Dissecting The Lizard Brain

Two researchers have run the data on Jimmy Carter's contention that race is playing a role in the anger over health care. It's bookmark-worthy:

Our research favors Carter's interpretation and adds some hard data to the debate. In fact, the partisan divide today is even more troubling than if it was driven by race alone.

Americans' views of political issues and their partisan attachments are being increasingly shaped by gut-level worldviews. On one side of many issues are those who see the world in terms of hierarchy, think about problems in black and white terms, and struggle to tolerate difference. On the other are those who favor independence over hierarchy, shades of gray over black-white distinctions, and diversity over sameness.

We call this dividing line an authoritarian one, and we find that what side of the line people fall on explains their positions on a wide ranging set of issues, including race, immigration, gay rights, civil liberties, and terrorism. This is because what lies behind these preferences is a larger difference in worldview, where people understand reality in starkly different ways. This, in turn, leads to rancorous and irreconcilable-seeming political conflicts.

As evidence of the link between health care and racial attitudes, we analyzed survey data gathered in late 2008. The survey asked people whether they favored a government run health insurance plan, a system like we have now, or something in between. It also asked four questions about how people feel about blacks.

Taken together the four items form a measure of what scholars call racial resentment. We find an extraordinarily strong correlation between racial resentment of blacks and opposition to health care reform.

Among whites with above average racial resentment, only 19 percent favored fundamental health care reforms and 57 percent favored the present system. Among those who have below average racial resentment, more than twice as many (45 percent) favored government run health care and less than half as many (25 percent) favored the status quo.

No such relationship between racial attitudes and opinions on health care existed in the mid-1990s during the Clinton effort.

I would say that in general, opposition to any social insurance program for the less fortunate meets head-on with racial animus. Whether the presumed leader of this policy shift is white or black, a substantial portion of those with racial resentment pictures that leader as delivering their tax dollars to the undeserving other, which can be pictured in their minds as a black family, a Hispanic immigrant family, or really anyone who doesn't share the same features. It's no accident that opposition to Obama is clustered in the South, given such a reading.

What these professors are really probing is the lizard brain, the tribal identifiers that often bubble to the surface, in unguarded moments, as racism. It's almost too neat and simple to simply call it racial in intent. It goes much deeper to a visceral resentment, a put-upon persecution complex, this constant paranoia that someone else is getting a better deal, and that such inequity can form the basis of all the nation's problems. It's purely an emotional release to explain whatever personal failings or lack of compassion already exists. That this frequently codes racially is a symptom of the relationship between race and class, as well as the other longtime signifiers of identity that have been hard-wired into our brains for centuries.

I found this via DougJ last week, and it really summed up a lot of what I think animates modern conservatism, and it's not particularly or singularly racial:

“Those who have known him [Cheney] over the years remain astounded by what they describe as his almost autistic indifference to the thoughts and feelings of others. ‘He has the least interest in human beings of anyone I have ever met,’ says John Perry Barlow, his former supporter. Cheney’s freshman-year roommate, Steve Billings, agrees: ‘If I could ask Dick one question, I’d ask him how he could be so unempathetic.’”

There's an almost studied uncaring. And of course, Randian teaching gave those predisposed to uncaring a way to order their lack of compassion intellectually, to create virtue in selfishness and convince themselves that the less privileged are better off receiving no help from them. This anecdote from Rand (nee Alissa Rosenbaum)'s early life is fascinating and instructive:

Anne C. Heller, in her skillful life of Rand, traces the roots of Rand's philosophy to an even earlier age. (Heller paints a more detailed and engaging portrait of Rand's interior life, while Burns more thoroughly analyzes her ideas.) Around the age of five, Alissa Rosenbaum's mother instructed her to put away some of her toys for a year. She offered up her favorite possessions, thinking of the joy that she would feel when she got them back after a long wait. When the year had passed, she asked her mother for the toys, only to be told she had given them away to an orphanage. Heller remarks that "this may have been Rand's first encounter with injustice masquerading as what she would later acidly call ‘altruism.’ " (The anti-government activist Grover Norquist has told a similar story from childhood, in which his father would steal bites of his ice cream cone, labelling each bite "sales tax" or "income tax." The psychological link between a certain form of childhood deprivation and extreme libertarianism awaits serious study.)

These children grew up to want to maintain that state of retarded adolescence, of a belief only in their own self-interest and greed, and Rand built a philosophy around it so they could justify their inhumanity and relieve the burden of their own consciences. They flipped morality on its head and built statues to the virtuous capitalist, and a drive for permanent growth that benefits only himself which is seen in this inverted pyramid as a glory to all mankind. In short, they have no compassion because they are told they have no need for it. It is a philosophy that served masters. And if taken to extremes, it can become profoundly sociopathic, as the desires of the individual trump social norms or conventions.

Is that racial in nature? It's certainly an argument that benefits the super-wealthy by relieving their guilt, makes it moral to hoard wealth and provides an element of superiority for anyone in the ruling class. That's definitely tribal. And class and race have become profoundly mixed in this culture. The teabaggers eat up Randian thought because they can easily justify their selfishness and identify a group with which they can hold some level of superiority. There's a comfort in a common enemy, in a tribal clustering against the other, armed with a philosophy that you can wield as armor to protect yourself from feeling any human emotion about that other's suffering. They may be the dreaded "populists" who Rand and her ilk would bar the door to the mansion to keep out in the rain; but they can internalize both halves of this at once, especially when they share the same enemies.

These thoughts have taken decades if not hundreds of years to wind through the American lizard brain. It will take perhaps as much time to wind them out. If race is what makes wingers uncomfortable with their own beliefs, then perhaps that's the proper line of attack. But it's much deeper than that.

The Other

All of the health care bills offer their subsidies to those who need help affording coverage through tax credits. This is seen as completely normal and a cost-effective way to provide such subsidies, since it only requires a new line item on the tax form instead of some new structure for paying out credits. But it actually hurts people who have to lay out money for health insurance and then wait all year until April to get their money back. In addition, some groups, like nonprofits, don't pay taxes. But they also provide health care for their workers, which means they cannot benefit from any tax credits for small businesses to help with affordability in the plan.

The main bill in the House would award a tax credit to small businesses that provide their employees with health insurance — but nonprofits do not pay income taxes and thus would not benefit.

“Why should employees of nonprofits be treated worse than employees of for-profit businesses?” said Jonathan A. Small, government affairs consultant at the Nonprofit Coordinating Committee of New York.

Nonprofit groups were hoping that the president would include them in his speech to Congress on Wednesday, but instead he mentioned only “families, businesses and government.”

“There was nothing in that much-repeated trilogy of those needing help that spoke to nonprofits,” said Lester M. Salamon, director of the Center for Civil Society Studies at Johns Hopkins University.

This sounds like a nitpicky point, except that nonprofits are collectively the fourth-largest employer in America.

And there are dozens of little inequities like this. We've heard about the canceling of all individual health insurance, essentially, for undocumented immigrants, even when they have the ability to pay with their own money. Then there's the issue of nurse home care for the children of the poor, a proven crime reduction strategy that has run aground amid shouts of "billions for babysitters" and the like.

It's part and parcel of a long-running strategy by the right to cry martyrdom for their tax dollars being given to the undefined "other." It doesn't matter if a government program reduces crime or saves money or just makes moral sense. This boils down to a largely homogenous Republican Party not wanting their money to go to people who don't look like them or don't act like them or don't work like them. "Illegals" or the undeserving poor or "do-gooders" in the nonprofit sector need not apply. It's been a time-tested tactic going back to Richard Nixon's Southern strategy.

This is the paradox of the tea-party movement and other right-wing protests fueled by genuine citizen anger and fear. It is true that the federal government embraces redistributive policies and that middle-class income is seized in order that "someone else benefits." But so obviously, that "someone else" who is benefiting is not the poor and lower classes -- who continue to get poorer as the numbers living below the poverty line expand and the rich-poor gap grows in the U.S. to unprecedented proportions. The "someone else" that is benefiting from Washington policies are -- as usual -- the super-rich, the tiny number of huge corporations which literally own and control the Government. The premise of these citizen protests is not wrong: Washington politicians are in thrall to special interests and are, in essence, corruptly stealing the country's economic security in order to provide increasing benefits to a small and undeserving minority. But the "minority" here isn't what Fox News means by that term, but is the tiny sliver of corporate power which literally writes our laws and, in every case, ends up benefiting [...]

