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.

New Leader Of The Fiscal Scold Gang

Well, if you hadn't heard, the crisis in the financial markets ended, and everything's fine now. The banks were able to raise more capital than needed to comply with the stress tests, as investors swallowed all their stock offerings. And why not? The federal government put a virtual guarantee that the top banks would not be allowed to fail, and the stocks are already low, low, low, so there's almost no risk to the purchase. CEOs aren't buying the stock, so maybe they know this to be a bear-market rally, but they also know they have what amounts to a federal backstop. Sure, the next wave of foreclosures will degrade the quality of loans and mortgage-backed securities even further, but then the government will just buy the bad ones out. In fact, the banksters don't like the price right now, so they've put a plug in the legacy loan program:

The Federal Deposit Insurance Corporation indefinitely postponed a central element of the Obama administration’s bank rescue plan on Wednesday, acknowledging that it could not persuade enough banks to sell off their bad assets. . . .

Many banks have refused to sell their loans, in part because doing so would force them to mark down the value of those loans and book big losses. Even though the government was prepared to prop up prices by offering cheap financing to investors, the prices that banks were demanding have remained far higher than the prices that investors were willing to pay.

Just last week at least some banks wanted to participate in the program – to buy assets from themselves. Once Sheila Bair rejected that idea, I guess they lost interest. Essentially the stress tests placed a big government stamp of approval on their balance sheets, so their current strategy is to wait out the recession and hope the prices of their legacy loans recover. There’s no downside risk, because if the economy gets worse and they ever need to unload those loans, they can count on the plan being resurrected.

The Federal Reserve asked the banks to raise additional capital to comply with repaying their TARP money, but if they found it this easy to sell stock already, they should have no problem reaching that hurdle. Basically the industry made it through the worst, and now they exist on this fantasy plane where they remain too big to fail, socializing the risk while privatizing the profit.

So it should come as no surprise that, now that the crisis has lifted, I guess, the successor to the Maestro is immediately calling for fiscal discipline.

The Federal Reserve chairman, Ben S. Bernanke, said on Wednesday that the United States needed to develop a plan to restore fiscal balance, even as the government builds huge budget deficits as it tries to spend its way out of the worst economic crisis since the Great Depression.

In remarks to the House Budget Committee, Mr. Bernanke said that the government must address the immediate problems of a crippling recession that has erased trillions of dollars in household wealth, hobbled investment portfolios and raised unemployment to its highest levels in a generation. Still, he said, the government needs to think about putting its fiscal house back in order.

“Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth,” he said [...]

“Even as we take steps to address the recession and threats to financial stability, maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance,” Mr. Bernanke said.

I thought the Fed dealt with monetary policy and the Treasury Department fiscal policy, but what do I know.

Let me pinpoint the years where the words "deficit" or "fiscal sustainability" never crossed the lips of someone of Bernanke's stature: Jan. 1981-Jan. 1993 and Jan. 2001-Jan. 2009. At that time deficits didn't matter. Now all of a sudden, in the midst of cleaning up the wreckage of the Bush regime, no discussion of economic policy can go by without the important mention of getting our fiscal house in order.

I believe deficits do matter, eventually. But it only makes sense to work on "fiscal responsibility" if you believe the crisis is over. And if that's what Bernanke thinks, we have serious problems. Because the housing market remains in free-fall. And unemployment is still going over the edge. What's happening here is that Bernanke is fronting for the fiscal scolds (so is Peterson Institute fellow Simon Johnson, who dresses up this talk in prettier language sometimes) who seek to eliminate the social safety net through "entitlement reform." Going back to the same old arguments as if the Great Recession has transformed into some boom time seems really premature.

Paying For Health Care

The advocacy community has made a lot of headway on forcing a public option as the fulcrum point in the health care debate. They've used a variety of tactics and achieved much success. That's very positive. And it's worth noting that a public option, along with the short-term actions like health IT and comparative effectiveness research, as well as the savings of having everyone inside the system, will reduce the overall bottom line on health care, making reform in some respect pay for itself, over time. Peter Orzsag explains how this works:

...health care reform has two components: cost containment provisions and expanded coverage. In the near term, the impact of expanded coverage will temporarily dominate, and health care reform will therefore temporarily increase government spending. Over time, however, the impact of the cost containment provisions will accumulate, and the net impact will be a reduction – and perhaps a dramatic one – in government spending. Second, while we are waiting for the cost containment provisions to take hold, we are insisting that health care reform be deficit neutral. In other words, the Administration is committed to a health care reform that is at least deficit neutral over 10-years -- and deficit-reducing, potentially to quite a significant degree, over the longer term.

