor Gloria Molina proposed that the county pursue temporary state and federal waivers of eligibility requirements for cash aid, food stamps and housing benefits.

"As more and more people lose their jobs and search in vain for new ones in a shrinking job market, many families are finding themselves, often for the first time, with inadequate funds to pay their rent or mortgage, keep their utilities and provide food for their children," Molina said Tuesday, citing an article in The Times last week.

Molina noted that each month, food stamp applications are denied for more than 19,000 county residents, and 7,000 applicants are denied benefits under CalWorks, a welfare program for families.

The middle-class needs for aid have gone up dramatically in the state over the past six months. Particularly in our areas in Depression, the crisis is very wide and broad. Until the economy recovers, and as a means for it to recover, these actions at the federal level can at least cushion the blow.

Coming For The Social Security Checks, Again

How interesting that the Washington Post, in the midst of this Great Recession, decides that the biggest fallout of the loss of millions of jobs is not the health and welfare of those unemployed themselves, but the concurrent depletion of the Social Security Trust Fund, with a not-so-subtle inference that benefits need to be cut.

The U.S. recession is wreaking havoc on yet another front: the Social Security trust fund.

With unemployment rising, the payroll tax revenue that finances Social Security benefits for nearly 51 million retirees and other recipients is falling, according to a report from the Congressional Budget Office. As a result, the trust fund's annual surplus is forecast to all but vanish next year -- nearly a decade ahead of schedule -- and deprive the government of billions of dollars it had been counting on to help balance the nation's books.

While the new numbers will not affect payments to current Social Security recipients, experts say, the disappearing surplus could have considerable implications for the government's already grim financial situation.

Considerable!

Since the WaPo doesn't make it clear, Dean Baker can explain what they're talking about. Payroll tax revenue may be coming into balance with current payouts from the system during this recessionary period, but the article conveniently sidesteps the $2.5 trillion dollar surplus the system has generated over the years.

While those seeking to cut Social Security benefits are highlighting these new projections, in reality they have very little significance for the program. Under the law, Social Security benefits are paid out of its trust fund. This trust fund has accumulated a surplus of almost $2.5 trillion. The lower projected surpluses for the next few years will have some impact (if the projections prove correct) on the date at which the fund is projected to be depleted, but the projected depletion date will almost certainly be beyond 2040, even after CBO adjusts its numbers for the downturn.

Remarkably, this piece alludes to plans to cut benefits without ever noting that older workers and retirees have just lost close to $15 trillion in wealth due to the collapse of the housing bubble and the plunge in the stock market Presumably this would be an important factor in any debate over reducing benefits.

The issue here is not the successful administration of Social Security, but the historic maladministration of the economy and the rest of the budget by the "deficits don't matter" crowd. Of course, to them deficits only matter with respect to Social Security, not the magic doesn't-cost-any-money military budget.

By the way, I don't know why this wasn't heavily pushed all that much by the White House, but as part of the federal stimulus, beneficiaries of Social Security will receive a one-time $250 payment, beginning in May. This puts money into the hands of those who need it, for the most part, and goes a little way to strengthening the social safety net and helping out those who are collateral damage to this economic storm. We need more of it, not the Village nonsense about how benefits have to be cut based on misleading fiscal projections.

Pension Guarantee Money Set Ablaze On Wall Street

From the Boston Globe, a terrifying report about how the Pension Benefit Guaranty Corporation, the agency that insures retirement funds, decided to play in the stock market at precisely the wrong time:

WASHINGTON - Just months before the start of last year's stock market collapse, the federal agency that insures the retirement funds of 44 million Americans departed from its conservative investment strategy and decided to put much of its $64 billion insurance fund into stocks.

Switching from a heavy reliance on bonds, the Pension Benefit Guaranty Corporation decided to pour billions of dollars into speculative investments such as stocks in emerging foreign markets, real estate, and private equity funds.

The agency refused to say how much of the new investment strategy has been implemented or how the fund has fared during the downturn. The agency would only say that its fund was down 6.5 percent - and all of its stock-related investments were down 23 percent - as of last Sept. 30, the end of its fiscal year. But that was before most of the recent stock market decline and just before the investment switch was scheduled to begin in earnest.

The PBGC is a backstop against major losses by private pension funds and the parent companies slipping into bankruptcy. Especially at this time, with the economy struggling, the PBGC could be called on more than ever to help protect pensioners. Just as an example, a structured bankruptcy by GM or Chrysler would mean that huge liabilities would be passed on to this agency. Which apparently gambled and lost tons of money. That's exactly the opposite investment strategy that should be taken by what amounts to an insurer.

David Kurtz is blunt and right on the money.

A finance professor who had previously advised the agency not to make the switch away from bonds compared the move to an insurance company writing policies to cover hurricane damage and then investing the premiums in beachfront property.

Bush was able to do for the PBGC what he tried and failed to do for Social Security.

Josh Marshall concurs. These were Bush Administration officials who, in the wake of losing their battle to privatize Social Security, had this big pot of money - close to $64 billion - that they sunk into stocks, providing more money to Wall Street for them to keep pushing asset values higher. The timing of it happening just at the time before the market began to crash suggests that the Administration viewed this as perhaps a last-ditch effort to prop up Wall Street. The director of the PBGC, who advised and directed this strategy, is Charles E.F. Millard, a former managing director at LEHMAN BROTHERS, just to give you some more assurance. In the article he practically admits that he was just taking a whirl at the casino with public money:

He said the previous strategy of relying mostly on bonds would never garner enough money to eliminate the agency's deficit. "The prior policy virtually guaranteed that some day a multibillion-dollar bailout would be required from Congress," Millard said.

He said he believed the new policy - which includes such potentially higher-growth investments as foreign stocks and private real estate - would lessen, but not eliminate, the possibility that a bailout is needed.

Asked whether the strategy was a mistake, given the subsequent declines in stocks and real estate, Millard said, "Ask me in 20 years. The question is whether policymakers will have the fortitude to stick with it."

I don't think policymakers will be sticking with it, because there's probably almost no money left in that portfolio. Money that was designed to insure pensions.

This is a crime.

