Matt Yglesias

The Trouble With State Government

I was talking to a libertarian-minded fellow at the Kaufman Foundation conference I was attending on Friday, and he asked me something like why does all this big government stuff have to be done at the federal level? Couldn’t we leave it all up to the states? That way there’s be a kind of “policy competition”—states could try different things, people could leave policy regimes they didn’t like, and we could see what works:

The most obvious problem with this proposal is that in the areas where the case for government activism is the strongest, it just wouldn’t make sense to take action at the level of a small sub-unit of a large economically integrated country. Rhode Island can’t regulate air pollution since it can’t help air wafting in from neighboring states. And Kentucky can’t do macro stabilization policy—there’s too much economic leakage into the rest of the country.

But probably the more profound problem here is that it doesn’t seem to work in practice. In the context of the normal political debate, I obviously come down on the big government side of the equation. But at the same time, I wouldn’t disagree with the observation that there are some elements of our economy that are badly over-regulated. It’s much more difficult to start or expand a business than it should be and this is one of the reasons why our economy has gotten so dominated by cookie-cutter chains that have enough scale to amass expertise and legal clout needed to navigate this thicket. There’s more occupational licensing than their needs to be. There’s too much regulation saying that buildings have to be short, or can only occupy so big a percentage of the lot, or have to have so many parking spaces. At the same time that I think the country’s overall policy dynamic is too tilted toward the automobile, the actual vehicle registration process is weirdly cumbersome, and the rules governing auto dealers are positively insane.

But all this malfeasance is done by state and local governments.

Rather than the small scale of the units leading to better policy via competition, what seems to me to happen is that the lack of public attention paid to policymaking at the state, county, and municipal level leads to much more pure interest-group capture than you see on the federal level. Not that interest groups don’t have a lot of clout in federal politics. But the relatively competitive nature of elections and the relatively bright spotlight shown on national politics puts a check on these things. At the state level, bad policy really runs amok. So I wind up being skeptical that you could really improve much of anything even in those areas when I think the libertarian perspective is broadly correct by devolving more authority downward.

Obama Comes Out Swinging in Weekly Address

In 1936, Franklin Delano Roosevelt delivered an important campaign speech in Madison Square Garden, saying among other things:

For twelve years this Nation was afflicted with hear-nothing, see-nothing, do-nothing Government. The Nation looked to Government but the Government looked away. Nine mocking years with the golden calf and three long years of the scourge! Nine crazy years at the ticker and three long years in the breadlines! Nine mad years of mirage and three long years of despair! Powerful influences strive today to restore that kind of government with its doctrine that that Government is best which is most indifferent. [...]

They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob.

Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me‹and I welcome their hatred.

For some time now, I think many progressives have been waiting to hear something similar from Barack Obama. And in today’s edition of the weekly YouTube address, I think we get something like it. Talking about a budget that will cut taxes for most families while raising them on a few, increasing federal aid to college students while reducing federal aid to private sector student loan writers, and boost health care coverage while reducing subsidies to health insurance firms, Obama says:

I know these steps won’t sit well with the special interests and lobbyists who are invested in the old way of doing business, and I know they’re gearing up for a fight as we speak. My message to them is this: So am I. The system we have now might work for the powerful and well-connected interests that have run Washington for far too long, but I don’t. I work for the American people. I didn’t come here to do the same thing we’ve been doing or to take small steps forward, I came to provide the sweeping change that this country demanded when it went to the polls in November.

I’m not sure whether or not this kind of feisty presidential rhetoric and leadership is actually as decisive as some liberals think, but it is nice to hear.

Marijuana Legalization as a Revenue Enhancer

Jesse McKinley takes a look at states searching for unorthodox revenue sources including this one:

Nowhere is that more true than California, where Assemblyman Tom Ammiano, a freshman from San Francisco, made a proposal intended to increase revenue, and, no doubt, appetite: legalizing and taxing marijuana, a major — if technically illegal — crop in the state.

“We’re all jonesing now for money,” Mr. Ammiano said. “And there’s this enormous industry out there.”

I don’t think this is the optimal policy. I fear the creation of a legal marijuana industry with lobbyists and advertising aimed at creating as many problem pot smokers as possible. It would be better, I think, to decriminalize possession and growing for personal use but keep maintain a ban on selling and marketing marijuana. That said, the revenue possibilities of moving to full legalization are pretty tempting. And what Ammiano is proposing would be a significant improvement over the status quo. I think it’s a real sign of the poverty of our policy conversation that this idea isn’t in wider circulation.

