Matt Yglesias

Endgame

Strange but not a stranger:

— Arizona doubles down on discriminatory laws.

— The difficulty of knowing what to say about financial regulatory reform.

— Polarization is not driving declining trust in government.

— What’s ailing Bob Bennett.

— Dave Berri endorses conventional wisdom, says Curry & Evans were the best rookies.

Nick Beaudrot found an awesome Tom Jones / Cardigans cover of “Burning Down the House”.

Rush Limbaugh Hits ThinkProgress

I can’t actually understand what Rush Limbaugh is trying to say about our team here:

RUSH: The Think Progress blog here is a George Soros operation, and they have a post on me today: “Limbaugh suggests Obama is touchy about Arizona law because you can’t produce his own papers.” Remember when I said that yesterday? I knew that’d tweak ‘em. I knew that’d tweak ‘em. They quote me as saying, “Papers = Nazi. ‘Your papers, please,’ equals Nazi. That’s why Obama using the term. I can understand Obama being touchy on the subject of producing your papers. Maybe he’s afraid somebody’s going to ask him for his,” and then they link to the audio on my website to listen to it. Then they talk about all the other “false claims,” and Snerdley said during the break, “You know, you’re going to get blowback on this comparison here to Hitler and the Soviets.” Fine! Let the blowback come. What did I say that’s wrong?

What did I say that’s not factually correct? The Soviets, the communists divided people by class. That’s how they promoted war and chaos in their culture: Haves versus have-nots. Obama’s doing that in this country. Joe the Plumber. “We wanna spread the wealth around.” Hitler, as we all know, used race as his divide and conquer technique. Well, what’s going on now here? What’s untrue about that? Did Hitler do that? Ask the Jewish people and the gypsies. Ask anybody if Hitler did it. Ask anybody if the Soviets did it. Both statements are true. Are we not being divided by class in this country? Is that not what this agenda is all about, redistribution? And Obama is throwing the race card here on this Arizona immigration bill. So let the blowback come. I am not afraid of the blowback. Truth is the truth. That’s why truth will drive liberals crazy if they listen to this show.

I guess this is why Jews and racial minorities are such vehement opponents of Barack Obama and loyal friends of the conservative movement?

Jonah Goldberg On Iran & Arizona

Sometimes Jonah Goldberg lacks the imaginative resources necessary to come up with new stupid things to say, so he relies on his audience of stupid people and relays their emails. For example this:

Isn’t it striking how many on the left shriek their immediate support for an Arizona boycott even as they stand mutely by as Iran – in violation of international accords – accelerates towards nukes…

actually, no – it isn’t….

Iran, of course, is already subject to very stringent US sanctions and somewhat stringent international sanctions, and the Obama administration is seeking to tighten those sanctions. What’s more, the whole debate about Iran is about efficacy—what will actually work. The debate about Arizona is about content—conservatives in Arizona and around the country are cheering a discriminatory policy on and liberals are opposing it. There’s no debate in the United States about whether or not Iranian nuclear weapons are desirable.

Ratings Agency Primer: Understanding the “Nationally Recognized Statistical Ratings Organizations” Rule

Pretty much everyone agrees that we have a ratings agency problem. But I think the conventional way of describing it as a “conflict of interest” that’s created by the fact that “banks pay them to rate their securities” leaves some crucial steps out.

Like suppose I was opening a salad joint in downtown Washington and wanted to convince people of the high quality of my salads. This might be tricky, especially if my business model was to buy a bunch of crappy ingredients and tell people they’d been mixed together in just such a way as to be delicious. One thing I definitely couldn’t do is just turn to Moody’s Salad Rating Agency and pay them to say “these ingredients may be gross individually, but combined they’re delicious—AAA!.” And the crux of the problem isn’t that regulators would stop me, it’s that it would be pointless—nobody would take Moody’s Salad Rating Agency seriously if it operated on that business model.

A plan that actually might work is that I could go to The Washington Post and promise to pay them under the table in exchange for a favorable review. But it’s important to note that that kind of fraud isn’t what’s going on with the ratings agencies. Everyone understands that this conflict of interest exists, but it doesn’t kill them off.