Obama's Budget Hawkery - Ending Corporate Welfare

There are excerpts of the President's address floating around, and most of it is pretty standard stuff: the rah-rah lines about how America "will emerge (from the economic crisis) stronger than before"; campaign talk about how the economic turmoil is a reckoning for the short-sighted and the laissez-faire crowd; the urgency of making investments in the key challenges of the future, in "areas like energy, health care, and education"; how a budget is "a blueprint for our future." But there are a few paragraphs about fiscal responsibility that I would like to highlight.

My budget does not attempt to solve every problem or address every issue. It reflects the stark reality of what we’ve inherited – a trillion dollar deficit, a financial crisis, and a costly recession.

Given these realities, everyone in this chamber – Democrats and Republicans – will have to sacrifice some worthy priorities for which there are no dollars. And that includes me.

But that does not mean we can afford to ignore our long-term challenges. I reject the view that says our problems will simply take care of themselves; that says government has no role in laying the foundation for our common prosperity.

Yesterday, I held a fiscal summit where I pledged to cut the deficit in half by the end of my first term in office. My administration has also begun to go line by line through the federal budget in order to eliminate wasteful and ineffective programs. As you can imagine, this is a process that will take some time. But we’re starting with the biggest lines. We have already identified two trillion dollars in savings over the next decade.

In this budget, we will end education programs that don’t work and end direct payments to large agribusinesses that don’t need them. We’ll eliminate the no-bid contracts that have wasted billions in Iraq, and reform our defense budget so that we’re not paying for Cold War-era weapons systems we don’t use. We will root out the waste, fraud, and abuse in our Medicare program that doesn’t make our seniors any healthier, and we will restore a sense of fairness and balance to our tax code by finally ending the tax breaks for corporations that ship our jobs overseas.

I don't know what he means by "education programs that don't work," but I know exactly what he's talking about with the rest, and those are things that should have been cleaned up years ago. I haven't heard the phrase "reform our defense budget" come out of a President's lips in a long time, probably since Eisenhower. Obama is taking on bloated military spending, contractor fraud in Iraq, corporate welfare and Medicare Advantage. That's quite a chunk of change.

And I'm assuming this will segue into how reducing health care spending is the only path to fiscal stability and yes, Liz Sidoti, you magnificent idiot, "the single most pressing fiscal challenge we face by far." (She lied and said Obama was talking about Social Security.) The fiscal scolds may not like it - maybe that's why they got uninvited to the White House - but Obama's team is pressing the case that health care reform is crucial to the long-term budgeting process, and that only through a cost-controlling universal health care plan can we bring the budget in line.

I understand that calling to slice the budget in half during this precarious time may not be very smart in the long-term. And calling for austerity and shared sacrifice just doesn't seem like the right message. However, the spending Obama wants to eliminate really is truly wasteful, and a lot of it just goes into the pockets of corporate executives and heightens inequality. The broad view may not look so good, but based on these specifics I am completely comfortable with it.

What Progressive Fiscal Responsibility Looks Like

Barack Obama had his fiscal responsibility summit today, where he tried to thread the needle between arguing for public investment and deficit reduction at the same time. It's a difficult argument to make, and one that is easily hijacked, even though there are parts of it that are true.

Obama declared the country "cannot and will not sustain deficits like this without end."

He also said that he wants to reinstate a pay-as-you-go policy on federal spending programs, get rid of programs that do not work and end tax breaks for companies that ship jobs overseas.

Calling for fiscal restraint even while federal spending soars, Obama summoned allies, adversaries and outside experts to a White House summit Monday to address skyrocketing budget deficits and announced $15 billion in Medicaid money to states from his $787 billion economic stimulus package.

"As we take the steps that we must to get through the crisis we're in now, we will not lose sight of the long-term," Vice President Joe Biden said as he opened the event. Obama's No. 2 promised that the administration would be frank with the public about budget challenges, though he also said there was a need to reform the nation's health care system and wean the United States off heavy reliance on foreign oil.

I think I get what they're trying to do here. It's a plain fact that borrowing is wasteful and deficits are unsustainable unless you want to inflate your way out of them. It's also true that the problem was almost entirely brought about by the last three Republican Presidents. Too much of federal spending doesn't meet long-term priorities of the nation's people. Tax fairness by repealing the Bush tax cuts - some would argue, the Reagan tax cuts that concentrate wealth and lead to bubble economies and inequality - makes a lot of sense and would provide needed revenue. Same with reducing wasteful and outdated military spending. And the really bold move here is to re-imagine the entitlement crisis as a health care crisis. This is the killer app here - if Obama can successfully define out-of-control health care spending as the most urgent danger to the federal budget, then universal health care reform, despite its up-front costs, becomes the fiscally responsible thing to do.

Where a decade ago the looming fiscal threat of entitlement spending led economists and budget wonks to wear out their worry beads, today a more subtle understanding of our fiscal future dominates. In this telling, there's no such program as SocialSecurityandMedicareandMedicaid. There's Social Security, which has modest long-term liabilities and needs little, if any, help. And then there's health-care reform. "That," says Henry Aaron, a senior economist at the Brookings Institution, "is the big kahuna."

How this happened depends on whom you talk to. Dean Baker, an economist at the Center for Economic and Policy Research, points to the 2005 Social Security privatization fight. "A lot of people were suddenly out there arguing that there's no crisis and we don't need to do anything on Social Security," he says. That forced left-of-center wonks who'd not thought much about the crisis to confront the numbers or, more precisely, the graphs. "We've done a graphic that shows what deficits look like in every country with longer life expectancies than us and what the deficit looks like going 70 years with the same per-capita health-care costs of that country."

It's a startling image. That orange line shooting into orbit? That's our projected deficit. That blue line levitating gently upward? That's our deficit if health costs grew more slowly. And those other lines sinking downward? They're our deficit if we had the per-person health costs of countries like France, Germany, and Canada. In all cases, Social Security spending remains unchanged.

Controlling health care costs through universal care (as a BIG number one to reducing long-term debt), reducing spending on the military and wars, and instituting a fairer tax code - these are the progressive steps to fiscal responsibility. But Obama keeps stepping on his message. He apparently said today that long-term Social Security solvency is "the single most pressing fiscal challenge we face by far." That's just not true - raise the cap on FICA taxation above $106,800 and you're basically done. Alex Rodriguez doesn't pay into Social Security on 99.5% of his salary. It's just not worth bowing to Beltway elites by attacking Social Security when it has no place at all in the debate. To their credit, Democrats are pushing back on the Administration's "Social Security task force" and got it shelved. However, officials inside the Administration still have the wrong mindset:

One liberal activist who weighed in against the proposed task force told me that some within the administration are ready to attempt "one more fix" for Social Security, thinking of the 70-year-old benefits program "as an equation to be solved" and the Obama team as the mathematicians on the case.