The first part is very valuable. Reducing spending over time and expanding access sounds like a win-win. But two things bother me. First, we HAVE to reduce spending pretty massively to avoid busting the budget entirely. And then there's the commitment to being deficit neutral in the near term. That means that some funding mechanism will have to be approved to pay for health care. You could say that this pays for itself, and the Iraq war and so many other initiatives of the recent past were unfunded, but the Administration committed to paying for it, and there wouldn't be 60 votes for an unfunded mandate besides. So, how do you accomplish this?

Cutting Medicare Advantage payments doesn't get you far enough. The Administration's proposal to cap charitable deductions was immediately rejected in Congress. The unions hate capping the employer deduction. And broader-based taxes, well, nobody's selling that to the public, and so the public demurs:

A new national poll indicates that most Americans are receptive to having more government influence over their health care in return for lower costs and more coverage.

Sixty-three percent of people questioned in a CNN/Opinion Research Corp. survey released Friday said they would favor an increase in the federal government's influence over their own health-care plans in an attempt to lower costs and provide coverage to more Americans; 36 percent were opposed.

The poll also suggests that slightly more than six out of 10 think the government should guarantee health care for all Americans, with 38 percent opposed.

That's pretty encouraging. If more than six out of 10 Americans want government to have more of a role in the health care system -- nice job, insurance companies -- the right will need to change its focus if it hopes to derail efforts to fix the system and expand access.

The poll seems to offer conservatives a hint in this regard. Respondents were asked, "Would you prefer a health care reform plan that raises taxes in order to provide health insurance to all Americans, or a plan that does not provide health insurance to all Americans but keeps taxes at current levels?" The result: 47% would accept the tax cut as a tradeoff, 47% would not.

With that in mind, expect to hear a lot of "reform = tax increases" in the very near future.

I've seen other polls showing that people will accept higher taxes in exchange for a better health care system. But I think the change reflects a shift from the general to the specific. It's one thing when you ask the question with GW Bush in charge, when it's completely hypothetical. It's another when health care's actually happening. We have 30 years of selfishness to break through. Another explanation for the poll slippage is that nobody consistently argues that health care for your family is worth everyone chipping in for.

I think a "health care reform will pay for itself" frame makes sense, alongside an "if we do nothing, everyone will spend more than you can imagine and destroy the budget" frame. But it's just not going to be possible to get 60 votes in the Senate without some funding mechanism, and it will be incredibly easy for enough stakeholders to say No to specific funding for none of them to get approved. And I worry that the above frames can be easily short-circuited by "your taxes will go up $X" (which the right will say no matter what, see their zombie lie on cap and trade costing $3,100 per family). At some point somebody needs to advocate for taxes as worth paying for to provide services for the greater society. The right has gotten away with promising expanded services and low taxes forever - the so-called "Two Santa Claus Theory". We can only sidestep that for so long. We cannot go after tax fairness sideways. Shrinking from the argument means that nobody will ever get a sense of the common good and the need to pay for a free society.

The other problem, of course, is that the cost controls in the current Obama plan are insufficient, and nobody seems to want to be bold enough to increase those controls. So we could end up with a reform that costs a lot up front and does NOT provide enough savings down the road, approximately the worst of all possible worlds.

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.

Not So Fast With The Cost Cutting

I do understand the impulse for Obama to portray an image as a good fiscal steward of the people's money. And I agree that government can occasionally be wasteful and spend money on things that don't make sense. And I'm fairly sure that all of these cuts, $100 million or so, being made by Cabinet Departments have a sound basis and will not really influence the proper workings of government - in fact, they are far too small to do so. Government should run a tight ship and use efficiencies where necessary to cut costs. In the end, these are symbolic efforts.

But like Robert Reich, I don't want to see this get out of control in the midst of a Great Recession and a huge shortfall in demand. Government needs to continue being the spender of last resort, and any waste that creates a job is at this point not waste. In other words, this impulse toward fiscal restraint cannot go off in any other directions, particularly when it comes to entitlements.

Over the longer term, Obama must be careful not to put entitlement programs on the chopping block as part of a "grand bargain" to elicit Republican support for health care and cap-and-trade. Social Security is not in dire straights; it can be made flush for the next 75 years by ever-so-slightly lifting the ceiling on the portion of income subject to Social Security payroll taxes (and if Democrats are reluctant to do that on incomes over $100,000, then they could do so on incomes over $250,000).