What's really happening with these protests is that the genuine rage and not unreasonable economic insecurity of these citizens is being stoked, exploited, distorted and manipulated by movement leaders for entirely different ends. The people who are leading them -- Rush Limbaugh, the Murdoch-owned Fox News, Glenn Beck, business-dominated organizations of the type led by Dick Armey -- are cultural warriors above everything else. They're all in a far different socioeconomic position than the "middle-income Americans" whose anger they're ostensibly representing. Their principal preoccupation is their cultural contempt for various groups (illegal immigrants, the "undeserving" poor, liberals) and their desire to preserve the status quo whereby the prime beneficiaries of government policies remain themselves: the super rich and the interests that control Washington. It's certainly true that many of these protesters are driven by the standard right-wing cultural issues which have long shaped that movement -- social issues, religious fears, cultural and racial divisions, and hatred for "liberals" as Communist-Muslim-Terrorist-lovers. For many, all of that is intensified by the humiliation of being completely thrown out of power, at the hands of the first black President. But much of it is fueled by the pillaging of the corporations and Wall St. interests which own their government.

Matt Taibbi called it the peasant mentality. The powers that be get the lower classes to fight amongst themselves and split along ideological or tribal or other identifying lines, leaving room for them to prosper. For Republicans, that means painting their opponents, who are less homogenous and are made up of so-called "outsiders" of society - the poor, the disenfranchised, African-Americans, Hispanics, gays and lesbians, etc. - as undeserving of really anything; and painting the leaders of that party - whether it be a Governor from Arkansas or a war hero from Massachusetts or South Dakota or a multicultural community organizer from Illinois - as the head of a movement to destroy American culture. That's really basically it. And sadly, considering that Democrats have over the last several decades abandoned their role as protectors of the weak, the poor and the voiceless, you can almost sympathize with the misled in the teabagging protests, who finds nobody standing up for them.

Except, their susceptibility to what is essentially a racial argument leaves me little room to share sympathy for their concerns.

The Rise Of The Tenthers

This is a very important article by Ian Millhiser for The American Prospect. Conservatives have found a new Amendment in the Bill of Rights to glorify, making a grand total of two, as they trash the other eight. Their entire Constitutional theory now rests on the tenth Amendment.

Almost a year after she called for an investigation to discover which members of Congress are "anti-American," Minnesota's nuttiest lawmaker is back. In a recent appearance with Fox's Sean Hannity, Republican Rep. Michele Bachmann accused her colleagues of "forg[etting] what the Constitution says" because they are poised to pass comprehensive health-care reform. Not to be outdone, Sen. Jim DeMint of South Carolina told right-wing activists on a conference call last Thursday that health reform violates the 10th Amendment; he also called on state legislators and governors to "champion individual freedom" by resisting the bill. Two Florida lawmakers beat DeMint to the punch, having already introduced legislation to block health reform from taking effect in their state.

These efforts are all part of a movement whose members are convinced that the 10th Amendment of the Constitution prohibits spending programs and regulations disfavored by conservatives. Indeed, while "birther" conspiracy theorists dominate the airwaves with tales of a mystical Kenyan baby smuggled into Hawaii just days after his birth, these "tenther" constitutionalists offer a theory that is no less radical but infinitely more dangerous.

Tentherism, in a nutshell, proclaims that New Deal-era reformers led an unlawful coup against the "True Constitution," exploiting Depression-born desperation to expand the federal government's powers beyond recognition. Under the tenther constitution, Barack Obama's health-care reform is forbidden, as is Medicare, Medicaid, and Social Security. The federal minimum wage is a crime against state sovereignty; the federal ban on workplace discrimination and whites-only lunch counters is an unlawful encroachment on local businesses.

I guess the words "to pay the debts and provide for the common defense and general welfare of the United States" don't appear in their pocket Constitutions.

Really, there's nothing new about Tentherism - it's basically nullification prettied up for the 21st century. But of course, nullification was a prelude to eventual secession and Civil War. It's not completely out of bounds to see us headed in that direction.

When George Bush sought to take money out of people's paychecks and deposit them in private retirement accounts, that was fine. Only when a Democrat takes office can the majority of actions of the federal government be seen as not only misguided, but actually in violation of the Constitution. Because conservatives consider it against the natural order of things for them not to control the government and distribute its Treasury to their favored corporate interests, a circumstance with them out of control must be criminal in nature.

This is an outgrowth of the right-wing populism we've seen in reaction to a recession and the uneasiness people feel with job insecurity and an uncertain economic future.

Today, however, the tenthers tap into the same populist outrage that inspired a generation of working-class religious conservatives to enthusiastically vote against their own interests. Fox News star Glenn Beck exhorts his audience to "be a constitutional watchdog for America" by lining up against health-care reform, cap-and-trade legislation, and the stimulus package. Gov. Rick Perry of Texas, who enthusiastically backed a tenther "state sovereignty resolution," told a right-wing radio host that he is "willing and ready for the fight if this administration continues to try to force their very expansive government philosophy down our collective throats." Tenther-inspired claims that federal spending violates the Constitution are so common at "tea party" protests that it is impossible to tell where the tenthers end and the tea baggers begin.

In other words, it is all but certain that tenthers will play a significant role in selecting the GOP's presidential nominee in 2012. And if that nominee wins, the tenthers could even come to dominate the administration in the same way that the religious right set its hooks into George W. Bush.

This is the inevitable point where all the anti-government rhetoric of the post-Reagan years was bound to go. Tenthers literally want a government that cannot govern, period. And the movement is growing. Ultimately, this is where the teabaggers meet up with the corporate interests who would thrive in an era of no regulation and no ability for the government to use their power.

But, you know, liberals are the Constitutional "activists."

Prioritize The Populism

Out of nowhere, the Obama Administration and its federal agencies have started to crack down on speculation and monopolies, while improving individual safety. These populist positions deserve pride of place from the White House; they should talk a lot more about them.

Hold a press event about stopping oil speculation:

In a big departure from the hands-off approach to market regulation of the last two decades, the chairman of the Commodity Futures Trading Commission, Gary Gensler, said his agency would consider new limits on the volume of energy futures contracts that purely financial investors would be allowed to hold.

The agency also announced that it would pull back part of the veil on the oil and gas markets, publishing more detailed information about the aggregate activity of hedge funds and traders who arbitrage between domestic and foreign energy prices.

....Oil prices have swung wildly in the last year, hitting about $145 a barrel last summer, then plunging to $33 in December before rising to about $70.

....A growing number of critics have blamed some of the extreme volatility on the role of purely financial investors — those who are simply betting on the direction of energy prices, as opposed to those who actually use such products, like airlines....Non-commercial traders accounted for almost a fifth of the activity in several major oil and gas products for the week that ended June 30, according to data compiled by the commodities agency.

Matt Taibbi, in his great story on Goldman Sachs, writes about how last year, "a barrel of oil was traded 27 times, on average, before it was actually delivered and consumed." That's just unconscionable, and the CFTC has a role to play in dialing that back.

Furthermore, the President should deliver a live speech on telecom monopolies:

The U.S. Justice Department has begun looking at big telecom companies to try to determine if they have abused their market power, the Wall Street Journal reported in its online edition Monday.

The journal, which cited people familiar with the matter, said that the Antitrust Division's review was in its very early stages and was not official.

Lawmakers have recently raised questions about whether large wireless carriers were hurting smaller rivals by entering exclusive agreements with the makers of popular phones.

I think they could reel in a lot of people by telling them they shouldn't have to change carriers to use an iPhone.

Finally, rather than a fact sheet and a webcast, how about a prime-time special on food safety?

The Food and Drug Administration (FDA) is issuing a final rule to control Salmonella contamination of eggs during production. This rule is estimated to reduce the number of foodborne illnesses associated with consumption of raw or undercooked contaminated shell eggs by approximately 60%, or 79,000 illnesses every year, and will generate annual savings of over $1 billion [...]

Stepped Up Enforcement in Beef Facilities: FSIS is issuing improved instructions to its workforce on how to verify that establishments handling beef are acting to reduce the presence of E. coli. Also, FSIS is increasing its sampling to find this pathogen, focusing largely on the components that go into making ground beef.

Preventing Contamination of Leafy Greens, Melons, and Tomatoes: By the end of the month, FDA will issue commodity-specific draft guidance on preventive controls that industry can implement to reduce the risk of microbial contamination in the production and distribution of tomatoes, melons, and leafy greens. These proposals will help the Federal government establish a minimum standard for production across the country. Over the next two years, FDA will seek public comment and work to require adoption of these approaches through regulation [...]