Washington Post Still Dodging Core Issues in George Will Scandal

The latest from Washington Post ombudsman Andy Alexander is really pathetic. I’ll quote Ryan Avent’s recap:

George Will wrote a column suggesting that there was a broad scientific consensus in the 1970s regarding the threat of global cooling. This is simply not true. Moreover, this untruth is readily verifiable. And George Will attempted to sow doubts about global warming by citing a bogus analysis of research findings, from an organization that has publicly said that the analysis was bogus and that their research in fact says just the opposite of what George Will argued. And then of course there is the fact that there is a broad scientific consensus regarding the threat of global warming, supported by overwhelming evidence.

The Post continues to not even address the majority of these concerns. Instead, in the eyes of the Post the only issue here is that there’s a disagreement between Will and some other people about how to characterize research findings from the Arctic Climate Research Center. The Post thinks that the opportunity should have been taken to foster more constructive debate about this. But why would there be a “debate” about how to interpret scientific findings undertaken between, on the one hand, the scientists who did the research and on the other hand a political pundit who’s misrepresenting it? Then the Post simply has nothing to say about the fact that Will’s column falsely claimed—and not for the first time!—that there was a scientific consensus in the 1970s about a global cooling phenomenon. This myth, though widespread, is false. And though false, it’s widespread, because prominent media organizations like The Washington Post see misleading people about climate change as a valuable service that they’ll pay people money to do.

Meanwhile, The New Republic thinks liberals are too hard on the MSM and that we should be defending it from right-wing jackals rather than piling on to its corpse. Mark Thoma replies:

When the press does its job well, it deserves defenders, and when it does a lousy job, it deserves being taken to task. The complaint seems to be that the criticism is without foundation, and there’s some of that, but the fundamental problem is not, in my view, the people doing the criticizing, it’s the media companies themselves. The argument also seems to treat “media” as something other than Fox News. I agree that the term journalism conjures up another image, as it should, but presently Fox News isn’t clearly separate from other media outlets, far from it, and the commingling of all of these sources of information in the minds of the public is part of the problem. If journalists in the mainstream media want respect, they need to differentiate themselves from the “partisan outlets,” including calling foul loudly and in no uncertain terms when Fox or whomever crosses the line, and they also need to do a better job themselves of establishing and maintaining their credibility through solid reporting.

There’s been a lot of discussion recently of the narrow question of the declining economic feasibility of the newspaper business model. But there’s a broader crisis of legitimacy in the broader news media. And I think The New Republic is looking at this in precisely the wrong way. Decades ago, the press began to come under systematic attack from a conservative movement that wanted to transform it from something that’s primarily a vehicle for truth-telling into something that’s primarily a vehicle for transmitting right-wing propaganda. Media organizations could have chosen to stand firm against that. And those institutions and—more common—individual journalists who’ve done that of course deserve support. But most organizations chose to respond to the attacks by bending to the will of the right.

So George Will will lie to you about climate change, and when this is pointed out The Washington Post will throw its institutional weight behind a defense of lying and an attack on people being rude to Will. This kind of behavior doesn’t earn you a respite from the right’s attacks, but it does make it impossible for a progressive to, in good conscience, defend your organization.

Huckabee Making Strong Bid to Lose “Likeable Conservative” Credentials

I met Mike Huckabee once, briefly, and he was extremely charming. He offered up more of what I’d seen in the best of Mike Huckabee on television—a charismatic, friendly guy who laced his conservatism with real Christian values like generosity and humility. And then there’s this guy:

“The Union of Soviet Socialist Republics may be dead,” said Huckabee, “but a Union of American Socialist Republics is being born.” Democrats, according to Huckabee, were packing 40 years of pet projects like “health care rationing” into spending bills. “Lenin and Stalin would love this stuff.”

Steve Benen says “I suspect that if a prominent Democratic office holder, in 2005, delivered a speech referring to George W. Bush’s agenda as “fascism,” comparing his administration to totalitarian regimes, and casually throwing in a reference to Hitler, that Democrat would have a very difficult time being taken seriously by the political establishment moving forward.” Indeed, recall that when Dick Durbin compared American mistreatment of detainees to maltreatment of prisons in the Gulag, we was pressured into offering a groveling apology. In Durbin’s case, though, one could see the point of the comparison.

Why Huckabee thinks that federally funded research into determining which medical treatments are effective is similar to being a totalitarian mass-murderer is a bit beyond me. But it’s par for the course in the uglier corners of conservatism, they’re just not corners Huckabee’s been known for dwelling in.

Christina Romer on ARRA

If you’re interested in a less political and more technical defense of the American Recovery and Reinvestment Act’s likely efficacy, you could do worse than to start by reading this speech from CEA Chair Christina Romer (via Mark Thoma). Something of a myth sprung up to the effect that the Obama team’s economic policy ran contrary to her research findings.