Medicaid and Medicare are in trouble because health care costs are rising so fast, which argues for health-care reform rather than cuts in these important programs. Yet if health-care reform has any prayer of controlling the rising tide of health care costs, the plan must allow beneficiaries to opt into a public insurance plan -- something Republicans and the health-care establishment are determined to fight. So it's critically important that the Senate wrap health care into a reconciliation bill that can be enacted by a majority vote in the Senate.

The good news is that cost savings and real reform can actually go hand in hand. The Administration has argued that health care reform equals entitlement reform, period, and by bending the curve on health care costs we can improve the health of our budget while providing more health care to more Americans than ever before. Another more provocative example would be Tom Ricks' call to shutter the service academies and use campus-based ROTC schools in their place, saving money and breeding a better type of officer.

So let's not get too cozy with these calls for budget-tightening in a time where government needs to spend. And when we get around to saving money, let's do so in a way that INCREASES services and effectiveness for the American people. I actually think that Obama's team gets this, and are trying to do some rebranding on this stuff.

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.

Pete Peterson Rules Their World

I agree with Dean Baker that it's amusing to hear these nervous ninnies going on about the deficit when the economy remains in free fall. And these are the ones who say Obama needs to keep focus:

People are losing their homes through foreclosures at the rate of more than 100,000 a month. The default rates on credit cards, car loans and other debt is at record levels. Most of our major banks are effectively insolvent.

Home and stock prices have plummeted, destroying most of the wealth of the baby boom cohort as they stand on the edge of retirement. The economy is shedding almost 700,000 jobs a month, with the unemployment rate rapidly approaching the highest level since the Great Depression.

In this context we are supposed to be up in arms over the deficit projections for 2013 or 2019? This is a bit like someone complaining about the lawn not being mowed at a time when the house is on fire, it's just not the first priority. And the media all seem to go along with the charade - yes, they are very concerned about the projected deficit for 2013, just as the characters in the movie expressed concern about the health of Bianca the blow-up doll.

It is especially annoying to hear the whining from this group of deficit hawks since their whining in prior years helped to drown out serious discussion of the dangers posed by an $8 trillion housing bubble. While some of us were yelling at the top of our lungs about the imminent disaster that would hit the economy when the housing bubble burst, the media chose to focus on these deficit hawks with their dire warnings about budget deficits 40 or 50 years in the future.

This is especially ignorant because, without fixing the economy, those deficits will skyrocket anyway.

But this fight should have been engaged a long time ago. It may be too late:

Here's Treasury Secretary Timothy Geithner today at the Council on Foreign Relations having a jolly laugh with moderator and investment banker Roger Altman about the process now getting under way—all thanks to propaganda assistance from investment banking billionaire Pete Peterson.

For those without a decoder ring, "everyone" being a fiscal hawk means that due to the current financial disaster, they'll soon be coming after Social Security and Medicare:

GEITHNER: Of course, we are all fiscal hawks now because of Pete Peterson. (Laughter.) There are no doves left on the fiscal side. (Laughter.)

ALTMAN: And he deserves credit for that.

Yes, the coming massacre of American lives will be quite funny indeed. (Laughter.)

Hahahahahaha!!!!

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.

Stimulus Pre-Post-Mortem

It looked touch and go for the stimulus conference deal for a minute today, as House Democrats balked at the lack of school construction money in the bill (or maybe just not being consulted), but that seems to have been squared away. And so maybe it's a good time to look back.

On the bill itself, it's still probably too small to do the lifting it needs to do, and the inclusion of the patch to the alternative minimum tax is the most inexcusable part of it.

But the final bill retained a $70 billion tax cut that would spare millions of middle-class Americans from paying the alternative minimum tax in 2009, which some Democrats decried as wasting a large chunk of the bill on something that would do little to lift the economy and that Congress would have approved regardless of the recession [...]

“I am not happy with it,” said Senator Tom Harkin, Democrat of Iowa. “You are not looking at a happy camper. I mean, they took a lot of stuff out of education. They took it out of health, school construction and they put it more into tax issues.”

Mr. Harkin said he was particularly frustrated by the money being spent on fixing the alternative minimum tax. “It’s about 9 percent of the whole bill,” he said, “which we were going to do later this year in a tax bill. Why is it in there? It has nothing to do with stimulus. It has nothing to do with recovery. This makes no sense whatsoever.”