Building a National Traceback and Response System: A system that permits rapid traceback to the source of foodborne illness will protect consumers and help industry recover faster. Yet despite the dedicated efforts of food safety officials across the country, our current capacity to traceback the sources of illness suffers from serious limitations [...]

Improving Organization of Federal Food Safety Responsibilities: Building a more effective safety system requires federal agencies to improve management of their food safety responsibilities and coordinate more effectively with each other.

I hear that the President's approval rating is sinking in Ohio. They are experiencing a terrible economy like the rest of the country, but they also see bank bailouts without the same attention paid to the auto industry, and think they're getting the shaft. Maybe if they knew that their government was trying to stop oil speculation to lower the price of their gas, stop the phone companies from ripping them off, and stop food manufacturers from making them sick, they'd have a little more comfort that their President is on their side.

The Fight Over Border Adjustment

So the President, who during the 2008 campaign traipsed through Ohio turning into a second coming of Paul Wellstone, vowing to tear up every free trade agreement and ensure they under his Administration complied with labor and environmental statutes, wants you to know that elements of the Waxman-Markey bill are protectionist.

President Obama on Sunday praised the energy bill passed by the House late last week as an “extraordinary first step,” but he spoke out against a provision that would impose trade penalties on countries that do not accept limits on global warming pollution.

“At a time when the economy worldwide is still deep in recession and we’ve seen a significant drop in global trade,” Mr. Obama said, “I think we have to be very careful about sending any protectionist signals out there.”

He added, “I think there may be other ways of doing it than with a tariff approach.” [...]

The House bill contains a provision, inserted in the middle of the night before the vote Friday, that requires the president, starting in 2020, to impose a “border adjustment” — or tariff — on certain goods from countries that do not act to limit their global warming emissions. The president can waive the tariffs only if he receives explicit permission from Congress.

The provision was added to secure the votes of Rust Belt lawmakers who were wavering on the bill because of fears of job losses in heavy industry.

In the floor debate on the bill Friday, one of its authors, Representative Sander M. Levin, Democrat of Michigan, said, “As we act, we can and must ensure that the U.S. energy-intensive industries are not placed at a competitive disadvantage by nations that have not made a similar commitment to reduce greenhouse gases.”

In the interview on Sunday, Mr. Obama said American industries like steel, aluminum, paper and glass had legitimate concerns about competition from developing nations. But he warned that trade sanctions based on the extent to which other countries curbed carbon dioxide emissions might be illegal and counterproductive.

You can read the transcript of these remarks here.

The thing about global warming is the word "global." More than that, the policy objective of cap and trade is to limit greenhouse gas emissions used by people in this country. Energy companies have already made the threat that, in the event of Waxman-Markey taking hold, they would simply process fuel and coal offshore and bring it to the United States to avoid the emissions cap. Border adjustment is a perfectly reasonable way to avoid that outcome, as Paul Krugman explains:

The truth is that there’s perfectly sound economics behind border adjustments related to cap-and-trade. The way to think about it is in terms of a well-established theory — the theory of non-economic objectives in trade policy — that owes its origins to Jagdish Bhagwati, who certainly can’t be accused of being a protectionist. The essential idea is that if you have a non-economic objective, such as self-sufficiency in food production, you should choose policy instruments to align incentives with that objective; in normal circumstances this leads to consumer or producer intervention, rarely to tariffs.

But in this case the non-economic objective is to reduce greenhouse gas emissions, never mind their source. If you only impose restrictions on greenhouse gas emissions from domestic sources, you give consumers no incentive to avoid purchasing products that cause emissions in other countries; as a result, you have an inefficient outcome even from a world point of view. So border adjustments here are entirely legitimate in terms of basic economics.

And they’re also probably OK under trade law. The WTO has looked at the issue, and suggests that carbon tariffs may be viewed the same way as border adjustments associated with value-added taxes. It has long been accepted that a VAT is essentially a sales tax — a tax on consumers — which for administrative reasons is collected from producers. Because it’s essentially a tax on consumers, it’s legal, and also economically efficient, to collect it on imported goods as well as domestic production; it’s a matter of leveling the playing field, not protectionism.

And the same would be true of carbon tariffs.

If the WTO can look at border adjustments and offer its blessing, surely the United States can. The dirty little secret is that countries use very real protectionist policies all the time - it explains the existence of Toyota. In this case, the goal is simple to avoid unintended consequences from the policy. I assume Barack Obama does want to reduce greenhouse gas emissions. This is the way to ensure that cap and trade doesn't simply result in leakage. In addition, making China concerned about a trade war is a good way, perhaps the only way, to get them on board with global climate change talks.

In addition, there's that dirty little secret about the Congress and also this nation: we have a lot of fair traders, enough to scuttle the bill:

First, I may be wrong on this, but given the closeness of the vote, is anybody sure that Waxman-Markey would've passed without the border adjustments? I'm not, and, I'm also pretty sure that nothing passes the Senate without them (maybe not even with them), so this surely deserves much larger weight on the 'pro' side of the ledger than people seem to be granting.

Second, the potential scale of losses from leakage don't sound trivial to me. A report by RFF says that the benefits of unilateral US carbon pricing are reduced by 25% if nothing is done to stop leakage. And, comparing border adjustments to other ways to curb this leakage while we wait on an international agreement make them look pretty good to me.

I am not very sanguine about the politics of losing a quarter of the benefits of an incredibly hard-fought legislative win every year while we wait on an international agreement - how durable do people think the WM win will be if opponents can come back every year with (not totally in-credible) estimates of how many jobs we've lost to trading partners because of it? The border adjustment in WM buys more than a decade to reach an agreement before it kicks in. This seems entirely reasonable to me.

Third, where I think Krugman is most right about this stuff is how bizarre it is that a (literally) textbook economics solution (albeit a second-best one) to this problem (that is probably even allowed under existing international trade law) has inspired such ferocious hand-wringing about protectionism, coercion, and making other countries furious. There is no rational reason at all why a carbon tariff that any country can unilaterally disarm through its own actions should be a serious hold-up to an international agreement.

Nobody wants to talk about the populist elements of the House, which is this case are the only ones who get the economics of the situation, IMO. But they must be reckoned with.

Credit Card Reform Takes Shape

The President held a town hall meeting today in New Mexico, and they got "populist Obama," the one looking out for consumers and concerned about credit card companies jacking up their interest rates.

You should not have to worry that when you sign up for a credit card, you're signing away all your rights. You shouldn't need a magnifying glass or a law degree to read the fine print that sometimes don't even appear to be written in English -- or Spanish. (Applause.) And frankly, when you're trying to navigate your way through this economy, you shouldn't feel like you're getting ripped off by "any time, any reason" rate hikes, and payment deadlines that seem to move around every month. That happen to anybody? You think you're supposed to pay it this day, and suddenly -- and it's never on the end of the month where you're paying all the rest of your bills, right? It's like on the 19th. (Laughter.) All kinds of harsh penalties and fees that you never knew about.

Enough is enough. It's time for strong, reliable protections for our consumers. It's time for reform -- (applause) -- it's time for reform that's built on transparency and accountability and mutual responsibility -- values fundamental to the new foundation we seek to build for our economy.

I actually think, judging from the support in Congress and the outcry from consumers, that some form of this actually gets done on the President's timetable, with a law signed by Memorial Day. Tom Coburn tossed in what he thought would be a poison pill about carrying concealed weapons in national parks, but since the NRA has essentially silenced gun control advocates in Washington that pill tastes like a blueberry pie, even to Democrats. And I don't know if it'll make it through conference. Interest rates won't be capped, and some of the provisions will be a bit weaker than the initial bill, but basically something along the guidelines of the Federal Reserve will pass. And that's because the credit card companies are just the most contemptible companies in America, and they pushed it too far.

The exploration into cardholders’ minds hit a breakthrough in 2002, when J. P. Martin, a math-loving executive at Canadian Tire, decided to analyze almost every piece of information his company had collected from credit-card transactions the previous year. Canadian Tire’s stores sold electronics, sporting equipment, kitchen supplies and automotive goods and issued a credit card that could be used almost anywhere. Martin could often see precisely what cardholders were purchasing, and he discovered that the brands we buy are the windows into our souls — or at least into our willingness to make good on our debts. His data indicated, for instance, that people who bought cheap, generic automotive oil were much more likely to miss a credit-card payment than someone who got the expensive, name-brand stuff. People who bought carbon-monoxide monitors for their homes or those little felt pads that stop chair legs from scratching the floor almost never missed payments. Anyone who purchased a chrome-skull car accessory or a “Mega Thruster Exhaust System” was pretty likely to miss paying his bill eventually.