"We just think the timing is terrible" to formally open such a Social Security task force now, this activist added. "At a time when the economy is terrible and people are losing their 401(k)s, you want people to feel more comfortable about their retirement." [...]

But while many progressives are eager to stop lumping Social Security and Medicare together, others view reluctance to address Social Security as giving in to pre-emptive fears that conservatives would hijack the process to promote privatization.

"Wouldn't it be a progressive achievement to lock Social Security in for everybody alive today and their children?" one person close to the issue asked me. "Why wouldn't we do it? [As for] how you do it, there will be a long discussion with stakeholders to get it done."

The reason we wouldn't do it is that the President has a limited supply of political capital, and health care spending is a bajillion times the problem to the long-term deficit than Social Security is. It's just not an issue of deep concern, a rounding error practically compared to health care reform. I would put all my effort into figuring out the structure and the funding for that (phasing out Medicare Advantage won't do all the heavy lifting required).

See Robert Kuttner for more.

UPDATE: Ugh. The AP got Obama's quote wrong. The full context is: "In the coming years, we'll be forced to make more tough choices and do much more to address our long-term challenges, from the rising cost of health care that Peter described, which is the single most pressing fiscal challenge we face by far, to the long-term solvency of Social Security." He said health care spending is the most pressing fiscal challenge we face, not Social Security. I should have known better than to trust AP. Sorry. I'm largely OK with Obama's stance here. Peter Orszag's remarks are great as well.

In charting a new fiscal course, we need to be clear in diagnosing the problem. The single most important thing we can do to improve the long-term fiscal health of our nation is slow the growth rate in health care costs. Health care is the key to our fiscal future.

So to my fellow budget hawks in this room and in the rest of the country, let me be very clear: health care reform is entitlement reform.

The path of fiscal responsibility must run directly through health care.

We also must recognize that reforms to Medicare and Medicaid will only succeed in the context of slowing the spiraling growth of overall health care costs.

Improving the efficiency of the health system -- so that we get better results for less money -- is therefore not just or even primarily a budget issue.

Health reform would also provide direct help to struggling families, since health care costs are reducing workers’ take-home pay to a degree that is both under-appreciated and unnecessarily large.

And for many states, health care is increasingly crowding out other priorities -- such as support for higher education, which in turn had lead to higher tuition and painful cutbacks at state universities.

All of this is why the President has said time and again that he is committed to reforming our health care system this year.

Great stuff.

Blog Fights!

Seems to me there's been a spasm of blog fights lately. First "rational progressive" Nate Silver and "Marxist" David Sirota (I think Silver came out of that one looking really bad, BTW, and he desperately needs a special election to talk about or something). Now Jane Hamsher and Ezra Klein.

Jane has been dogged in her efforts to uncover what's going on at this "fiscal responsibility summit" next week, which may be headlined by billionaire hedge fund manager Pete Peterson. Now fortunately, House and Senate leadership have shut down the trojan horse designed to force an up or down vote on "entitlement reform" that could possibly lead to Social Security benefit cuts. But Jane noticed an interview with Peter Orszag that put "modest" benefit cuts back on the table:

Orszag’s long-running project – something that has made him the Left’s favorite Cabinet member – has been replacing talk of an “entitlement crisis” with his argument that Social Security requires only modest tax hikes and benefit cuts, while Medicare and Medicaid have much more dramatic fiscal woes.

“Social Security faces an actuarial deficit over the next 75-100 years. In the past I’ve resisted the term ‘crisis’ to describe that kind of situation,” he said. “This is not quantitatively as important as getting healthcare done.”

In steps Ezra to say that the important part of the sentence is that there is no entitlement crisis, that is, there is no thing called "entitlements" including Social Security, Medicare and Medicaid that all have the same funding problem. In fact, what Orszag has focused on all along at the CBO and elsewhere is that Medicare and Medicaid spending have the ability to destroy the federal budget, and only comprehensive health care reform can stop that. Social Security should not be in that conversation.

And you know what? They're both right! Orszag has been far more focused on health care spending as it relates to the budget, and he's absolutely right that the fiscally responsible thing to do is reform it to bring down costs (which coincidentally, would be done be eliminating the inefficiencies in delivery, namely the insurance industry). But the Diamond-Orszag plan clearly adds benefit cuts to Social Security, and Ezra's attempt to talk past that doesn't deny that reality, either. Orszag may want to end the fearmongering on Social Security by taking "entitlement reform" off the table, but he wants to do that through cutting. And that's not a liberal position. In fact, benefits ought to be increased given the collapse of the private pension system.

Jane goes after Ezra on this one.

Orszag's not running for prom king here so whether he's "one of the good guys" is not really relevant. He has been presenting his plan to cut Social Security benefits as part of the White House's efforts on "fiscal responsibility," according to people who have directly participated in those presentations. I granted anonymity in this instance in accordance with the rules followed by the New York Times, because I trusted where the information was coming from, I thought it was important to get out, and there was a valid reason (not wanting to jeopardize relationships with the administration) for requesting it.

Now Orszag confirms that reporting by doing an interview where he says he thinks Social Security requires benefit cuts. Ezra says my conclusion is "an effort to read the tea leaves to suggest that the Obama administration has a secret plan to cut Social Security benefits." I don't know what the "secret" part is.

He then goes on to tell us that what Orszag really means is that he has no intention to cut Social Security, what he really wants to do is deal with the broad question of Medicare and Medicaid as part of healthcare reform. Fair enough. But Ezra wrote a post this morning quoting anonymous administration officials on the subject wherein he granted them anonymity for no legitimate journalistic reason I can tell, because they did nothing other than give administration spin. Nobody legitimately speaking on behalf of the administration should fear retribution for doing so. Ezra transcribed this exchange with no pushback or critical scrutiny, something Glenn Greenwald has been taking Mark Ambinder to task for. If Ezra's got great sources in the administration, why is he venturing guesses about what Orszag intends? Why doesn't he go and ask them, point blank -- is cutting Social Security benefits off the table? [...]