The answer is that Republicans and quite a few Democrats are too cowardly to rewrite the tax code and offset the AMT patch with new revenue. Nobody thinks that a tax meant to hit high-income tax dodgers should come into play for an individual making $100,000 a year or even less; but if that's the case, Congress should change the law permanently, instead of these silly one-year patches that allow them to evade responsibility.

And yet the Axis of Centrism has the audacity to call their effort to gut the bill of some of its effectiveness "fiscally responsibile." There is no legitimate reason to cancel out state government aid or school construction funding - Nelson, Collins and Specter set an arbitrary number of $800 billion and demanded compliance, and they got it. Of course, Arlen made sure his pet project, funding for the NIH, stayed. There's no reason to it at all.

Which is why I think the sausage-making we saw is mostly due to giving power and agency to the moderates, and most of that is on Harry Reid. Barack Obama is right to say that he should have started the bill with no tax cuts and let those who put them in own them. I'm glad he learned that lesson. I'm not sure it would have made a fundamental difference to the final outcome. A majority of the Senate wanted to lard this up with tax cuts. The dynamic of the filibuster gives a lot of agency to those two or three Republicans on the margins. There are things Obama and the Democrats could have done, certainly. One is to insist that Al Franken be seated to narrow the margins needed for passage - or at least confirm Judd Gregg and use the open seat in New Hampshire as a lever to get Franken in. The passivity there is shocking. And of course, Obama's public offensive on the bill happened about a week late.

Digby writes about the differences when George Bush barely skated into the Oval Office, immediately asked for a huge tax cut, and got most of what he wanted, as opposed to what we saw here. That's because there is no bargaining partner on the Republican side of the aisle, that their nature is not to govern but to oppose, and they'll put party over country every time.

As for whether or not this will be the last chance for Obama to push forward his agenda - I'm not sure. In the short term, Obama's probably stronger for getting this passed, though public opinion hasn't really worked on Republicans yet. And Stan Collender reminds that there's a budget to be passed, which will have the opportunity for stimulus.

The continuing resolution put in place last Fall to cover the nine 2009 appropriations that were not enacted by the start of the fiscal year will expire on March and additional spending almost certainly will be added to the levels currently in place just a week or so after the stimulus is signed.

The Obama 2010 budget will start that year's budget process and the appropriations for that year will provide another opportunity for an additional economic jolt this Fall.

But even more important, the 2010 budget process could include a reconciliation bill that increases spending or reduces revenues or both that, because of the rules, won't be subject to a filibuster in the Senate. In addition, the budget resolution that has to be adopted before a reconciliation bill can happen also can't be filibustered.

Not only will that make another stimulus bill much easier to enact, it's also something that could happen any time after the budget resolution is adopted so the process could be completed relatively early this year and the stimulus provided quickly.

So there may be other bites at the apple. I too am worried about the pervasive talk of "entitlement reform" coming from some corners of Washington, especially in this time of economic hardship. But I really don't get the sense that it's anything more than a recognition that comprehensive health care reform must happen or the budget is toast. This has been Budget Director Peter Orszag's mantra for a while now.

Hopefully, everyone's learned some lessons from this battle and is ready to go to war for the next one. But the Senate is where the dynamic has to change. I'm all ears about how to get that done.

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.

Fighting Foreclosures, Not Entitlements

Some progressives are worried about this signal by PEBO (President-elect Barack Obama) that he will tackle entitlement spending at this time where fiscal spending takes precedence over the deficit, but I'm not. It's based on a direct question he was asked at yesterday's press conference, and his answer was pretty boilerplate. Whenever the chattering class hears the word "entitlements" from a powerful politician, they get a thrill up their leg. Doesn't mean anything's going to happen. And Medicare spending needs to go down as a portion of overall health care spending, so if he's just talking about a comprehensive health care policy, that's not really the same thing.

This part later in the interview is interesting:

In an interview later in the day with CNBC and The New York Times, Mr. Obama suggested that he would hold his economic stimulus proposal to the low end of the amounts that economists think will be necessary because it was likely to grow in size as it moved through Congress. He said that he intended to propose a broad overhaul of financial regulation by April, and that he was working with Congressional leaders on his promised plan to limit foreclosures in the wake of the mortgage crisis.

“We’ve got to prevent the continuing deterioration of the housing market,” he said.