....Testing indicated that Martin’s predictions, when paired with other commonly used data like cardholders’ credit histories and incomes, were often much more precise than what the industry traditionally used to forecast cardholder riskiness....Data-driven psychologists are now in high demand, and the industry is using them not only to screen out risky debtors but also to determine which cardholders need a phone call to persuade them to mail in a check. Most of the major credit-card companies have set up systems to comb through cardholders’ data for signs that someone is going to stop making payments. Are cardholders suddenly logging in at 1 in the morning? It might signal sleeplessness due to anxiety. Are they using their cards for groceries? It might mean they are trying to conserve their cash.

Unbelievable.

Obligatory Brown/Newsom Past/Future Race To The Governor's Mansion Post

I've been pretty up front in questioning whether or not the next Governor matters compared to the structural reforms needed to get California back on a sustainable course. Nevertheless, the off-year CDP convention in Sacramento does traditionally kick off the following year's gubernatorial race, and this year was no different. Given what we know right now, I think it's highly probable, actually, that the Democratic primary will feature only two candidates. Jerry Brown and Gavin Newsom were the only two with any visibility whatsoever in Sacramento, and while Antonio Villaraigosa may still feel he can jump in late and capture a healthy share of the Latino vote in any primary, his awkward exit from the festivities does not lead me to believe that he will bother with the race.

If that is the case, we have a virtual mirror-image of the 2008 national Democratic primary, with a candidate positioning himself as looking to the future against a candidate firmly implanted in the past. That's the general belief, anyway, and there's quite a bit of truth to that. Clearly, Mayor Newsom's convention speech continually framed the choice for voters as "whether we’re going to move forward in a new direction or whether we’re going to look back." Clearly, each candidate has a profile that fits that general mold. And the general mood of each candidate's signature event, with Brown lolling at the old Governor's Mansion with his 1974 blue Plymouth in the driveway, literally an historical set piece, while Newsom closed off a street and held a block party featuring Wyclef Jean (and got what amounts to an endorsement from Sacramento Mayor Kevin Johnson when he introduced Newsom as "the next Governor of California"), could not have been more different.

And yet Jerry Brown has always been something of a political futurist, someone who was mocked in his time for being unrealistic and silly, on issues which are now firmly in the mainstream of the American political debate. And as CalBuzz points out, Brown's presentation to the convention may be closer to the zeitgeist than Newsom's right now:

While Newsom (a Hillary supporter, BTW) spent the weekend trying to position himself as Obama to Brown’s Clinton, General Jerry delivered a Jim Hightower-like jeremiad to the convention, filled with rips and roars at financial insiders and white collar criminals. In tone and substance it seemed closer to tapping the populist zeitgeist of these financially troubled times than did Newsom's effort to fight the last war.

Voters fed up with Governor Arnold's shattered promises to “blow up boxes” and sweep clean the mess in Sacramento may well be in the mood for less “change” and more common sense, which happens to be Brown’s political meme du jour.

Ultimately, I don't cotton much to these popularity-based views of major elections, preferring to judge on substance. The primary electorate is older, but that means there's more potential for increasing turnout among youth, so we'll see where that leads. But ultimately, I'm going to judge on the basis of substance, particularly with respect to structural reform. And while Brown gave a fairly nice speech, highlighting his high-profile work as Attorney General suing the likes of Wells Fargo, in essence he left unanswered the charges that he is an apostle for fantasyland in thinking he can just bring Democrats and Republicans in a room together and get them to work everything out. On the other hand, Newsom, in a meet and greet with bloggers, came out once again in favor of a Constitutional convention to put all of these contradictory and hobbling budget and governing ideas on the chopping block and work from scratch to figure out a way to organize the state that makes sense. You can ague with his somewhat rosy picture of his record - as I have - but you cannot argue that he has a forward-looking view of how to finally blow up this insanely dysfunctional structure.

On the near-term issue of the special election, Brown has appeared on stage with Arnold Schwarzenegger to tout the Yes side on all measures, while Newsom has not. In fact, he expressed his opposition to Props. 1C, 1D and 1E, saying "I can't get my arms around balancing the budget with lottery money" and that 1D and 1E would raid successful and cost-effective programs. Now, what I can't get MY arms around is Newsom's support for 1A, particularly because he explained that his first instinct was to oppose, but that he "had to be responsible" and look at the impact on city budgets. However, 1A would provide no budgetary relief for two years, while 1C, 1D and 1E, which he opposes, would. In clarifying this, Newsom spokesman Eric Jaye explained that the impact on city budgets could be made worse by the bond markets seeing the failure of 1A and raising their interest rates, but there's definitely a tension there. Perhaps Newsom thinks that he can fix whatever damage is done by a constitutional convention, but a voter-approved spending cap would be hard to cancel out within a the space of a year or two.

(More on the Newsom blogger meetup in a later post.)

I think there's room to be critical of both candidates, as well as room to be praiseworthy. But rather than framing this election along cultural or generational lines, I think it's necessary to frame it along the policies they would both bring to Sacramento and whether they make sense for progressives to get behind. So it's not past vs. future for me so much as success vs. FAIL.

A Stroll Through The Teabags

This isn't turning out entirely well for the right. Even the roundup piece on the AP includes this balloon-puncturing nugget.

The tea parties were promoted by FreedomWorks, a conservative nonprofit advocacy group based in Washington and led by former Republican House Majority Leader Dick Armey of Texas, a lobbyist whose corporate clients including Verizon, Raytheon, liquor maker Diageo, CarMax and drug company Sanofi Pasteur.

The group's federal tax returns show its educational and charitable arms received more than $6 million in donations in 2007, the most recent year for which returns are available.

Dick Armey and Newt Gingrich have no possible claim to leading a grassroots movement, though Armey did helpfully explain to the protesters what teabagging is, which at least should help their sex lives. This is corporate underwriting to harness populist sentiment. And the results have been ugly, like with this Fox News reporter exhorting his charges to "wake up and fight the fascism."



Or this.



"He's a fascist." "Why?" "Because he is."

I still haven't figured out what this protest is all about, but it sure is entertaining. Elsewhere, teabaggers threw tea over the White House gate, causing a lockdown while protesters shouted "Death to the President." This is an echo of teabaggers sending tea bags to Congressional offices and having them mistaken for hazardous materials. And here are some pictures - my favorite being "cut taxes, not defense," which just shows no recognition of how government or money or really anything works. Oh yeah, and this.

Robert Gibbs could only sigh and remark that the White House just passed the largest middle-class tax cut in American history, which is true and about all they really should say at this point, given their position of authority. I think Thomas Frank put it best:

Unless it rains today, thousands of average people will stand up across the land, declare their mad-as-hell-ness. Look for folks to holler for lower estate taxes and a replacement for Sarbanes-Oxley. They will put on three-cornered hats, wave "don't tread on me" flags, and imagine that they are channeling the spirit of Tom Paine as they do their part to ease the troubles of the economy's winners.

And Fox News, which plans to cover the tea parties, will no doubt hail this plastic populism as the realest kind of social uprising, a movement that is the rightful expression of this year's discontents [...]

The conservative movement, too, has long been a master of this maneuver. From the days of Richard Nixon to those of Sarah Palin it has described itself as a rebellion of Middle America against elitist liberals; as a nation of Joe the Plumbers rising against interfering bureaucrats.

It has little patience with traditional populism of the anti-big-business sort. Looking around on the Web site of the D.C. pressure group FreedomWorks, for example, I came across a denunciation of former Arkansas Gov. Mike Huckabee's "small-minded populism" written in January 2008 by former House Majority Leader Dick Armey, now FreedomWorks's chairman. Mr. Huckabee's offense was his claim to favor "Main Street, not Wall Street," thereby implying, Mr. Armey sputtered, "that the interests of the two are not in alignment. . . ."

As the mad-as-hell come together to proclaim their outrage, all the well-known earmarks of right-wing populism will no doubt be present. Leadership, in certain instances, will probably be furnished by one of the many well-known, well-funded Washington pressure groups. The ideology will be strictly Manichean: "government" and "freedom" in a zero-sum cage match, light versus darkness, with a victory for one being automatically a setback for the other.

Other than that, the tea partiers' stance on the issues is a little mysterious. But outrage is outrage, the party organizers probably figure; who will know the difference?