That would have reflected an odd decision-making process in the White House if true. But it’s not true. As she explains, her research, at least, indicates that conventional studies have been underestimating the likely efficacy of this sort of stimulus measure.

Ride the Train

My how times change: “Louisiana’s transportation department plans to request federal dollars for a New Orleans to Baton Rouge passenger rail service from the same pot of railroad money in the president’s economic stimulus package that Gov. Bobby Jindal criticized as unnecessary pork on national television Tuesday night.”

I love passenger rail, but it’s hard to see this as being high on the list of useful high-speed rail endeavors. The distance is right, but metro New Orleans is the country’s 50th largest metro area (bigger than Tuscon, smaller than Rochester, NY) and Baton Rouge is 67—smaller than Worcester, MA but bigger than El Paso. Which isn’t to deny that a quality rail link could be useful; only to observe that there are a large number of potential projects—basically everything on the existing HSR corridor list plus all kinds of littler things like Phoenix-Tuscon, Worcester-Boston, DC-Norfolk, DC-Richmond—that would seem like a better idea.

John McCain Pretends Not to Understand What Beaver Management Is

For any given federal expenditure of funds, there’s an argument to be had over whether the deadweight loss to the economy caused by the taxation required to generate the funds exceeds the benefit obtained by the expenditure. But this is a technical argument that’s difficult to win decisively. And at the same time, the government rarely spends money on anything that’s genuinely pointless—though presidents do sometime propose the idea of a manned mission to Mars. Consequently, even though everyone’s against “out of control spending” and “pork” and everyone knows that “fiscal responsibility” is good, it’s difficult to criticize specific actual expenditures in a persuasive way. One popular thing the GOP has been doing to get around this problem in recent months is to criticize made-up programs. So the right is against a $30 million mouse earmark that they’re pretending Nancy Pelosi put in the stimulus, they’re against an $8 billion scheme to build a Disneyland-Vegas mag-lev train that they’re pretending Harry Reid put in the stimulus, and now they’ve invented a tattoo removal program that they’re pretending is in the omnibus appropriations bill.

Their other big idea is feigned stupidity. Michael Steele pretended not to know what a fish passage barrier removal program is. Turns out that these are programs designed to remove barriers to the passage of fish. So that fish species don’t vanish from certain habits and wreck entire ecosystems. Bobby Jindal was inspired to denounce “something called volcano monitoring”. Volcano monitoring is when you monitor volcanos to try to understand when they might erupt. And now we get this Tweet from John McCain:

Not having ever worked in beaver management before, I couldn’t say in detail how a beaver-management program would work. But again the basic concept here is really pretty clear. But if McCain is really confused, he could look it up. Brendan Nyhan suggests that we may need to let the GOP know about Let Me Google That For You. If anyone out there wants to know why beavers could be a problem for a given area, or about different ways that you can manage the beaver population and minimize beaver-related problems I would direct them to the Beaver Control and Management Information page on the Internet Center for Wildlife Damage Management. I found that right away using Google.

Ruffini: The Right Must Abandon Gimmicks and Addiction to the Past, Embrace Newt Gingrich…

If you want an idea of how completely brain-dead the conservative movement is, you desperately need to read this post from Patrick Ruffini.

It starts strong:

If you want to get a sense of how unserious and ungrounded most Americans think the Republican Party is, look no further than how conservatives elevate Joe the Plumber as a spokesman. The movement has become so gimmick-driven that Wurzelbacher will be a conservative hero long after people have forgotten what his legitimate policy beef with Obama was. [...]In these serious times, conservatives need to get serious and ditch the gimmicks and the self-referential credentializing and talk to the entire country. If the average apolitical American walked into CPAC or any movement conservative gathering would they feel like they learned something new or that we presented a vision compelling to them in their daily lives? Or would it all be talk of a President from 25 years ago and Adam Smith lapel pins?

And then it ends . . . um . . . not so strong:

This is why I love Newt’s emphasis on finding 80/20 issues and defining them in completely non-ideological terms.

That’s right; the man to bring the right-wing out of its addiction to gimmicks and icons of the past is—Newt Gingrich! I could see someone arguing, perhaps, that these gimmicks are clever gimmicks but the idea that they’re an alternative to gimmick-based politics is insane.

See also what Chris Orr says here.