It may be that in the wake of the horrified response Orszag got from Congressional leaders at the very thought that "fixing" Social Security has been abandoned -- these things seem to be changing by the minute. But if Ezra has valuable sources within the administration willing to speak to him about what the White House intends, there are a lot of people right now who would like to know. He should be using them to find out solid information on that front rather than float anonymous spin and then speculate about the meaning.

There are two things in conflict here - an effort to decouple Social Security with government health care spending to delegitimize the smears about Social Security, and a desire to cut benefits to put it on a path to stability (even though that's not required and an increase in the spending cap would be all that's necessary). Both of these people have enough sources inside the White House that they could get to the bottom of it. So, work the phones.

On "Fiscal Responsibility."

You know, I'm not knee-jerk opposed to fiscal discipline. There's unquestionably a lot of government waste, expenditures that are unnecessary, and programs that remain due to inertia. Many of these are in the defense sector, but that's another story. The problem is that very rich and well-heeled groups have been using the rhetoric of "fiscal responsibility" to wall off their profits and screw everybody else for decades, if not centuries. The term is no longer used in good faith. Which is why the very idea of a fiscal responsibility summit is terrifying, especially with the news that entitlements may be able to be cut with a majority vote:

Speaking Friday to business leaders at the White House, the president defended the surge of spending in the stimulus plan, but he made sure to add: "It's important for us to think in the midterm and long term. And over that midterm and long term, we're going to have to have fiscal discipline. We are not going to be able to perpetually finance the levels of debt that the federal government is currently carrying."

Along those lines, White House budget director Peter R. Orszag has committed to instituting tougher budget-discipline rules -- once the economy turns around. Those include a mandate that any "nonemergency" spending increases be offset by equal spending cuts or tax increases [...]

Obama aides say they aren't looking for quick action, but a start to the conversation. "We're going to bring some things to the table, but we're going to listen to everybody else," said Christina Romer, chairman of the White House Council of Economic Advisers, in an interview Friday. "It's a giant issue, and it's not one we can solve unilaterally."

The president met with 44 fiscally conservative "Blue Dog" Democrats this week and gave a nod to legislation that would set up commissions to deal with long-term deficit strains. The commissions would then present plans to Congress for an up-or-down vote.

"We feel like we've found a partner in the White House," said Rep. Charlie Melancon (D., La.), a Blue Dog co-chairman.

It sure looks like it.

Jane Hamsher is extremely skeptical of this whole thing, especially Peter Orszag, who she notes is the author of "the Diamond-Orszag plan for reforming Social Security, which calls for raising the retirement age and cutting benefits." I actually like Orszag because he's talked repeatedly about how health care spending is what will torpedo the economy, and that only comprehensive reform that brings down costs will save it. That's the good side of "fiscal responsibility." So is demanding that excellent adventures in Iraq or bailouts to banksters are paid for.

But gutting Social Security during an economic crisis is just outrageous. And progressives won't stand for it. Already Obama appears to be breaking promises by agreeing to this up-or-down vote on entitlements. He will hear from the great mass of Americans on this one. With private pensions going down the drain, if anything we need Social Security benefits INCREASED to a level where people can live off them. And we can easily pay for it by lifting the cap (you can even create a doughnut hole between $100,000 and $300,000 to unburden the upper middle-class). Why any self-respecting Democrat would screw with the most successful program in government history is beyond me.

Playing With Fire

Rahm Emanuel has been strutting around lately, taking full credit for bringing the stimulus bill to term. This could be seen positively if you didn't understand his next act:

The fiscally conservative Democrats might not have been able to defeat the bill, but a large chunk of Democrats defecting on the top priority of a new Democratic president would have heaped insult on the injury inflicted by the GOP’s wall of opposition. So they huddled in the majority leader’s hideaway, and Emanuel pledged that they would see signs of Obama’s commitment to fiscal reform.

Fiscal reform is a coded word in political circles - he's talking about entitlements. And as nuts as it would be for the President to concern himself with them (in the name of "taking them off the table") during an economic free-fall, that really appears to be what's happening, if Dean Baker is to be believed.

Word has it that President Obama intends to appoint a task force the week after next which will be charged with "reforming" Social Security. According to inside gossip, the task force will be led entirely by economists who were not able to see the $8 trillion housing bubble, the collapse of which is giving the country its sharpest downturn since the Great Depression.

This effort is bizarre for several reasons. First, the economy is sinking rapidly. While President Obama's stimulus package is a good first step towards counteracting the decline, there is probably not a single economist in the country who believes that is adequate to the task. President Obama would be advised to focus his attention on getting the economy back in order instead of attacking the country's most important social program.

The second reason why this task force is strange is that Social Security doesn't need reforming. According to the Congressional Budget Office, it can pay all scheduled benefits for the next 40 years with no changes whatsoever [...]

In short, the vast majority of baby boomers will be approaching retirement with little other than their Social Security and Medicare to support them. And now President Obama is apparently prepared to appoint a commission that will attack these only remaining pillars of support.

I've tried to give the President the benefit of the doubt when hearing these rumblings. His stated goals for Social Security reform have always been progressive (like raising the payroll tax cap), and his description of Medicare's problems have always shown an acknowledgment that runaway health care spending is the problem, which requires a comprehensive health care solution. You can see that thinking here.

Nevertheless, he's playing a dangerous game by flirting with the fiscal responsibility scolds, the same people who voted to appropriate hundreds of billions for endless war, bank bailouts and the Bush tax cuts. They don't have an interest in controlling long-term Medicare spending, they have an interest in self-aggrandizement and pushing an essentially conservative agenda. Chris Hayes' Nation article profiles one the Blue Dogs, and they are not allies:

The Blue Dogs continue to wield influence. Before the stimulus could be brought to the floor, the House had to approve emergency orders to expedite the process. The Blue Dogs balked and threatened to rebel until the White House sent a letter to several House committee chairs reaffirming its commitment to return to pay-go budgeting after the stimulus is passed. In the end, half the caucus voted against the leadership anyway. The week after the stimulus passed the House, Blue Dog co-chair Stephanie Herseth Sandlin sent an open letter to Pelosi and House majority leader Steny Hoyer expressing the caucus's support for efforts by Senate Republicans and conservative Democrats to cut approximately $100 billion from the package--including money for things like school construction, rural broadband and early childhood programs. "We believe that's a highly worthwhile goal," they wrote [...]