Great stuff.

...not that numbers are everything, but the biggest claim I've seen is that 60,000 people have turned out nationwide for this thing. 500,000 people rallied for immigration reform just in LA, and without any right-wing money or infrastructure, besides. Of course, I saw very little coverage of those rallies compared to the teabagging. And the disconnect from the traditional media is sadly predictable.

...Go Nancy!

PELOSI: What they want is a continuation of the failed economic policies of President George Bush which got us in the situation we are in now. What we want is a new direction. … This [tea party] initiative is funded by the high end — we call call it astroturf, it’s not really a grassroots movement. It’s astroturf by some of the wealthiest people in America to keep the focus on tax cuts for the rich instead of for the great middle class.

Why Not Anger?

Shorter everyone who presumes to speak for everyone: This rabble-rousing is sure making it harder to continue with our legalized theft!

I don't want to completely dismiss the pushback from those who find the public anger over the AIG bonus babies distasteful. Without question, the larger scandal concerns the counter-parties and the use of AIG as a conduit to reward multinational banks, especially because the company made the counter-parties whole instead of forcing them to take a haircut. Joe Nocera makes additional good points. But whines that people are angry about the wrong thing hardly obscures the fact that people ought to be angry, extremely angry, at the hash financial, political and media elites have made of our collective economic well-being.

This anti-anger consensus among our political elites is exactly wrong. The public rage we're finally seeing is long, long overdue, and appears to be the only force with both the ability and will to impose meaningful checks on continued kleptocratic pillaging and deep-seated corruption in virtually every branch of our establishment institutions. The worst possible thing that could happen now is for this collective rage to subside and for the public to return to its long-standing state of blissful ignorance over what the establishment is actually doing.

It makes perfect sense that those who are satisfied with the prevailing order -- because it rewards them in numerous ways -- are desperate to pacify public fury. Thus we find unanimous decrees that public calm (i.e., quiet) be restored. It's a universal dynamic that elites want to keep the masses in a state of silent, disengaged submission, all the better if the masses stay convinced that the elites have their best interests at heart and their welfare is therefore advanced by allowing elites -- the Experts -- to work in peace on our pressing problems, undisrupted and "undistracted" by the need to placate primitive public sentiments.

While that framework is arguably reasonable where the establishment class is competent, honest, and restrained, what we have had -- and have -- is exactly the opposite: a political class and financial elite that is rotted to the core and running amok. We've had far too little public rage given the magnitude of this rot, not an excess of rage. What has been missing more than anything else is this: fear on the part of the political and financial class of the public which they have been systematically defrauding and destroying.

Consider that AIG is currently suing the federal government, which owns the company, for the return of $306 million in tax overpayments. I don't see these same elites shaking their heads soberly at AIG for their "populist anger" at trying to get $300 million from the entity that handed them $185 billion. Oh yeah, and with the real amount of the bonus increasing (now it's $218 million), before long the amount in bonuses and the amount requested from the government in tax overpayments will be equal, I'm willing to bet.

I agree that the fact that populism moved the House to pass the admittedly crude excise tax bill represents a great hope that finally, politicians are more worried about the public perception than their standing among the elites (the Senate remains out of reach, but only for now). People understandably reject a government and an economy owned by elites, and desire a voice in their affairs again.

And that's the point: only this true, intense, and -- yes -- scary public rage can serve as a check on ongoing pilfering by the narrowed monied factions who control our Government for their own interests and who otherwise have no reason to stop. Who else is going to impose those checks? The bought-and-paid-for, incomparably subservient, impotent and inept Congress? The establishment-loyal, vapid political press? An executive branch run by the very people who are most vested in, dependent on, and loyal to the financial system that produced these disasters? Only a healthy fear of the populace -- exactly what has been missing -- can achieve that.

Now rage can lead to bad outcomes, but I struggle to see how it could be functionally worse than the society of the pwned in which we live currently.

Lucian Bebchuk and Dean Baker have more.

The Return Of The Silent Majority

This video of Rick Santelli ranting at the Chicago Board of Trade about how hard-working Murcans have to pay the price for those "losers" facing foreclosure has been making the rounds. It was obvious that this would be the conservative response to Obama's housing plan. Since the bubble popped, the intimation has been that the government put a gun to the head of the banks to lend to poor people (just say the word, why don't you) who then made bad decisions with their money, and now the responsible people have to bail them out.

The government is promoting bad behavior... I'll tell you what, I have an idea. The new Administration's big on computers and technology. How about this, President and new Administration, why don't you put up a Web site to have people vote on the Internet as a referendum to see if we really want to subsidize the loser's mortgages, or would we like to at least buy cars and buy houses in foreclosure and give them to people who might have a chance to actually prosper down the road and reward people who actually carry the water instead of drink the water...

He gets a standing ovation from the traders at that point, and then he asks them if they want to pay for their neighbor's mortgages, and they boo. Then he goes off about how Cuba used to have mansions and when they went "from the individual to the collective, they started driving '54 Chevys." It's right-wing backlash stuff at its absolute best.

Lost from this complaint is the plain fact of predatory lending, that lenders got cash rebates to put people in crappy, high-interest mortgages, that they hid terms of the agreement and denied disclosure, and that all of those hardworking folks are seeing their property values plummet as a result of millions of foreclosed homes glutting the market. To the tune of $6 trillion dollars in home value.

But I digress. The more interesting part of the video is the part where he calls his buds on the trading floor part of "the silent majority."

These guys are pretty straightforward, and my guess is, a pretty good statistical cross-section of America, the silent majority.

This is all starting to sound very familiar. Paging Rick Perlstein...

It's also obvious that traders on the floor of the Chicago Board of Trade are clearly the new face of the average lunch-pail working stiff, isn't it?

The revolution has begun. These workaday stock traders are going to take back this country for the laissez-faire capitalists who are entitled to it.

...more from Ryan Chittum.

The Double-Edged Sword

There's been a boomlet of commentary that Obama has learned his lesson on bipartisanship, and that future legislative fights will be strategized differently. Here's a representative sample from the Politico.

White House aides say they have concluded that Obama too frequently lost control of the debate and his own image during the stimulus battle. By this reckoning, the story became too much about failed efforts at bipartisanship and Washington deal-making, and not enough about the president’s public salesmanship.

For Obama’s next act, the program is the same as he has been planning for months: New Deal-style plans to rescue struggling homeowners and rewrite regulations on the financial markets, plus a budget proposal that lays the groundwork for sweeping health care reform.

But the strategy to promote these items is getting an emergency overhaul. Obama plans to travel more and campaign more in an effort to pressure lawmakers with public support, rather than worrying about whether he can win over Republican votes in Congress. Officials suggested that the new, more partisan tone Obama embraced last week in his speech before House Democrats at their retreat and continued at his news conference Monday was what he should have been doing all along.

This is probably a good idea, especially if combined with putting the President's supporters to work pressing wayward legislators to support a bolder agenda. Here's pretty much the same article from the New York Times.

I have a caution, however. Populism can cut both ways. As much as it supports a leftist reading of, for example, trade policy and inequality and local control, it can just as easily support a right-wing reading of scapegoating immigrants and xenophobia and mob rule. It's a small point, but I found this story about a new country song moving up the charts to be instructive.

Because in the real world they’re shuttin’ Detroit down,
While the boss man takes his bonus paid jets on out of town.
DC’s bailing out them bankers as the farmers auction ground.
Yeah while they’re living it up on Wall Street in that New York City town,
Here in the real world they’re shuttin’ Detroit down.
Here in the real world they’re shuttin’ Detroit down.

–Shuttin’ Detroit Down, by John Rich

Detroit has long been the subject of hit songs — think of “Detroit City (I Wanna Go Home)” by Bobby Bare, or “Doctor Detroit” by Devo, not to mention “Motor City Madhouse” by Ted Nugent. But now, the country singer John Rich is joining them by venting his frustration over the plight of auto workers and Wall Street bailouts.

Earlier this month, Mr. Rich — one-half of the song duo Big & Rich — released “Shuttin’ Detroit Down,” which is rising rapidly on the country charts.

On Thursday, the song took the No. 18 spot on iTunes’ country listings, and it ranked No. 26 this week on the Radio and Records singles chart, another measure of song popularity.

“The demand has been crazy,” said Tree Paine, vice president of publicity for Warner Records Nashville, Mr. Rich’s label. The song, only available at the moment as a music download, will be on Mr. Rich’s new album, which is due out next month.