The Collapse

By now everyone’s seen the headline about the revised fourth quarter growth numbers. They’re now saying we shrank at a 6.2 percent annualized rate. This explains the semi-mysterious fact that the U.S.-originating global recession seemed to be hitting Europe harder than it was hitting the United States. Now it just looks like we were undercounting the extent of the downturn. At the point, we all seem to be pulling each other down:

A wider trade gap than previously reported — that is, fewer American goods being purchased abroad — also pushed G.D.P. further downward. Exports fell at an annualized rate of 23.6 percent last quarter.

U.S. exports are falling, it would seem, because economies abroad are shrinking. And those economies, in turn, are shrinking because they were previously dependent on exports to the United States. New demand is going to be needed.

Obama Moves Decisively to End the War in Iraq

Upon closer examination, the Obama Iraq announcement turns out to be more clear-cut and less in need of analysis than I’d initially thought:

What threw me off initially was that he’d slightly pushed back his already somewhat-murky promise to withdraw “combat forces” to a 19-month schedule rather than a 16-month schedule. That’s a little disappointing, but the precise calendar was always much less important than the question of what happens next. And here the news is extremely good. As Spencer Ackerman writes:

For the first time as president, Obama attempted to resolve ambiguities about a full withdrawal along the Dec. 2011 framework that the Iraqi government insisted upon in last year’s Status of Forces Agreement, committing himself to its mechanisms. Some on the left have wondered warily why Obama hadn’t made such a public commitment. Those worries will probably end with this line: “Under the Status of Forces Agreement with the Iraqi government, I intend to remove all U.S. troops from Iraq by the end of 2011. We will complete this transition to Iraqi responsibility, and we will bring our troops home with the honor that they have earned.”

Larry Korb observes:

By strengthening our commitment to leave, and setting an earlier deadline for the end of combat operations, Obama has also taken an essential step in building trust with the Iraqi government and people. Even after the signing of the SOFA, some Iraqis publicly doubted whether the United States would leave the country. Obama’s announcement today is a definitive sign that he does not intend to keep forces in Iraq indefinitely, and will work toward fully turning over our responsibilities to the Iraqi government and security forces.

This is huge, and calls for some Rancid:

Now if only he could fix the banking system.

Two Cheers for Regressive Taxes

David Leonhardt had an excellent article the other day on the long-run need for more tax revenue than can be generated merely be allowing for the expiration of the Bush tax cuts. He makes mention of something called Wagner’s Law, which is related to what I was talking about here, and that basically states that as society gets wealthier it demands more and more of the sort of services that need to be provided by the government. That means that over time as the economy grows the share of the economy that becomes tax revenue goes up. This not only meets public demand for more public services, but provided the tax rate doesn’t go up too rapidly, people’s after-tax income is still rising so private consumption goes up along with public services. And as he observed “the problem can’t be solved just by taxing the rich” largely because there aren’t that many very rich people.

The moral of the story, I would say, is that the left will need to embrace some revenue enhancements that are not-so-progressive in their distributional impact. I think that means, in the first instance, taxes on behavior that’s undesirable—carbon taxes, alcohol taxes, congestion pricing, market pricing of parking, etc. (obviously some of this stuff would be for local government rather than the federal government)—and in the second instance the dread VAT.

But why would progressives want to embrace non-progressive revenue sources? Well, fortunately Lane Kenworthy did an excellent post on this a year ago that contains graphs I can steal. The first chart shows that if you look around the one at what it is countries do to mitigate income inequality, nobody is substantially equalizing things through the tax system, but many countries are substantially equalizing things on the spending side:

Not that progressive taxation is a bad thing, or meaningless in the contribution it makes, but clearly insofar as direct public policy interventions (as opposed to things like wider distribution of educational attainment) are going to reduce inequality, it needs to be done on the spending side. Now this raises the question how do you get the spending side to do more? Is it by “means testing” existing programs and creating new small-bore “targeted” programs aimed at the neediest? Well, not really:

The most important thing is to just have lots of tax revenue. Public expenditures are pretty progressive in their impact everywhere, and the difference between a very progressive and a not-so-progressive system is mostly that the more progressive ones are bigger. So while liberals have no reason to give in to conservative demands to make the existing revenue scheme less progressive—by adopting a flat tax, say, or replacing the income tax with a consumption tax—there’s very good reason to basically be looking for revenue by any means necessary. If it’s easier, politically, to get some center-right politicians on board for new consumption taxes than for higher income taxes, then it’s incumbent on progressives to walk through that door and take the revenue. At the moment, of course, that’s not an open door so there’s really no need to worry about it either way. But this is the kind of choice you can imagine progressive politicians and/or activists facing at some future point, and I think it’s important to start building understanding of the structure of the choice.