That's good news on both fronts, IMO. The numbers he's throwing around are too small for the problem, so I certainly hope they expand. As for the part about the housing market, Kevin Drum sez that housing is still too overpriced and needs to deteriorate further. But in context, I think Obama is talking about foreclosures. And government ought to be creating incentives to limit those because they not only hurt housing prices but they cause major economic upheaval - a foreclosure costs the greater economy something like $250,000. So encouraging work-outs with homeowners to get them in a position to pay would be a step forward. Like the cram-down legislation working its way through the Congress.

Legislation designed to stem foreclosures by allowing bankruptcy judges to erase some mortgage debt will be introduced by Congressional Democrats on Tuesday, and hopes are high that it will pass after a similar plan failed last year [...]

The legislation would change allow bankruptcy judges to modify home loans in the same way that they currently may modify other unsettled obligations, such as credit card debt.

We simply ought to do this. And the fact that Sheila Bair, who has been pushing the most homeowner-friendly, foreclosre-stemming solutions to the housing crisis, will be staying at the FDIC, is more proof that foreclosures are going to be targeted by the incoming Administration. That's a good thing.

Rerun

Big ups to Tom Brokaw for structuring the debate in the same order, with practically the exact same questions, as the first debate a week and a half ago. Thanks for spending 90 minutes providing the same information that Jim Lehrer did. Great work, Tom.

The only things that stood out to me, that weren't practically the same canned responses as last time, were these:

• Obama called health care a right and not a commodity, and brought a moral dimension to the issue that calms my nerves about him on the topic.

• Darfur got mentioned, which was a new one.

• McCain basically called for a version of a new HOLC, with the government stepping in to buy up failing mortgages and work them out with struggling homeowners. This is completely at odds with his record, and I'd like to see him explain it to fiscal conservatives. Also, why now and not during the bailout negotiations?

• Fountains of conventional wisdom like Brokaw still think there's a problem with entitlements completely out of proportion to the actual problem. Social Security is not in crisis and Medicare's crisis has directly to do with skyrocketing health care costs and should not be viewed in a vacuum.

• Obama's line on why insurance markets should be deregulated because the credit card industry moved all their businesses to low-regulation states like Delaware was... you know, interesting, considering his Vice Presidential nominee.

• Both candidates are out to lunch on Afghanistan and were totally non-responsive on the plain fact that our presence there has become toxic.

• Obama's ending included the line "This country gave me a chance." I thought it was good framing.

No changes in the polls from this, as very little new things were revealed.

Oblivious Far-Right Activists Demand More Failed Conservatism

OK, this is hilarious. With wrong-track numbers at over 80% and the current President near historic low approval ratings, you'd think this would be a time of soul-searching in the GOP. Not so. In fact, the Lincoln Club of Orange County, which is about as close as you can get to the eliminate-the-income-tax, stop-the-fluoridation-of-water far-right nutters in this entire country, is stamping its little feet over the fact that nobody likes their failed policies anymore. They are calling for more completely unpopular ideas or they'll withhold all their money.

(keep in mind when reading that this is Novakula, and as a GOP propagandist his view is skewed, but he has good sources inside the party.)

The Lincoln Club of Orange County is telling the GOP leaders of both the House and Senate that it is too late to repent. They must go -- or else lose big money.

The message: "Come Nov. 5, should the current GOP leadership in either house survive to lead in a new Congress, the Lincoln Club of Orange County will review the financial backing of all congressional Republicans, and we urge others to do likewise. A GOP caucus that would re-elect such leaders is not one we would likely continue to support. Because, simply put, we refuse to support a permanent minority."

The Lincoln Club estimates that its nearly 300 members will together contribute $1.5 million to federal causes and candidates in the 2008 election cycle. The club is spreading its message to angry Republicans throughout California and around the nation. The ultimatum finds responsive members of the House (if not the Senate), who even now are preparing a housecleaning after the additional loss of seats in this year's election [...]

That's the view expressed in the Lincoln Club paper signed by Rich Wagner, the group's president, and Chip Hanlon, a board member. It deplores the refusal by party leaders to support a one-year moratorium on earmarks, whose 285 percent growth when Congress was under Republican control is "the perfect symbol of the GOP-led profligacy that drives us crazy still." Earmarks "epitomize the fiscal recklessness that led to Republicans becoming a minority in 2006. . . . It's no wonder the Republican leadership continued to fail on . . . entitlement reform and a reduction in federal spending."

They really do think, even at this late date, that their minority status is entirely attributable to federal earmarks which have almost no impact on the overall budget (try reducing military spending if you want to make a difference) and failing to eliminate Social Security or Medicare. Nothing to do with a failed war in Iraq, skyrocketing costs for food, energy and health care, the crisis of climate change, our hated position in the world, growing inequality and the great risk shift onto the middle class, etc., etc., etc.