Ms. Paine declined to make Mr. Rich available for an interview. But earlier this month, he told KKGO-FM in Los Angeles that he recorded the song in 36 hours after watching television news reports. He became incensed after learning of banking leaders who accepted bailouts, then spent money on private jets and redecorating their offices.

John Rich most recently endorsed and supported John McCain and wrote a song for his candidacy. His distaste for banksters taking bonuses while Detroit auto plants are shuttering is to be expected, but let's be clear where this will lead. We are in an economic position where we will need activist government for a while. It's extremely easy to conflate the fat cats on Wall Street with the stuffed shirts in Washington. The right is absolutely trying to tap into populism to stop Obama's agenda. They may not have his charisma, but they still have a noise machine, one that's spread out through talk radio networks and feels much more local than a visiting President, no matter the goodwill toward him.

Populism is a dangerous instrument and it can get away from you quickly, is my point. If Obama's not careful, the songs about the "boss man" could increasingly be about him, as odd as that sounds.

Breaking Their Backs

Simon Johnson has a really interesting aricle at TPM Café that puts the next massive economic decision to be made by the Obama Administration - what to do with insolvent banks - into an international perspective.

There comes a time in every economic crisis or, more specifically, in every struggle to recover from a crisis, when someone steps up to the podium to promise the policies that - they say - will deliver you back to growth. The person has political support, a strong track record, and every incentive to enter the history books. But one nagging question remains.

Can this person, your new economic strategist, really break with the vested elites that got you into this much trouble? The form of these vested interests, of course, varies substantially across situations, but they are always still strong, despite the downward spiral which they did so much to bring about. And fully escaping the grip of crisis really means breaking their power.

Not only is this a standard way of thinking about crisis resolution in many developing and post-communist countries, it also turns out to be a good guide to thinking about the US today. We have a powerful banking industry that has mismanaged its way into deep trouble. Yet these banks obtained an initial bailout - the Troubled Asset Relief Program, or TARP - on generous terms, and have consistently failed to use the opportunity provided by this government support to turn their operations around. Not only that, but they have flaunted their power - and their arrogance - through paying themselves large and largely inappropriate bonuses.

We come now, this week, to the podium.

You've doubtless heard some reports about what Treasury Secretary Timothy Geithner plans to say at that podium, and he is sadly more likely to protect elites and offer them welfare than do anything to admit their insolvency and break their power. In fact, he's likely to rely on private money from hedge funds and private equity firms to buy the toxic assets from the banks - no doubt with substantial favors from the government in return (like guaranteeing a floor value for the securities). The inescapable fact is that here, as it is in banana republics and oligarchies throughout the world in similar crises, no progress can possibly be made as long as the same people who caused the problem remain in control.

Mr. Geithner wants to use taxpayer dollars to keep bankrupt banks in business. In effect, he wants to tax teachers, fire fighters, and Joe the Plumber to protect the wealth of the banks' shareholders and to pay high salaries to their top executives. No readers of this piece would understand that this is the process being described.

The Post editorial page carried on with this deception. An editorial on saving the banks dismissed nationalization because it would involve the government in running the banks. Then it discusses the idea of buying bad assets and warns, "but there is a huge risk that the government would badly overpay in the first place."

Actually, this is not a risk, this is the point. If the government paid the market price for these assets the banks would be bankrupt and we would be back to step 1, nationalization. The point of buying the bad assets is to pay too much, so that the banks can get enough money to stay solvent.

Barack Obama plays the populist well on TV on occasion, whether by railing against executive pay bonuses or, today, backing the cram-down provision that would let bankruptcy judges modify mortgage terms for those facing foreclosure. But ultimately, his pretensions to populism, his belief that he has the best interests of the people in mind, will face the pressure from elites to make whole the banking system, the executives and the shareholders, and to use taxpayer funds to do it. The banks played casino night in unregulated markets for decades, racking up huge gains on paper and accruing enormous amounts of financial and political power. They practically bankroll most election campaigns, certainly at the Senate and Presidential level, and they used this leverage to wall themselves off from any assault on their power and influence from inside the Capitol. As Johnson says:

Ending the financial crisis is relatively straightforward - a forced recapitalization and change of ownership/management in the banking system - although this will not immediately lead to an economic recovery (more on that here). But seen in deeper political terms, decisive action to restructure large banks is almost impossible. Such action would require overcoming perhaps the single strongest interest group in the United States today.

How can you do it? The answer must be by splitting this powerful interest group into competing factions, and taking them on one by one. Can this be done? Definitely, yes. In particular, bank recapitalization - if implemented right - can use private equity interests against the powerful large bank insiders. Then you need to force the new private equity owners of banks to break them up so they are no longer too big to fail. And then... there is always more to do to contain the power of a lobby that is boosted by any boom and which, the more it succeeds, the more likely it is to ruin us all.

I see this as an unlikely scenario, but one way to reduce elite power is to give sunlight to arrogance like this in the hopes that popular anger will box in elites and their enablers in Washington so that they are unable to do anything but offer concessions. That's basically how the New Deal came about, although it was fought tooth and nail at every step.

Last month, Theresa Hatt died at 52, after a brief struggle with cancer.

Hatt, who lived in Portland, Maine, and worked for the city of Scarborough, had had several credit cards in her name. So, shortly after her death, Hatt's son, Paul Kelleher, began the sad task of calling his mother's creditors, to inform them of her passing.

The calls were uneventful, if depressing, until Kelleher got to Bank of America. Here is how he says his conversation with a representative of the company's estates unit went:

Paul Kelleher: Yes, I'm calling to inform you that my mom died on the 24th of January.

Bank of America Estates representative: I'm sorry. Oh, it looks like she never even missed a payment. That's too bad. Well, how are you planning to take care of her balance?

PK: I'm not going to. She has no estate to speak of, but you should feel free to just go through the standard probate procedure. I'm certainly not legally obligated to pay for her.

BOA: You mean you're not going to help her out?

PK: I wouldn't be helping her out -- she's dead. I'd be helping you out.

BOA: Oh, that's really not the way to look at it. I know that if it were my mother, I'd pay it. That's why we're in the banking crisis we're in: banks having to write off defaulted loans.

Right now, on the issue of the banks Obama is paying lip service to the populists and siding with the elites. The kind of people who try to con the bereaved and blame their own troubles on the dead. There is mass anger around this kind of buck-passing, anger that can be channeled into action. Another bailout for the wealthy and connected would do that.

Summers Eve

I am definitely worried that Lawrence Summers is acting as a kind of mole inside the Obama White House, defining economic policy in the most neoliberal of ways. I think he is mostly responsible for the mix of tax cuts, particularly corporate tax cuts, in the initial pre-compromised stimulus bill. And he's certainly responsible for the terrible "bad bank" idea, which I haven't gotten around to writing about recently, but which would basically hand over maybe trillions in taxpayer money to the very bankers who got us into this mess. Obama is cautious and certainly listens to varying points of view, but my fear is that Summers was winning the arguments, at least until the past couple days, when the President could no longer abide the right-wing attacks and came out in a forcefully partisan manner.

The question is who will be the counterweight to Summers in the White House? Chris Hayes thinks it could be the Vice President.

Summers has already come to dominate the White House economic policy shop. One person close to Obama's economic team told me that on economic policy, "it's looking like it's Larry's show." This leaves a disconcerting vacuum in the White House for a labor-liberal voice equal in stature and clout. Enter, perhaps, Joe Biden.

In December he named Bernstein, formerly of the labor-friendly, stoutly progressive Economic Policy Institute, to be his chief economic adviser, a position with no recent precedent. Bernstein then co-wrote the first economic report released by the transition team, which attempted to quantify the benefits of the president's proposed stimulus. He is one of the people present for the daily economic briefings to the president.

In the weeks before inauguration, Biden reached out to labor leaders, including the AFL-CIO's John Sweeney, confirming that he would be a strong advocate for them in the White House. And he has publicly supported "Buy American" provisions in the stimulus package that would require participating firms to purchase their materials from domestic companies--a measure that Summers pointedly refused to endorse during a recent briefing with reporters.

Biden is "really pushing hard" on "a more progressive populist approach to economic policy," says Mike Lux, the transition's liaison to the progressive movement. "I'm just delighted that there's somebody with his clout that's doing this, otherwise our side would be in a lot worse shape."

Indeed, Biden's appearance yesterday at a Maryland train station was a signal of his growing progressive populism on domestic issues, as is his task force on the middle class. I didn't think Biden would end up being the champion of any of this, but I hope he can keep Summers from dominating.