The Tragedy of Obama’s Climate Policy

If you want some detailed blog analysis of the Obama administration’s cap-and-trade package—and you should—check out Brad Plumer and Dave Roberts. For my part, I was initially puzzled by the linkage of carbon permit auction revenues to the administration’s Make Work Pay tax credit. But then I thought about it again on the Metro and it made more sense to me—it lets you characterize the proposal as a tax cut for working people financed through a tax on polluters.

The trouble with the plan, of course, remains what it’s long been namely that “my best guess is that Obama’s climate proposals are too ambitious to be enacted and too timid to avert catastrophe.” In other words, this is a good proposal. But it’s not good enough to avert catastrophe. And it’s overwhelmingly likely that to get it passed through congress it’ll have to be watered-down.

Obama’s Iraq Announcement

For the record, I am aware that the administration made a big announcement about Iraq today. But I’m pretty busy attending a conference so I haven’t really had the time to digest what’s going on, and I’d rather offer too-slow commentary on it than low-quality commentary.

Meeting Obama’s College Attainment Goals

Louis Soares has a good column up on the CAP website about the vital importance of the goal President Obama set for the United States to start increasing the proportion of the population that has a college degree. A significant portion of the story about growing inequality has to do with the fact that as demand for college-educated workers has increased, the United States hasn’t really increased the supply of such workers. Consequently, the wage differential, which was always significant, has gotten bigger-and-bigger. We’ve seen other forms of inequality growth that have to do with the super-elite pulling away from the vast majority of people, but alongside that there’s been a steady drift of the mass upper class of college educated professionals away from the middle class pack.

The main point I would make about this is that it’s crucially important to broaden the discussion here away from monomaniacal focus on the cost of college education. This is an important financial burden on many richer-than-average families, which makes it a politically appealing topic. But the evidence suggests that the main reason our rate of degree-attainment has been stagnating is that too few people who start college end up finishing college. And though money doubtless plays a role in some of this, the main problem is lack of preparation. There’s a need to both improve the performance of the earlier years of our system—from pre-K on forward—and to improve the performance of our colleges and universities, especially those that serve the low end of the market. In an ideal world, of course, every 12 grader would be perfectly well-prepared and colleges wouldn’t need to worry about that. But we need our institutions of higher education to serve the population we actually have, and that requires more transparency about what’s really going and more of an ethic of responsibility on the part of administrators.

Conservatives’ Unhinged Attacks on Nancy Pelosi

As you may recall, the country used to be suffering from a serious epidemic of Bush hatred, sometimes known as Bush derangement syndrome. Suffers from this syndrome used to do crazy stuff like call Bush a “liar” based on him saying stuff about the budget and Iraq that, well, to be sure, turned out by coincidence not to be true. These are the kind of people who would call Bush a “war criminal” just because he ordered some torture enhanced interrogation techniques that were illegal under U.S. and international law not inside the bounds of the Geneva Conventions. It was a very grave situation and we used to need to stroke our chins about whether bloggers or Paul Krugman were ruining the high-toned debate that had previously taken place between conservatives, right-wingers, the center-right, moderate Republicans, and reasonable liberals.

On an unrelated note, I’ve been noticing recently that some members of the conservative movement have been taking issue with some of Nancy Pelosi’s views on matters of public policy. For example, Ann Coulter observed:

As Obama prepared to deliver his address to Congress on Tuesday, the Republican House Minority Leader John Boehner, Fox News’ Bret Baier and Charles Krauthammer all gushed that history was being made as the first African-American president appeared before Congress. Even Gov. Bobby Jindal, whom I suppose I should note was the first Indian-American to give the Republican response to a president’s speech, began with an encomium to the first black president. (Wasn’t Bobby great in “Slumdog Millionaire”?) Are we going to have to hear about this for the next four years? Obama is becoming the Cal Ripken Jr. of presidents, making history every time he suits up for a game. Recently, Obama also became the first African-American president to order a ham sandwich late at night from the White House kitchen! That’s going to get old pretty quick. But as long as the nation is obsessed with historic milestones, is no one going to remark on what a great country it is where a mentally retarded woman can become speaker of the house?

Agree or disagree, clearly this is the kind of viewpoint that needs to be respected and taken seriously.

Talk radio host Roger Hedgecock took his turn speaking at CPAC to likewise weigh-in on the issues of the day:

I’ve never met Pelosi’s husband but I want to give the guy a medal.

Keep in mind that it’s widely believed to be the case that large numbers of members of congress regularly base their stands on pieces of legislation based on talk radio.