That seems mysterious, and at first glance you might reach for a free market approach. After all, why does it make sense for me to pay Moody’s SRA in the first place? Well, presumably because salad-eaters deem Moody’s to be credible. Consequently, even though Moody’s does< want as much business as possible, Moody's knows that in the long run it maximizes revenue by only giving the AAA-rating to really good salads. If Moody’s engaged in some giant salad screw-up, salad-eaters would lose faith in Moody’s-rated salad shops and reputable salad vendors would start shifting their business to other salad raters. In theory, a salad-rater could be perfectly credible notwithstanding the conflict of interest. In practice, however, consumers are likely to put more faith in third-party reviews in reputable media outlets or just rely on recommendations from friends.

The real question about the ratings agencies is why this kind of process doesn’t work. To understand the answer, you need to learn the term “Nationally Recognized Statistical Rating Organizations”. What’s an NRSRO? In short, it’s a ratings agency. But NRSRO isn’t just the name of a line of work, it’s the name of a special regulatory status. To be an NRSRO you need to be certified as one by the Securities and Exchange Commission. And becoming an NRSRO isn’t just a matter of having a fancy label, it’s embedded in a web of other regulations. For example, regulatory assessment of bank and insurance company capital reserves requires assets posted as reserves to have an NRSRO-certified rating. NRSRO-certified ratings are also relevant to regulations about money market funds and some pension funds.

This does two things. One is that it reduces competition, since it’s hard to get that NRSRO label. But that’s probably the less-important consequence. The more important consequence is that it undermines buyer-side incentives for ratings to be accurate. The “major” ratings agencies all use the widely criticized issuer-pays model. But if, qua buyer, you don’t like that model you can instead choose to rely on a smaller rater like Egan-Jones that doesn’t use that method. That, however, assumes you actually care about how risky the assets you’re buying are. But in many cases you care less about actual risk than about how your risk plays for regulatory purposes. It’s as if you’re not actually planning to eat the salad, you just need to tell someone else that you bought a AAA-certified tasty salad. And if you care more about the rating than the actual quality, then you don’t care whether or not Moody’s SRA has a sound methodology, you just care that it’s cheaper and more convenient to let the salad vendor go through the hassle of getting the rating.

Note that this is an issue where adopting the kind of discretion-free “Roman” approach that many liberals have been promoting in other contexts is part of the problem. The rigid rule may have made sense when it was initially adopted, but over time what started as a rule business practices have evolved that are based on knowledge of how the rule works that undermine its spirit.

Immigration Principles

This is a blog about politics, and politics on some level is about legislative proposals and whether they can pass and whether they help or hurt efforts to win elections and whether election outcomes help or hurt prospects for specific pieces of legislation. But on another level, politics is about ideas and sentiments and attachments and worldviews and so forth.

And to me, at least, when the topic comes to immigration I’m much more interested in that more abstract level of conversation than in narrow debates about forging a legislative compromise. The bottom line, for me, is that this is an issue fraught with misunderstandings. People wildly underestimate the extent to which immigration is a positive-sum interaction that leaves almost everyone better off. It’s true that as is typical in life some individual people are harmed by high levels of immigration, but those people are a distinct minority. It makes dramatically more sense to try to improve the living standards of native-born Americans through higher taxes to finance more and better public services than it does to try to improve the living standards of native-born Americans through trying to prevent people from moving to the United States to do work in exchange for money.

Accurately keeping track of which people are entering the country has some real value from a counterterrorism and smuggling point of view, but limiting non-criminals’ ability to come here as tourists or workers is a low- to negative-value proposition.

What’s more, though it’s inevitable that democratic politics will focus mostly on what Americans want and need from an individual perspective it makes more sense to take a more global outlook. Relative little of the most intense suffering in the world takes place in the United States or other developed countries. And one of the very most useful things developed countries can do to alleviate intense suffering is to allow people to come live in our countries and do work in exchange for money. Developed countries are nice places with democratic politics and liberal rights and economic opportunity. It’s good for people to experience these things and it’s good to expand the number of people who have the opportunity to experience them. The right to move where you want is one of the most important rights a person can be granted, and it’s a shame that so few people have that right.