They Wouldn't Be Able To Find First Base."

There is a rather remarkable hearing playing out right now on Capitol Hill. Harry Markopolos, the whistleblower in the Bernie Madoff scandal, is testifying to a House Committee, and he's basically calling out the SEC for its total incompetence - over a period of several years - in failing to identify the Madoff Ponzi scheme and put a stop to it. Markopolos, who went to the SEC in May 2000, when the Madoff scheme was only about $5 billion, is getting off line after line ripping the SEC a new one. TPM Muckraker has all the details. Some highlights:

• "If you flew the entire SEC staff to Boston, and sat them in Fenway Park, they wouldn't be able to find first base."

• Markopolos discusses Madoff's mob ties: "When you're that big and you're that secrective, you're going to attract a lot of organized crime money, and which we now know came from the Russian mob and the Latin American drug cartel, and when you are zeroing out mobsters, you have a lot to fear. And he could not afford to get caught, because once he was caught. And if he would've known my name and knew he had a team tracking him, I didn't think I was long for this world."

• Markopolos offered to go undercover wearing a disguise to catch Madoff.

• Perhaps the most telling statement: "They (the SEC) were a captive regulator. Mr. Madoff was too big," he just told Congress. "They looked at Madoff and said: 'he's a big firm, we dont attack big firms.'"

That really says it all. The real difference between Madoff's scheme and the rest of Wall Street was that Madoff was more explicitly criminal. But that's it. And the SEC's inability to go after anything substantive on Wall Street turned the place into a deregulated casino.

There is a populist uprising going on in the country right now, as more and more stories like this come out. Which is why Obama's limit on executive pay this morning was significant and important. But the stimulus is being caught in the crossfire, as anything from a position of power is becoming infected with all the talk of theft of taxpayer dollars. The Republicans are being very sanguine, and if they do derail the stimulus or render it ineffective, the next few years will be really terrible and people will just get angrier.

Obama Goes Populist

There was a populist streak to the election, and it has finally crashed on the shores of the White House. President Obama has chosen a villain in the economic spin war, and they are Wall Street CEOs.

The Obama administration is expected to impose a cap of $500,000 for top executives at companies that receive large amounts of bailout money, according to people familiar with the plan.

Executives would also be prohibited from receiving any bonuses above their base pay, except for normal stock dividends.

President Obama and Treasury Secretary Timothy F. Geithner plan to announce the executive compensation plan on Wednesday morning at the White House.

The new rules would be far tougher than any restrictions imposed during the Bush administration, and they could force executives to accept deep reductions in their current pay. They come amid rising public fury about huge pay packages for executives at financial companies being propped up by federal tax dollars.

This comes from nothing more than listening to the public. They are furious about these bailouts, Claire McCaskill's remedy for capping pay from companies that take TARP money was very popular, and Obama is moving to capitalize. While I think that executive compensation is pennies on the dollar compared to the massive giveaways that may be planned for the banking industry, there is a symbolic, cathartic feel to this. When you see Bank of America throwing a Super Bowl party or Wells Fargo sending their employees on a Vegas junket, acting like it's business as usual, you have to draw a line in the sand.

Oh, and James Reda? You're not helping your cause:

“That is pretty draconian — $500,000 is not a lot of money, particularly if there is no bonus,” said James F. Reda, founder and managing director of James F. Reda & Associates, a compensation consulting firm. “And you know these companies that are in trouble are not going to pay much of an annual dividend.”

Mr. Reda said only a handful of big companies pay chief executives and other senior executives $500,000 or less in total compensation. He said such limits will make it hard for the companies to recruit and keep executives, most of whom could earn more money at other firms.

“It would be really tough to get people to staff” companies that are forced to impose these limits, he said. “I don’t think this will work.”

Hey, tell you what: I'll run your company for $500,000. Can I do worse than the guys who lost hundreds of billions? Also, the idea that top staff will leave financial companies for greener pastures would make sense if every single company out there didn't need TARP money and wouldn't be subject to the exact same rules.

Sorry, Masters of the Universe. It's a new era of responsibility out here. Now, if only that responsibility extended to the balance sheets of the banks, which are clearly insolvent and shouldn't be propped up without falling into government hands and wiping out shareholders.

Since the early days of the financial crisis, officials have struggled to unwind that knot. If the government buys the assets at prices that banks consider fair, the Treasury would take a huge loss when it ultimately sells the assets for much less. If, instead, the government insists on paying market prices, the banks may not survive their losses.

Instead of taking a single approach, the Obama administration plans to divide assets and other loans into three categories, each with its own solution, according to sources familiar with the discussions, speaking on condition of anonymity because the details are not finalized.

The government would buy and hold on to those assets whose falling prices are putting banks under the most pressure. Officials want to limit these purchases because of the vast expense.

The centerpiece of the plan would be a guarantee to limit losses on a second group of troubled assets that can be kept by the banks because they have more stable prices.

And it would allow banks to retain and profit from their healthiest assets.

Beyond these initiatives, the government also is likely to inject more capital into troubled institutions.

This is just a gift to banks that sunk the economy by turning a blind eye to obviously bad deals. The bankers may not be as rich as before, but they still don't deserve this treatment.

The Dead-End Kids

Eve Fairbanks has an important piece about the deepening conservatism in the Congressional Republican caucus. They have been emboldened by their little model Congress stunt on offshore drilling in August, which led to a predictable capitulation from Democrats and the prospect of oil rigs on the California coast within a couple years. Despite the will of the voters at the polls, Republicans learned the lesson of 2008 is that if they stamp their feet and scream loud enough, there is no limit to what they can achieve.

The episode was the happiest moment of the House Republicans' two years in the minority. But, for House conservatives, the energy insurgency provided far more than mere satisfaction: It became a blueprint for the future. Forget the self-flagellating remedies proposed by white-flag Republicans like David Frum or the Sam's Club crowd. The House right-wingers concluded from the drilling victory that conservatism needn't compromise ideologically in order to win--just the opposite. It's a lesson they're eager to apply to Barack Obama's economic schemes, like health care reform and the huge infrastructure stimulus package. Rather than accepting the implications of John McCain's recession-driven loss--that Americans, perhaps, might be growing weary of Republican economics--the conservatives intend to trigger a popular revolt, like the one they provoked over drilling, against Democrat-led socialism itself.

Conservatives may have dwindling ranks, increasing illegitimacy and the headwind of a very well-liked incoming President eager to implement a popular agenda to deal with. But that is simply not what they gained from the election season. Their take was that McCain was insufficiently conservative (!) and that, besieged on all sides, they must stand up for the people and put the brakes on this whole "change" fad. They have nothing left but ideology, and the Drudge/Fox/talk radio megaphone that it still able to mainline that ideology into the public opinion stream. The years of groupthink have proved to BOTH sides in Washington that only conservative populists are the holders of the popular will, regardless of, you know, election returns.

By the time Pence and his pro-drilling confederates stormed the House floor on August 1, Republicans were primed to accept the ensuing battle's lessons: One, dramatic gestures pay; two, conservatives don't have to compromise to capture the people's imagination. "When [Pelosi] and other Democratic leaders felt the force of America against them ... Americans let their voices be heard, and they were enraged, and it affected the way the [energy] bill was put before the House," explains Representative Louie Gohmert, a bald, cheerful judge from Texas who got swept up in the August excitement.

Soon, as Lehman Brothers melted down and Treasury Secretary Henry Paulson rushed around the Hill begging representatives to do something, a new menace ripe for attack emerged: government intervention in the free market. Psychologically rejuvenated by the energy fight, conservatives turned their newfound taste for melodrama against government bailouts. Hensarling derided the September $700 billion plan to rescue the financial industry as a "slippery slope to socialism," and Thaddeus McCotter, a conservative from the Detroit suburbs, exclaimed that "it was no mistake that, during the 1917 Bolshevik revolution, the slogan was 'Peace, land, and bread.' Today, you are being asked to choose between bread and freedom. I suggest that the people on Main Street have said they prefer their freedom!"

All 17 House Republican freshmen rejected Boehner's tearful pro-bailout appeals and signed up with Hensarling's mutiny against the first bailout vote. And the enthusiastic response from constituents confirmed the conservatives' view that, while America (perplexingly) might not be planning to vote for them, it stood with them. As Culberson posted proudly on Twitter: "Texans core belief =leave me alone: gov't stay away from my home, my family, my church, my school, my bank account & my guns." Even Boehner became a believer. After the GOP's loss on Election Day, its second in a row, he promoted Pence, his old rival, to the leadership team and mailed a letter to House Republicans praising the conservatives and vowing to use the energy episode as his battle plan.