LeBron’s Stats, Now With Pace Adjustment

Over the weekend I made the point that one important thing holding LeBron James back from ever averaging a triple-double in one season is that the game is played at a much slower pace today. Unfortunately, since I don’t work at a basketball think tank I wasn’t able to get anyone to do any rigorous research on pace-adjusting his stats for this year. But Neil Paine at Basketball-Reference has the goods:

Okay, so you’ve all seen Wilt and Oscar’s numbers from 1962… but have you ever sat down and looked at the league averages that year? In ‘62, the average team took 107.7 shots per game. By comparison, this year the average team takes 80.2 FGA/G. If we use a regression to estimate turnovers & offensive rebounds, the league pace factor for 1962 was 125.5 possessions/48 minutes, whereas this year it’s 91.7. Oscar’s Royals averaged 124.7 poss/48, while Wilt’s Warriors put up a staggering 129.7 (the highest mark in the league). On the other hand, the 2009 Cavs are averaging a mere 89.2 poss/48. It turns out that the simplest explanation for the crazy statistical feats of 1961-62 (and the early sixties in general) is just that the league was playing at a much faster tempo in those days, with more possessions affording players more opportunities to amass gaudy counting statistics.

Let’s say LeBron ‘09 could switch paces (note that I didn’t say “places”, which is another argument entirely) with Oscar ‘62… That means we would have to scale down the Big O’s per-game numbers by multiplying them by .715, giving Robertson a far more reasonable line of 22.0 PPG, 8.9 RPG, & 8.1 APG — which are still really good numbers, to be sure, but not as crazy as they looked at the breakneck pace of ‘62. By contrast, we have to multiply LBJ’s stats by a factor of 1.4 if we want to see what they would look like if he played at a 1962-style pace. The results: 40.1 PPG, 10.3 RPG, & 10.0 APG!! As you can see, those 35.5 extra possessions per game really make a huge difference when comparing the two players’ stats.

As is well known from basically all sports arguments, these comparisons across long spreads of time are problematic in a large number of ways. But suffice it to say that the main factor making it impossible for Robertson’s achievement to be replicated today is that there aren’t enough possessions per game anymore. Robertson’s rate of rebounding, assists, and scoring would be very impressive today but they’re not off-the-charts relative to what today’s best players are doing. Also — LeBron James is really good basketball player, but you probably already knew that.

Buck McKeon’s Student Loan Crony Capitalism

The Obama administration’s budget proposes to have the federal government spend billions of dollars on student loans to help students attend college. Since conservative ideology indicates that money should only be spent on killing people, preparing to kill people, and threatening to kill people it’s not surprising to learn that some members of congress are not enthusiastic about this proposal. But there’s a twist. The government already spends billions of dollars on student loans. And the Obama administration is proposing to reduce expenditures.

How so? Well right now we do student loans through a really pointless mechanism of basically laundering the money through private firms. All of the downside risk is borne by the government in case of default. And the lenders receive federal subsidies for doing the service of undertaking no-risk lending. But of course the companies also take a slice off the top for profits and salaries for executives and so forth. Consequently, this is more expensive than just directly lending the money. And the government is bearing all the risk anyway. So what Obama is proposing to do is to save taxpayers money by simply having the government make the loans. What’s not to like? Well:

But there’s already been pushback from Republicans. Rep. Howard P. “Buck” McKeon (Calif.), ranking Republican on the House Education Committee, lashed out against the proposed shift, calling it a “government takeover of the private-sector-based student loan program, taking away options and benefits from students while adding tens of billions” of dollars to the deficit.

The government is not, however, “taking over” anything. The government already completely controls the industry since it’s existence is predicated on the existence of federal subsidies. Obama is simply proposing to cut out the middle man and save some money. The tens of billions of dollars to the deficit point, meanwhile, is just an accounting gimmick. By having the government guarantee loans that formally “belong” to the private firms, a certain level of implicit liability is kept “off the books.” But the liability is still there. And the actual overall cost to the government is lower lower.

The interesting thing here is not just the particulars of the policy, but the bizarre view of the role of government that Howard is espousing. Rather than a debate between progressives who want the government to provide a public service and conservatives who want the service to exist just insofar as it can be supported by the private market, we have a debate where both sides agree that the service ought to exist but the right thinks it’s important that it be done in a less efficient more costly manner because doing it that way generates profits for people who in turn give them money in some kind of nutty sense is supposed to preserve the integrity of the private sector. And it’s not just on student loans. You have essentially the same debate over Medicare Advantage between Democrats who want the government to provide seniors with costly medical services and Republicans who want Democrats to provide seniors with an even more costly version of those services by bringing private insurance companies in as middlemen. It’s ludicrous. Now elected officials are going to get mixed up in these kind of scams now and again, much as you see some Democrats siding with campaign contributors in the hedge fund industry over the basics of progressive politics. But when Chuck Schumer pulls that kind of stunt he takes crap about it from liberals while conservatives seem too busy whipping themselves into frenzies over fake pork-barrel schemes to send mice on maglevs to Disneyland to notice what’s happening.