This "fraternity" is ostensibly built around a single issue: fiscal discipline. It's a term that is both more and less than it appears.

Everyone understands that Democrats attempting to represent conservative districts have to convince their constituents that despite the D next to their name, they hear them, understand them and share their concerns and worldview. But to do this they've chosen to invest a tremendous amount of political capital in something that, well, no one cares about. In a recent national poll of priorities, the deficit/debt came in a distant sixth, after regulating the financial industry, ending the war in Iraq and healthcare reform. This could be because the national debt as a percentage of GDP is well within post-World War II norms. A Democratic Congressional candidate who unsuccessfully challenged a Republican incumbent in a conservative district in the South put it to me this way: "Nobody brings up the deficit. Ever." [...]

For all their cohesiveness, positive press and legislative leverage, the Blue Dogs haven't produced a ton of legislative accomplishments on their signature issue. On the two most massive expenditures of the last Bush years--the Iraq War and the financial bailout--they've offered little organized resistance. The offsets on the issues on which they've been able to enforce pay-go--like the tax increases to pay for the new GI bill, which the Blue Dogs peg at $63 billion--pale in comparison with the cost of the Iraq/Afghanistan wars and the bailout, which have cost more than $1 trillion over the past two years.

Where Blue Dogs have perhaps been most effective is in helping Republicans pass legislation and blocking or diluting progressive legislation. During the months-long debate in 2006 over the Military Commissions Act, which was crafted explicitly to deny the right of habeas corpus to enemy combatants, many Blue Dogs supported the bill (against the directive of the Democratic House leadership), and ultimately twenty-three of thirty-seven voted for it. And it's not just on national security issues that they've played this role. In 2007 Representative Brad Miller proposed legislation that would have amended bankruptcy law to allow judges to alter home mortgage terms, a reform seen by many Democrats as necessary to reduce the number of foreclosures. But according to National Journal's online Congress Daily, "bankers...knew exactly whom to go to in order to stop the bill in its tracks: the Blue Dog Coalition of moderate-to-conservative Democrats." Sixteen members of the caucus signed a letter objecting to the legislation, prompting it to be pulled from consideration on the floor. As of this writing, it has yet to pass the House.

Positions like this have convinced many progressives that Blue Dogs are little more than bought-and-paid-for agents of big business. One corporate lobbyist explained the Blue Dogs' fundraising prowess this way: companies say to themselves, "Blue Dog Democrats are probably going to be more business-friendly, so let's give them more campaign contributions.... You get elected, you join the Blue Dogs...the money comes flowing." Individual fundraising is then amplified by contributions from the Blue Dog PAC, much of it from large corporations like UBS ($10,000), Citigroup ($10,000) and Coca-Cola ($10,000).

These are corporatists who want to shrink the social safety net. When pushed, Rahm Emanuel will side with them every single time and say "It's the best we can do." This is his way. He sidelined antiwar candidates at the DCCC, he pushed freshman Dems to come out as more anti-immigrant because Hispanics "don't vote." (except they do). He is an accommodationist, perfectly willing to listen to and act on critiques like Dan Boren's, that any bill without bipartisan support is "not American." If fiscal responsibility is seen as the common ground, where the left must sit by while Rahm and the Blue Dogs build a bridge to the Beltway media by cutting off the mass of society to fend for themselves, then we will have a major problem winning elections anywhere in the future.

Obama thinks he can charm the pants off an elephant. This is not the crowd to try that with. They will seal his political fate.

IL-05: Way Outside The Box

As we await the carnage that the Axis of Nelson-Collins brought to the recovery bill, my thoughts turn to what could happen if some real progressives were in positions of power in Washington. We have an opportunity in Rahm Emanuel's old seat, IL-05, where I lived for a while a decade ago (and I believe my Congressman was one Rod Blagojevich).

Earlier this week I was able to attend an event with Thomas Geoghegan, a labor lawyer who has dedicated his life to helping working people, running for Congress as a first-time politician. He has a completely different conception of what's needed right now, a three-point plan that you'll almost never hear from anyone in the political arena. He describes it in this video:



1) Increase Social Security benefits so we have a livable public pension system comparable to the rest of the developed world. Businesses have all but eliminated their pensions, and Social Security is not enough to survive.

2) Single-payer national health care now. It is crucial we take over the non-wage labor costs from the private sector so they can increase their global competitiveness and stay in business. Insurance company overhead is a waste of money and single payer is the way to fund health care and hold down costs.

3) Reduce the interest rates on what the financial sector can take out of the economy, and in exchange for bailing out the banks (and taking them over temporarily), cancel consumer debt just like we're canceling the debt from toxic securities.

Geoghegan's overall goal is to increase the economic security of working people while making US businesses more competitive globally. The key point he said is that "people have no sense that they get anything back on their taxes" and that we'll never win the long-standing tax battle if we don't offer something tangible. In European nations the tax base is higher, but people are happy to pay it because they see a return. His smaller point was that the banks have become the real economy instead of the industrial sector, and this has taken all the creative energy of the economy away from entrepreneurship and into the financial sector.

This is a radical departure from how most politicians talk about the economy. Instead of placating an interest group or tailoring a message to the people who can fund a campaign, Geoghegan is really talking about the return of the social contract, where work is rewarded and government is on the side of the people. We're so unused to hearing these ideas, so ready to dismiss them as unworkable, that these avenues get permanently closed off. It's time to shift the debate.

If you believe in the progressive movement and in real, lasting change, you can get behind Tom Geoghegan's campaign. More here, here and here.

Just The Time For Entitlement Reform?

It was one comment over an hourlong interview, but "entitlements" is like catnip to Beltway journos, so that became the lede. Still, it's pretty troubling:

President-elect Barack Obama pledged yesterday to shape a new Social Security and Medicare "bargain" with the American people, saying that the nation's long-term economic recovery cannot be attained unless the government finally gets control over its most costly entitlement programs.

That discussion will begin next month, Obama said, when he convenes a "fiscal responsibility summit" before delivering his first budget to Congress. He said his administration will begin confronting the issues of entitlement reform and long-term budget deficits soon after it jump-starts job growth and the stock market.