The bailout bill was ideologically muddled by the fact that it was designed to funnel money to giant investment banks at least partially responsible for the financial meltdown, and as such is not the best example. But what's significant is the language used, the simplistic shibboleths of "freedom" and "socialism". These didn't work during the Presidential campaign, but when they are channeled into populist proposals that Democrats haven't successfully pushed back on, the result could be dangerous.

Gohmert, the conservative Texas judge, had the brainstorm for his own contribution to the coming wave as he emerged from anesthesia a few days before Thanksgiving. He'd just undergone surgery to repair his anterior cruciate ligament, torn in the annual House softball game, and, as he lay recovering, he was possessed with the germ of an idea. He dropped an e-mail to Newt Gingrich. "He wrote, 'Do you realize that the amount of money they want [in the remaining, as-yet-unused $350 billion of the Wall Street bailout fund] is so great that you could actually give every American a tax holiday for two months?'" Gingrich remembers: "I looked at it and I thought, wow, what a great way to quantify it." Newt shot back a message predicting that a two-month holiday on both income and Social Security taxes--proposed by Gohmert as a conservatively populist, don't-let-Big-Brother-take-your-money alternative to the bailouts--would be "brilliant." "I don't get a lot of e-mails from anybody, especially somebody as smart as Newt, saying 'This is brilliant,'" Gohmert modestly admits.

I don't think anyone has invalidated that "let the people have their own money" approach. Obama's transition team is talking about reducing withholding taxes to give tax cuts to working Americans (which is a behavioral economics scheme based on the idea that people will spend an extra $20-$50 they get every two weeks instead of a lump sum of $500 or $1,000, which would just go to paying down debt). Traditional media still foregrounds ideas like "sales tax holidays" forwarded by lobbying groups like the National Retail Federation. And conservative economists can still credibly view the stimulus choice as one between tax cuts and public spending, and call on 40 years of demonization of government to trot out tax cuts yet again as the solution. After all, Obama's proposed it, so it's just a matter of more of them and less of that nasty big-spending liberalism.

The goal will be to end or moderate the recession. According to the textbooks, government spending raises the demand for goods and services. Tax cuts also spur demand by putting more income in the hands of consumers or more after-tax profits in the hands of businesses.

Is a fiscal stimulus good policy? The answer is no if the stimulus consists of increased spending. The stimulus may be good policy, though, if it consists of lower taxes.

See? They're just the same, only lower taxes lets YOU keep YOUR money, and big gubmint spending steals your money for pork. Pork!

There really is nothing left for conservatives to argue beyond "that way lies socialism." As Fairbanks explains, this is the same strategy they used in the 1930s to try and slow down the New Deal. They argued to themselves that Roosevelt was just a charismatic leader and his policies were abhorrent to the majority of the public. They tried to corner the 1930s version of Blue Dog Democrats to get them to flip their votes. They believed the country was center-right and that by holding to their convictions, they could not fail. What else could they do, other than disband? The strategy wasn't very successful then. Nowadays, there is the constant hum of the noise machine and a right-wing movement well-practiced in the art of obstruction. Not to mention a Democratic majority that fetishizes bipartisanship and timid in the face of these cries from the other side.

(I'm wondering about the connection between dead-ender conservative populists and the "Lost-Cause" mythmakers of the South. Michael Lind calls for a "Third Reconstruction" of the South to save the US economy, while Ed Kilgore has a contrarian view, while acknowledging that "first-wave" economic strategies of low wages, deregulation and the absence of unions have taken hold in the South in the Bush era.)

A lot of commenters and writers in the blogosphere thinks that we should just dismiss the conservative populists and let them play their little games, that the elections have rendered them irrelevant. I don't subscribe to this point of view. We still have a media inclined to promote conflict, and a steady stream of right-wing operatives ready to get their position into the discourse. Further, the imbalance between extreme partisan warfare on one side and the desire to play nice on the other persists. Past history of Congressional capitulation is not promising here. Not to mention that so many of the initiatives the incoming Administration wants to implement need to happen fast to maximize their effectiveness, giving the dead-end kids a piece of leverage that they are sure to use.

Cranks like this are present in virtually every new Administration, but in our current media/political age I think they are uniquely equipped to succeed. And I don't see a real strategy to counteract them yet.

President Paulson, Vice President Bernanke

It is kind of amazing that all of these massive government bailouts have occurred with virtually no input from any elected leader. The Fed and the Treasury Department are really driving the boat. Bush made a statement in the Rose Garden this morning which said, approximately, that's he's aware of the problem and somewhat concerned about it. Some would say he's pulling a Katrina; clearly he's not involved in this at all.

According to The Wall Street Journal, Bush was briefed on the rescue after it was in play. And even then, he was only "briefed." There's been no effort on the part of the White House to even advance the idea that Bush is an engaged participant who's actively signing off on these actions, possibly because suggesting his involvement in a crisis of this complexity would cause the stock market to run and hide in a corner.

Congress, too, has been cut totally out of the loop. The AIG bailout -- in fact, all of the bailouts -- have been conceived entirely without their involvement. Indeed, the Federal Reserve and the Treasury Department have been acting, over the course of this crisis, as if they are the sum total of the government. And that may be the correct approach: Neither the president nor the legislative branch possess the expertise or speed to be involved in the real-time crisis management that Bernanke and Paulson are trying to manage. They could, presumably, reverse decisions after the fact or change the contours of the law, but for now, the ship is being steered by the Chairman of the Federal Reserve, the Treasury Secretary, and an informal working group of Wall Street CEOs and banking powerhouses. And the government, as we normally think of it, has basically accepted their temporary authority. You've heard of martial law? We're currently in a state of market law.

I think Paulson and Bernanke clearly have enough information to know what they're doing, but of course they have a different loyalty than an elected official. Clearly their goal is to save the financial markets. Elected officials would presumably look at how this impacted constituents. There's a significant amount of overlap there, but it's not a monolith. If the Fed is running the show, you will get Fed-friendly policies.

Lawmakers are fairly teed off that they've been pushed out of the loop here, and Nancy Pelosi is seeking to put them back in charge. I think it's fair that a $85 billion dollar bailout of the world's largest insurer comes with some Congressional, and therefore popular, input. Interestingly, the Republicans in the House are the ones talking populist.

"My instincts and my gut tell me they made the wrong move. But I don't have all the information they do," said Rep. Paul D. Ryan (R-Wis.), the senior Republican on the House Budget Committee, who yesterday fielded furious calls from constituents. "People are angry because they see this as their tax dollars bailing out Wall Street speculators. And in some cases, it is." [...]

"Just how long can the poor beleaguered taxpayer be expected to bear all the losses and bear all the risk?" said Rep. Jeb Hensarling (R-Tex.), one of the protest's organizers. "Lehman Brothers must have the worst lobbyist in town, since they are the only ones that appear to have lost out on the bailout mania."

This seems like a cover, something easy to say after the fact without taking responsibility for the environment they helped create. Indeed, the standard-bearer of the party is trying to show his conversion to a corruption fighter and a regulator who will stop the greed on Wall Street, bail out the auto industry and unleash the innovation of the American economy. But it's a fantasy world.



That's brutal. So is Harry Reid.

“Yesterday, nearly 80 years after the Hoover Administration took America with blissful ignorance into depression, the Dow Jones Industrial Average dropped more than 500 points – the biggest one-day decline since trading opened after the attacks of 9/11. With one major investment bank headed for bankruptcy, another sold at a bargain-basement price, and one of the world’s largest insurance companies teetering, investors rushed to sell their shares.

“With our financial markets reeling, the American people are wondering whether they will lose their jobs, whether they will be able to pay their child’s next tuition bill, whether their pension and retirement savings will be safe.

“There is no reason to think we are headed into an economic depression. There is no reason to panic. Yet one Senator – John McCain – woke up yesterday morning, surveyed the state of the U.S. economy, summoned the ghost of his fellow Republican, Herbert Hoover, and declared, ‘The fundamentals of our economy are strong.’

Even his helpers, like Mike Huckabee, aren't helping, recounting his long history against government and regulation.

I don't want Paulson and Bernanke making these huge decisions outside public scrutiny, but I certainly don't want John McCain or his picks doing it, either. Just consider that, in a McCain Administration, the guy with this unbridled power would likely be Phil Gramm.

More on what I think could be done in a bit.