The Ontology of Transformers

There’s no denying that this is a pretty amusing poster. Still, it reminds me that I think the film engaged in a bit of revisionism when it portrayed the Autobots as humanoid-shaped robots capable of change into cars and trucks and so forth. My understanding from my childhood is that we should think of them as car-shaped robots capable of changing into humanoid-shaped ones. After all, they’re called autobots, like automobiles. Their essential property is their car-ishness.

On the other hand, they’re also called transformers which indicates that it’s the transforming itself that the essential fact. They’re neither humanoid nor car-shaped, but transformative. Or something.

McConnell: Hanging Out With Rush Limbaugh is Awesome

Sarah Posner reports from CPAC:

In his CPAC speech, Senate Minority Leader Mitch McConnell insisted that conservatives are more “interesting” and “fun” than liberals. Here’s his proof: “who wants to hang out with guys like Paul Krugman and Robert Reich when you can be with Rush Limbaugh?”

The extent to which the formal political leaders of the Republican Party are eager to go this far out of their way to embrace Rush Limbaugh is interesting. But there are more Rush fans than Mitch fans:

Just yesterday, Rush once again reiterated his hope that the economy continues to tank because that would be bad for Barack Obama’s reelection prospects.

When is a Bank Nationalized?

There’s always been some conceptual unclarity around the idea of “nationalizing” a bank. But it seems to me that if the government is going to own 30-40 percent of Citi then that looks a lot like nationalization to me. But how come only some of the board is getting sacked? Would anyone argue that Citi’s directors have been doing a great job? Why can’t I get a gig on the board? How poorly managed could the company get?

The Right’s Civil War

Predictions of a “conservative crack-up” tend to be a dime a dozen in American politics, and it rarely happens. But this month, I really do get the sense that we’re witnessing the opening rounds in a significant battle inside the conservative movement. The difference, it seems to me, is that you’re increasingly seeing actual politicians and people who are very close to the political arena getting into the fray. That’s difference from a question of a handful of disaffected conservative intellectuals or an intramural squabble between pundits. Here, for example, Utah Governor Jon Huntsman basically calls the congressional GOP a “very narrow party of angry people”:

Q: In December you talked about people 40 and under having a very different view on the environment. Is there a similar generational gap on gay rights?

A: You hit on the two issues that I think carry more of a generational component than anything else. And I would liken it a bit to the transformation of the Tory Party in the UK…They went two or three election cycles without recognizing the issues that the younger citizens in the UK really felt strongly about. They were a very narrow party of angry people. And they started branching out through, maybe, taking a second look at the issues of the day, much like we’re going to have to do for the Republican Party, to reconnect with the youth, to reconnect with people of color, to reconnect with different geographies that we have lost.

On Huntsman’s side, roughly speaking, I think you can also see Governor Charlie Crist of Florida and New York Times columnist David Brooks along with his merry band of reformist conservative pundits. Anchoring the other end of the spectrum, you’ve got Bobby Jindal of Louisiana leading a weird band of stimulus rejectionists. He’s being backed up by the House GOP’s quasi-official leaders Rush Limbaugh and Newt Gingrich both of whom have taken the reality-defying view that Jindal’s speech yesterday was secretly brilliant. Guys like Eric Cantor and Mike Pence in the House and Jim DeMint and Mitch McConnell in the Senate have, likewise, really been digging in their heels on the idea that blanket oppositionism is the way to go. Thus far, though, you haven’t seen anyone on the Hill really take up the reformist banner. There’s the Senate’s troika of northeastern moderates, of course, but I think everyone agrees that they’re not the future of the American right. For the infighting to really become significant in a policy sense, you’d need some members of the House and Senate to try to put what Crist and Huntsman are talking about into practice.

CAP Budget Reax

Everything you wanted to know about the Obama budget and more from the Center for American Progress policy teams:

1. Dan Weiss on the climate and energy elements.
2. Cindy Brown and Melissa Lazarín on education.
3. Larry Korb on defense.
4. Michael Ettlinger on the big picture.

It’s not Obama’s style to actually say this, but were this budget to be enacted it would be by far the most significant progressive step in over forty years.