"What we have done is kicked this can down the road. We are now at the end of the road and are not in a position to kick it any further," he said. "We have to signal seriousness in this by making sure some of the hard decisions are made under my watch, not someone else's."

In the same interview, Obama backed financial regulatory reform and endorsed a set of policies already put forward by Paul Volcker. In a way, he's much further ahead on that front than on this entitlements thing. As I said, catnip.

He also happened to say the right things about those specific entitlements. While I wasn't happy with his emphasis on Social Security in the primaries, it's important to remember that his SOLUTIONS were always progressive, like lifting the cap on payroll taxes from roughly $100,000 to something higher, and even adding a donut hole (so $100,000-$300,000 are exempt, and then incomes above that are subject to payroll taxes, which makes perfect sense).

"Social Security, we can solve," he said, waving his left hand. "The big problem is Medicare, which is unsustainable. . . . We can't solve Medicare in isolation from the broader problems of the health-care system." [...]

The president-elect has been in frequent conversation with lawmakers, including House Majority Leader Steny H. Hoyer (D-Md.) and the Blue Dog Coalition of fiscally conservative Democrats, who repeatedly told Obama they would be willing to support his stimulus package only if he pledged not to lose sight of the larger budget picture. Those who will be invited to attend the summit include the Blue Dogs, Senate Budget Chairman Kent Conrad (N.D.), ranking minority member Judd Gregg (N.H.) and a host of outside groups with expertise on the topics, the president-elect said.

If this is some bargain for universal health care, with light, progressive tweaks to make Social Security more sustainable, then we're on solid ground. But I'm sure that is not the intention of the Blue Dogs or a Judd Gregg. Obama is emboldening a group whose overriding goal is to break the social safety net, not strengthen it.

I believe that everything about this is a huge mistake. It validates incorrect right wing economic assumptions, incorporates their toxic rhetoric about "entitlements," focuses on the wrong problems and continues the illusion that social security is in peril when it isn't. The mantra of shared sacrifice sounds awfully noble, but it isn't very reassuring to talk about the government going broke at the moment, particularly when the cause of our problems isn't the blood-sucking parasites who depend on government insurance when they can't work, but rather the handiwork of the vastly wealthy who insist on operating without restraint and refuse to contribute their fair share. I would have thought that a bipartisan commission on financial system reform might have at least been on the agenda before social security.

Obama is empowering the Republicans and the Blue Dogs with this fiscal responsibility rhetoric and perhaps he believes they will reward him by acting in good faith. And maybe they will.Or perhaps he thinks he can jiu-jitsu the debate in some very clever way to actually bolster social security and enact universal health care. But it's a big risk. I believe that all this talk about "entitlements" and fiscal responsibility will make it much tougher to sell universal health care and easier to dismantle some of the safety net at a time when many people have just lost a large piece of their retirements, their jobs and their homes. It's very hard for me to understand why they think it's a good time to do this.

There's actually another way to go with all this, and that is claiming the mandate given by the voters, based on very clear elements of change. George Bush tried to privatize Social Security completely out of nowhere, and despite his majorities in Congress that was a key reason for its downfall. Social Security and Medicare were not tossed around during the campaign outside from a little bit in the primaries (and Obama was immediately slapped down hard for doing so and he never returned to it, except to explain that McCain thought Social Security was a disgrace). There's this Beltway disease where "entitlements" are always the most pressing issue, and in this case, it's really quite the opposite (By the way, there's never been a more descriptive word for how the Village thinks of the people than "entitlements" - how dare they think they're entitled to not starving and being cared for in their old age!). The economy is a mess and major spending is needed, and deficits don't matter for the near term. But responsible "centrists" think that a Grand Bargain must be made, and so the price for a moderately liberal policy on short-term spending must be the end of Social Security and Medicare. Tom Frank's op-ed is brilliant:

There is no branch of American political expression more trite, more smug, more hollow than centrism.

After all, as Mark Leibovich pointed out in Sunday's New York Times, transcending faction has been the filler-talk of inaugural addresses going back at least to Zachary Taylor's in 1849. When you hear it today -- bemoaning as it always does "the extremes of both parties" or "the divisive politics of the past" -- it is virtually a foolproof indicator that you are in the presence of a well-funded, much-televised Beltway hack [...]

The reason centrism finds an enthusiastic audience in Washington, I think, is because it appeals naturally to the Beltway journalistic mindset, with its professional prohibition against coming down solidly on one side or the other of any question. Splitting the difference is a way of life in this cynical town. To hear politicians insist that it is also the way of the statesman, I suspect, gives journalists a secret thrill.

Yet what the Beltway centrist characteristically longs for is not so much to transcend politics but to close off debate on the grounds that he -- and the vast silent middle for which he stands -- knows beyond question what is to be done.

And centrism's achievements? Well, there's Nafta, which proved Democrats could stand up to labor. There's the repeal of the Glass-Steagall Act. There's the Iraq war resolution, approved by numerous Democrats in brave defiance of their party's left. Triumphs all.

These things don't typically work out. Obama, responsible centrist that he is, had better opt for what ACTUALLY works. Even if it is, Heaven to Betsy, ideological.

IL-05: A Real Live Liberal For Congress

Thomas Geoghegan announced his campaign on Daily Kos today. You're going to like his platform.

We’re deep in an economic crisis unlike any other we’ve known. It may last years. We need new and creative ways to protect working Americans, especially our older working people who have no real pensions to live on.

For years we’ve heard the doomsayers: "We can’t afford Social Security." "We can’t afford ‘single-payer’ national health." One thing we all learned from the $700 billion bail out: We’ve got the money to do all of this and more.

At the moment, the Federal Reserve is literally printing money, to give not billions but trillions to banks and financial firms. To the people of this District, the banks and others have gotten their money. Now it’s your turn. Here’s the bailout I will go to Congress to get:

First, I want to expand Social Security, our public pension system, to replace - not overnight but in stages - the private pension system which has collapsed. Social Security now pays about 38 to 39 percent of your working income. In other developed countries, it averages 65 percent. That’s where our fiscal stimulus should be: a commitment to reach this goal, a public pension that ordinary working people can live on.