Obviously, that’s all way off message and not where politics is going. But we’ll be talking about migration in 2020 and 2030 and 2040 and 2050 and beyond and it’s important to not just promote good bills, but sound, humane ways of thinking about the issue.

MLBPA: AZ Immigration Law “Could have a negative impact on hundreds of Major League players”

The executive director of the Major League Baseball Player’s Association has released a strong statement condemning the Arizona immigration law. I’ve pasted it below the fold:

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Stephen Spuriell on Student Loans

One major analytic error I think liberals tend to make is vastly overstating the level of dishonesty among conservative pundits, analysts, advocates, etc. The crux of the matter is that the overwhelming majority of smart people with conservative political opinions are working as businessmen. If they think about public policy at all, they’re thinking about how to cheat on their taxes or clever knew ways to bilk the public, and certainly not talking about it. So you’re left with a kind of denuded population in terms of brainpower. But at the same time, smart conservative businessmen have financed a staggering array of conservative institutions creating a tremendous number of jobs for conservative pundits and so forth despite the shallow talent pool. The result is a lot of people saying dumb things that they genuinely believe.

Which is all by way of introducing an excellent Barron Young Smith post in which he recaps a dispute between Jon Chait and Stephen Spuriell over the latter’s bizarre critique of Barack Obama’s student loan program and then ads his own detailed demolition of Spuriell’s stance. I think if you read it, it quickly becomes clear that Spruiell has no idea why he opposes student loan reform. Or, rather, he knows he opposes it because Obama proposed it and conservative politicians mobilized against it. So he started grabbing random ideas and throwing them together, citing Jason DeLisle without attempting to understand what he was saying, and generally making a fool out of himself.

Declines in State and Local Government Spending Continue to Drag Economy Down

State Capitol, Augusta, ME (cc photo by jimbowen0306)

Here’s some important details buried inside the new GDP figures:

Real federal government consumption expenditures and gross investment increased 1.4 percent in the first quarter, compared with no change in the fourth. National defense increased 1.2 percent, incontrast to a decrease of 3.6 percent. Nondefense increased 1.7 percent, compared with an increase of 8.3 percent. Real state and local government consumption expenditures and gross investment decreased 3.8 percent, compared with a decrease of 2.2 percent.

The point here is that contrary to the impression fostered by the right of a grasping federal government crushing everything, all increases in federal spending have been doing lately is partially offsetting recession-induced declines in state and local government spending. Those declines are very economically damaging. If you ignore the large element of the American Recovery and Reinvestment Act that was dedicated to cutting taxes, the largest spending element was aid to state and local governments to prevent tax hikes and these kind of spending cuts. In an ideal world, Congress would have appropriated even more funds for these purposes than was in the initial problem. Instead, the Senators from Maine teamed up with some moderate Democrats to scale it back. It’s been a huge mistake and we’re likely to continue paying the price for it in terms of sub-trend output for years to come.

American Politics Needs De-Presidentialization

In the course of a series of excellent observations on the UK leadership debate Rick Hertzberg says:

I have qualms about the Americanization—the Presidentialization—of British politics. These debates change the focus from the parties and their policies (which are outlined in manifestos that are taken seriously, even by those who draw them up) to the leaders and their personalities. I’m not sure that what Western democracies need is greater fealty to the Führerprinzip.

Ever since I first heard it in reference to Canadian politics I’ve been puzzled by these complaints about the “presidentialization” of parliamentary political campaigns. It actually makes much more sense for a country like Canada or the UK—with few veto points and strong party discipline—to have this kind of personality-focused campaigning. It’s the United States where it doesn’t make sense to have this kind of monomaniacal focus on the will and character of Barack Obama as the key determinant of policy outcomes. In the UK, Gordon Brown can do pretty much whatever he wants and the opinion of some random Labour backbencher in a marginal constituency is irrelevant. In the US, by contrast, policy outcomes are the result of a complicated bargaining process in which the White House matters more than anyone else in particular but most of the power is in the dispersed hands of sundry members of congress.