Here on Planet Earth, it's amusing to see this crack-up between separate factions of the Birch Society crowd. Some of the GOP establishment know that their policies are unpopular, and they hope to put some lipstick on them in presenting them to the public. The rest, including the Lincoln Club, want their version of Gilded Age conservatism, disaster capitalism, denial of science and xenophobia to take center stage.

Conservative activists are preparing to do battle with allies of Sen. John McCain in advance of September's Republican National Convention, hoping to prevent his views on global warming, immigration, stem cell research and campaign finance from becoming enshrined in the party's official declaration of principles.

McCain has not yet signaled the changes he plans to make in the GOP platform, but many conservatives say they fear wholesale revisions could emerge as candidate McCain seeks to put his stamp on a document that currently reflects the policies and principles of President Bush.

In fact, Bush's name is on 91 out of the 100 pages of the platform, which means the rewrite will be a knock-down drag-out fight between the really conservative and the really really conservative, with all the attendant ugliness on full display.

It is to laugh.

Sensible Centrist Crisis Manufacturing

This is a dumb article.

Presidential hopefuls are mum on Medicare and Social Security woes

With the presidential campaign going full tilt, a new government report on a big national problem is usually followed by volleys of rhetoric from the candidates. But on Tuesday, when the annual report on the precarious state of Medicare and Social Security came out, the reaction was not exactly deafening.

The two programs on which millions of elderly Americans depend are apparently just too hot to handle -- especially since any realistic solution is likely to involve a politically unpalatable mix of higher taxes and lower benefits.

Apparently, the candidates aren't worshipping at the High Broderist altar of entitlement reform quite enough for the refined tastes of media elites. It's an easy issue to demagogue ("They're going to run out of money!") but nobody wants to tell the truth about it.

The trustee's report on Medicare and Social Security showed the programs "running out of money" at the same time in the future as the year before. In other words there's no financial deterioration in these programs, and they have massive trust funds to cover the distant possibility that expenditures will outpace receipts.

Medicare is a problem, but it's a symptom of the much larger problem of soaring costs in health care. And both Democratic candidates have extremely detailed programs to deal with that in a comprehensive way. So "being mum about Medicare" apparently means "having a plan to fix health care including Medicare."

Social Security is most assuredly NOT a problem. As Paul Krugman notes, statistically speaking the program is in better shape in 2008 than it is in 1993. This doesn't compute because we've been fed this line, and are continuing to be fed this line, that the baby boomers are all retiring and the entitlement system is a minute away from collapse. This has become hardened conventional wisdom that "everybody knows," and so when the Secretary of the Treasury comes out and claims that government benefit programs are in trouble, everyone nods sagely. Happens to be untrue, and you'll never guess the reason why: undocumented immigrants.

(L)ast year the trustees estimated that Social Security had an overall 75-year deficit of 1.95% of taxable payroll. This year it's 1.70%. That's a pretty substantial improvement. What caused it? [...]

In previous reports, the other-immigrant population was projected using assumed annual numbers of net other immigrants with a static age-sex distribution. For this year's report, the annual numbers of net other immigrants are projected by explicitly modeling other immigrants and other emigrants separately.

Translation: instead of just pulling a net number out of a hat, the trustees built a model that estimated the actual demographic characteristics of both immigrants and emigrants. And guess what?

• Illegal immigrants tend to skew young. This benefits the system.

• Young people have more children than older people. This benefits the system.

• Some illegal immigrants pay taxes for a few years and then leave. This benefits the system.

Bottom line: "This year's report results in [...] a substantial increase in the number of working-age individuals contributing payroll taxes, but a relatively smaller increase in the number of retirement-age individuals receiving benefits in the latter half of the long-range period." Give or take a bit, it turns out that this shores up the Social Security system to the tune of around $13 billion per year. Thanks, illegal immigrants!

This is one of those issues where the "sensible realist" proposal is actually radically skewed to suit the needs of the "drown-the-government-in-the-bathtub" crowd. Entitlements are mostly fine. Health care itself is in crisis and needs major cost control reform, but Medicare and Social Security are successful government programs. That's why they must be demonized as "on the verge of collapse" by conservatives who must never allow the perspective that government can work to enter the mainstream, and a lazy media elite goes ahead and believes them.

I'm assuming that most people reading this kind of already know all this, but it's good fodder for your conversations with those who don't.