Second, we have to move to single payer health care program, at least in phases: we might begin with extending Medicare to children, but the government should ultimately be the single payer for all. That’s not because single payer is the only ethical and efficient way to protect us all. No, it’s also because it is crucial to making us competitive globally. Through single payer and expanded Social Security, the goal is to pick up the "non-wage" labor costs that employers now have to pay. That’s already how other countries out-compete us: they have the government and not the private employer pick up these non-wage health and pension costs.

Unless we have government pick up the costs of pensions and health care, our companies can’t compete, and we’ll go on piling up huge trade deficits. We’ll have debacles like GM, which has collapsed in part because of the health and pension costs that the federal government should have been paying all along.

For years, the conservatives have said: "We can’t do this. The money isn’t there." Well, the money is there. It was there for the Iraq war, a colossal waste of money - and for the bailout, the first half of which has been a colossal waste as well. And if we now have the government pick up non-wage labor costs with the use of general revenues, we will in fact make it cheaper and easier for our companies to hire. This is in fact the best and most realistic approach for a long term recovery.

This is a serious leader, committed to improving the lives of working people through policy. It's the epitome of what you would want in a public servant. Plus, he'd drive conservatives crazy.

Tom's website is here. You can donate through ActBlue here. I'll be doing so today. Join me, won't you?

This Is What Happens When You Have No Narrative

You end up contradicting yourself 1,000 times because you can't keep your stories straight.

McCAIN: Now, of course we have an obligation to take care of citizens in our society who can’t care for themselves. That’s why we have those programs, those Safety Net Programs. But you know, the Safety Net Program, a lot of Americans pay in to Social Security, they pay in to a number of those programs. So the point is, yes, a society and government takes care of citizens who need our help. That’s what America is all about.

This from the guy who called the Social Security system a disgrace.

And taking this a step further, wouldn't taking care of the citizens in society who can't care for themselves be an example of ... perish the thought ... spreading the wealth?

Somebody call Joe The Plumber!!! We're a nation of socialists!

By the way, Obama today punctured the socialism nonsense nicely today, through outright mockery.

"By the end of the week, he'll be accusing me of being a secret communist because I shared my toys in kindergarten," Obama said, as per the prepared remarks. Then he added: "I shared my -- I shared my peanut butter and jelly sandwich."

In a similar vein:

"Spending $150,000 for a one month wardrobe while painting yourself as a 'hockey mom' or the voice of 'Joe Six Pack' is an insult," says CNA executive director Rose Ann DeMoro. "There's been a lot of talk about Marxists in this campaign, but the real Marxist is in the McCain camp – she's just a Neiman Marxist."

Never underestimate the galvanizing power of calling someone a fool.

Social Security, Populism Front And Center - Choice Needs To Be Made

As the financial markets go to hell, connecting the mess to the McCain-Bush plan to privatize Social Security is a natural. And it's worked its way into Obama's standard stump speech.



He actually went further:

Speaking at Bethune-Cookman University at an event highlighting his campaign's efforts to appeal to women voters, Obama invoked the current financial crisis by taking aim at an article carrying McCain's name in the current issue of Contingencies magazine, published by the American Academy of Actuaries.

In it, McCain wrote, "Opening up the health insurance market to more vigorous nationwide competition, as we have done over the last decade in banking, would provide more choices of innovative products less burdened by the worst excesses of state-based regulation."

"So let me get this straight -- he wants to run health care like they've been running Wall Street," Obama told the audience. "Well, Senator, I know some folks on Main Street who aren't going to think that's such a good idea." [...]

"You know, you hear them talking about Wall Street and Main Street -- well, this is Wall Street plus Main Street, and I'm worried about Main Street. I'm worried about people being able to send their kids to college or to be able to afford their homes," Bush said. "...I said, what's it going to take to make sure Main Street doesn't get affected by the policies of Wall Street? And this is what they came up with, and this is big ticket, because it's a big problem."

McCain has attacked Obama this past week for ties to former executives of Fannie Mae and Freddie Mac, including in two television ads. But he said it's McCain whose campaign is replete with current or former lobbyists for the mortgage giants. He cited comments by the former head of Fannie Mae's government relations office, who was quoted in Politico as saying, "When I see photographs of Sen. McCain's staff, it looks to me like the team of lobbyists who used to report to me."

"Folks," Obama said, "you can't make this stuff up."

On Social Security, Obama said, McCain's support for privatization would leave senior citizens at risk at a time when the stock market has plummeted. "I know Senator McCain is talking about a 'casino culture' on Wall Street -- but the fact is, he's the one who wants to gamble with your life savings and that is not going to happen when I'm president of the United States."

He said that if McCain had his way, "the millions of Floridians who rely on it would've had their Social Security tied up in the stock market this week," although McCain has not called for full privatization of the system.

That letter from the Fannie Mae guy is hilarious.

This is good populist stuff, and considering that, after all this, McCain still favors privatizing Social Security, this message is what's going to work.

Obama's statement of principles on the proposed bailout is similarly good, although we're going to need to see what happens the moment after Bush and Paulson say "no" to see what happens on that one.

I also love this ad using Lily Ledbetter:



We have the lines clearly drawn. But the result of that bailout legislation will prove whether those lines result in talk or action.

Social Security, Anyone?

I don't think the Obama campaign has made this clear enough:

As it happens, though, not that long ago we had a rare political moment in this country, a moment where the public sat up and took notice of economic policy -- and spoke out and made its voice heard too. When George W. Bush made it to term #2, he decided to try to privatize social security to reward his supporters on Wall Street with a new source of capital, customers, and fees. (Those would be the same people whose firms are now cratering under the weight of the bad debt they recklessly took on while Republican regulators looked the other way). But as it turned out, we Americans were not about to let our elected representatives turn over our social security taxes to Wall Street financiers to gamble with if it meant losing the guaranteed income that has allowed millions upon millions of American seniors to live out their sunset years with at least a basic measure of dignity.

But while ordinary Americans spoke out, John McCain stood with Bush (hugged him awkwardly in public, even), against the American people. In fact, just six months ago, McCain again let slip his fondness for privatization.

I have been scratching my head why this has not been talked about more, especially since Obama has been having trouble winning votes among seniors. There may well be some good reason I'm missing why it hasn't been a top argument thus far.