Funded by the Funds

Part of Barack Obama’s budget is his plan to go after the special tax break enjoyed by hedge fund and private equity fund managers. This is an obvious idea, since there’s no good reason for this special treatment. But it didn’t manage to get done last year because Republicans love rich people and this particular class of rich people has given a lot of money to a few key Democrats. Indeed, Tom Edsall’s article on the subject includes these charts showing the Democrats are the main beneficiaries of the fund managers’ largess:

and

One noteworthy thing about this is that these guys weren’t just following the political winds and backing the majority party. It’s typical for Democrats to do well with certain industries when they’re in power, but not-so-well when they’re out of power. But these guys were Democrat-friendly even through the lean years. Thus:

When the hedge and private-equity fund industries faced a similar challenge to their capital gains tax break in 2007, most of them entered the ring expecting defeat, only to emerge victorious. In addition to campaign contributions, the individual companies and their trade associations sharply escalated their lobbying activities, pulling out the stops to beat back the tax reformers. [...] One of the factors working to the funds’ advantage is that the Senate Finance Committee works in mysterious ways, unexpected decisions abruptly emerging from private deal-making that can radically transform the impact of tax legislation. Anyone assuming that the special treatment of hedge and private-equity fund managers will be scrapped by a populist Democratic majority should hold the champagne until Obama signs the bill into law.

Of course the wild car here to some extent is the Republicans. I thought the quiet death of hedge fund loophole repeal during the last congress would have been a great opportunity for the GOP to steal a bit of the Democrats’ populist mojo while at the same time punishing a class of people who mostly finance the opposition. Certainly that political tactic would have seemed more likely to broaden the parties appeal than a lot of “Joe the Plumber” antics. And it would have been better for democracy, too. You need real competition between the parties.

Sari Nusseibeh’s Big Idea for Peace in the Middle East

Sari Nusseibeh, the Palestinian philosopher, academic, and moderate leader has a joint initiative with former Shin Bet chief Ami Ayalon called “The People’s Voice.” It’s basically a fleshed-out version of the Arab Peace Initiative from 2002 that gets more specific on the refugee front. It calls for:

• A return to the 1967 borders.
• 1:1 land swaps that deviate from the ‘67 borders if those can be agreed to.
• A connection between the West Bank and Gaza.
• Removal of settlers from the new Palestine.
• Establishment of Palestine as a demilitarized state.
• Return of Palestinian refugees only to Palestine, with financial compensation and international community support for refugees who wish to permanently settle in their current country of residence.
• Shared control of Jerusalem.

The Arab Initiative is very fuzzy on the refugees, but as an Arab League Initiative carries with it the significant sweetener that all the Arab League states are promising full normalization of relations with Israel. But the point is that the basic outline of this framework is not especially novel—this is basically what everyone agrees a mutually acceptable settlement would more-or-less have to look like. What’s provocative is this idea relayed by Jonathan Zasloff:

Nusseibeh noted that neither side’s leadership is prepared to make the compromises for peace at this stage, either because of weakness, ideological rigidity, extremist vetoes, or a combination of all of these. Thus, his proposal is to allow the Israeli and Palestinian publics to take the matter into their own hands. How could this be done?

George Mitchell, Nusseibeh suggested, should take an American peace plan (and he made it clear that it should be the People’s Voice framework) to both Netanyahu and Abbas.

He should then publicly challenge Netanyahu to place this plan on the Israeli ballot as a referendum. Netanyahu would not have to endorse the plan, but rather allow the voters to decide whether they would accept it as long as the other side does.

On the Palestinian side, he should publicly challenge Abbas to call for new elections (due in the PA thus year in any event) and run on that platform for his presidential campaign — accepting the plan as long as the Israeli electorate does.

Nusseibeh believes — and I agree with him — that such a public offer would be difficult for either side to refuse. It would not require Netanyahu to endorse the plan, but would undermine him politically if he refuses to allow the voters to decide. It would give Abbas a concrete platform and plan to rid the Palestinians of the occupation.

If the Obama Administration starts another round of negotiations, Nusseibeh argued, it will be drawn into an endless labyrinth. He’s right.

Both sides will have very strong incentives to vote yes — the side that votes no will very clearly be at fault for refusing an end to the conflict.

What Nusseibeh didn’t say is that the United States must send a strong signal about how important a yes vote is, and how difficult it will be to maintain strong political support for Israel in the US if it is seen as the obstacle. The Arab League must do the same for the Palestinians. The EU must do the same for both sides.

In the real world, it’s a bit hard for me to imagine an American president rolling the dice like this. Among other things, what do you do if one side votes yes and the other side votes no? Agree that this proves they’re the unreasonable ones and the other side now has license to deal with them through brute force? On the other hand, there are compelling elements to the logic. But I dunno . . . to really advocate putting all the chips on the table . . . it just sort of seems like too much. I dunno, I’ve got to think more.