There is no good reason. I will note that Sherrod Brown, the populist Senator from Ohio, made this point today, and hopefully that's a harbinger of things to come.

"Just imagine if Bush and McCain had had their way and privatized Social Security," said Brown. "People would have seen their private social security accounts just disintegrate the last two days. And imagine what that would mean in rural America, urban America, suburban America and small town America?"

It's one thing to say that McCain's record shows him to be captive to special interests and lobbyists, or that he has considered himself to be the king of deregulation and as a Senator has sought to remove any and all burdens from corporate interests. And it's important to correct the record on this, now that McCain is running away from it. But those are true statements but not visceral ones. Even the familiar line that McCain "gave tax breaks to companies that ship jobs overseas," while effective, doesn't have broad resonance for everyone.

The fact is that from 2001 to today, the stock market has gained, in the best analysis, 1%. And depending on the choice of stocks, an individual portfolio may have incurred significant losses in those years. And this is the system to which George Bush and John McCain want to turn over your retirement savings. Before Social Security it was commonplace to witnesses large numbers of elderly men and women in poverty, struggling to survive. This is the Republican vision of America.

It seems significant.

UPDATE: Turns out Obama snowed me. He released this unannounced attack ad on this very issue in Michigan.



The unannounced attack ad is really an innovation of this campaign.

Econ 101

The Tax Policy Center has a snapshot of the McCain and Obama tax policies, and it's right in line with other estimates, although their language is kind of loaded (1.5% is "significant" but 9.5% is not?)

The Obama plan would reduce taxes for low- and moderate-income families, but raise them significantly for high-bracket taxpayers. By 2012, middle-income taxpayers would see their after-tax income rise by about 5 percent, or nearly $2,200 annually. Those in the top 1 percent would face a $19,000, or 1.5 percent, reduction in after-tax income.

McCain would lift after-tax incomes an average of about 3 percent, or $1,400 annually, for middle-income taxpayers by 2012. But, in sharp contrast to Obama, he would cut taxes for those in the top 1% by more than $125,000, raising their after-tax income an average 9.5 percent [...]

In the July 23 update of its analysis, TPC added a preliminary estimate of the candidates’ health care proposals. Because the campaigns did not provide complete plans, TPC assumed certain details. We conclude that the McCain plan, which would replace the current exclusion for employer-paid premiums with a refundable income tax credit of up to $5000 for anyone
purchasing of health insurance and make other changes to the healthcare system, would increase the deficit by $1.3 trillion over 10 years and modestly trim the number of uninsured. The Obama plan, which would make relatively low-cost insurance available to everyone through non-group pools and subsidize premiums for low- and moderate-income households, would cost $1.6 trillion, but would also cover virtually all children and many currently uninsured adults.

When they say "modestly," they mean pretty much not at all (5% of the uninsured would get coverage).

Of course, almost nobody reads policy white papers. A few more of them read the morning newspaper, and Obama delivered a good summary of his position on Social Security in one, the New Hampshire Union-Leader:

IN THIS country, we have always believed that a lifetime of hard work and honest living should be rewarded with a secure and dignified retirement -- and Social Security is the cornerstone of that social compact. Last week, as we celebrated its anniversary, we reaffirmed our commitment to ensuring that Social Security is a safety net that today's seniors and future generations of Americans can count on [...]

We all know the system isn't perfect -- but it isn't broken. The underlying system is sound and the actual problem, a projected cash shortfall over the next 75 years, is relatively small and can be readily solved. For starters, that means strengthening the program over the long-term by returning to basic fiscal responsibility, so we're not borrowing billions from the Social Security Trust Fund.

But protecting Social Security also means opposing efforts to privatize Social Security, as I did when President Bush proposed risky private accounts a few years ago. Privatization is wrong. It tears at the very fabric of Social Security -- the idea of mutual responsibility -- by subjecting a secure retirement to the whims of the market. The Bush privatization plan that Sen. McCain now embraces would tell 39,000 New Hampshire residents that they're on their own, putting them at risk of falling into poverty and costing each of them more than $235,000 over their lifetimes. That's not what this country is about.

Very good, but not everybody reads the paper. There are media soundbites that kind of swim into the atmosphere that get tossed into the culture stew, like McCain's definition of "rich," (do check out the graph at that link) which Obama picked up on yesterday:

“Which I guess if you’re making $3 million a year, you're middle class,” said Obama, admitting that maybe McCain was joking. But that's reflected in his policies,” Obama continued, “where for people making more than $2.5 million, he's giving folks a $500,000 tax break. And so this is a fundamental difference in this election.”

Great. Whether people pick up on this or not will play out over the next few days. (Tying this to McCain's own fabulous life wouldn't hurt, either.

The basic problem here is that far too many Americans are not disposed to learning about policies, positions, and records of the candidates, and the traditional media is extremely hostile to providing that knowldege. The findings of this poll scare the crap out of me:

Middle-class Americans do know what policies they would like to see enacted. Despite media depictions of a sharp red and blue divide, the nation’s middle class displays broad consensus on a range of public policies aimed at easing their economic squeeze: they support a universal national health insurance plan, requiring employers to provide paid family and medical leave, making it easier for employees to join labor unions and allowing bankruptcy judges to change mortgage payments to keep homes out of foreclosure. A majority of middle-class adults – whether they are Democrats, Republicans, or independents and whether they are supporters of John McCain or Barack Obama for President – believe that these policies represent good ideas for the country. Regardless of party affiliation or presidential preference, these Fearful Families think largely alike.

Yet there is a profound disconnect between the nation’s legislators and their middle-class constituents. (emphasis mine) While two-thirds of respondents say they try to follow what Congress is doing to address their needs at least somewhat closely, most cannot name a single law passed by Congress over the last two years that has benefited their household. Asked about specific pieces of legislation, middle-class adults have a clear sense of what they support or oppose, but generally do not know how their congressional representatives voted on these issues.

Three out of four middle-class adults say they only receive communications from their member of Congress at election time – if they hear from them at all. Middle-class adults have an overwhelmingly negative perception of the job Congress is doing to represent the interests of Fearful Families like their own.

Frightening, to say the very least. But this can be overcome at the Presidential level with the kind of massive ground targeting campaign that the Obama campaign has initiated. That will ultimately be the story of this election, and I plan to begin telling it in the coming days.