Smoking, Age, and Income

Ryan Avent comments on Gallup’s analysis of the demographics of smoking:

Fascinating to see how these variables interact. For those without a high school diploma, there is basically no relationship between income and smoking habits, while for other groups, the relationship is clear and significant. To me, the educational (and implied class-based) effects on these habits are really interesting, but let’s focus on the income side for a moment. Smoking, as a habit, seems to be an inferior good—the higher your income, the less of it you do. But this is really remarkable. A pack of cigarettes costs perhaps $5 on average (though this varies widely based on local tax rates). And smokers probably smoke about a pack a day on average. That means that a smoker is spending nearly $2,000 in after-tax dollars on smoking. That’s an enormous share of household income for those earning $24,000 a year. How to explain this?

That analysis seems wrong to me. Among the better-educated cohorts, income is highly correlated with age. I think we’re seeing that among people with some college education, young people are much more likely to smoke than are older people. I know lots of people who smoked at one time but quit during their late-twenties or early-thirties and I don’t know anyone who picked up the habit at 28. So this seems like a coincidence.

That said, ignoring the education piece of this it remains the case that Consumer Expenditure Survey data indicates that tobacco products are a very large share of poor people’s overall consumption. If nicotine addiction rates decline among future cohorts of poor people, that will be a boon to their welfare completely apart from the narrow health consequences of smoking.

GDP Grows By 3.2% Annual Rate in First Quarter

Catherine Rampbell reports on the continuing saga of our so-so economy:

National output grew at a seasonally adjusted annual rate of 3.2 percent in the quarter, the Commerce Department reported Friday, after growth of 5.6 percent in the fourth quarter of 2009 and 2.2 percent in the third quarter.

The steady growth has quelled fears that the downturn is not quite over.

“It’s been a case of, when will they stop worrying and learn to love the boom?” said Robert Barbera, chief economist at ITG, who said that many economists have been too hesitant to acknowledge the steady recovery because the job market is still weak.

Look, a 3.2 percent rate would be strong performance for an economy operating in a normal context. It’s consistent with recovery. Everyone who said the Obama/Bernanke/Geithner anti-crisis measures were going to sink the global economy was wrong. But given the quantity of idle resources and idle people in the United States, it should be possible for us to put together several 5+ percent quarters in a row. America is more productive than ever, employment costs are restrained, the price * output level remains way below trend, and there’s no particular reason to be satisfied with these results. There’s a ton of focus right now on how to prevent the next economic crisis, but not nearly enough on how to pull out of the current one faster.

Obama Administration Learns That Oil Leads to Oil Spills

The other day my colleague Brad Johnson took the opportunity to remind us that when Barack Obama rather abruptly chose to emphasize his pro-drilling credentials he was at pains to repeat the myth that offshore drilling is a safe and spill-free enterprise:

I don’t agree with the notion that we shouldn’t do anything. It turns out, by the way, that oil rigs today generally don’t cause spills. They are technologically very advanced. Even during Katrina, the spills didn’t come from the oil rigs, they came from the refineries onshore.

It’s of course true that oil rigs don’t “generally” cause spills in the sense that on the vast majority of days there is no spill. The problem is that when spills do happen, it’s catastrophic. It’s never been accurate to say that hurricanes Katrina and Rita didn’t lead to drilling-related spills and now we’re seeing today once again that offshore drilling poses a clear and present danger to the surrounding ocean. If that were the only problem with drilling, it would probably be a problem worth living with, but given that there are many reasons to think we should be attempting to transition to a post-oil economy endangering the oceans to simply postpone adjustments that are needed anyway seems shortsighted.

Today, the White House says they need to put a hold on new drilling until we can investigate what happened, and White House environmental advisor Carol Browner seems to be indicating that the policy will be rethought.

Florida Republicans Don’t Like Arizona Immigration Law

Conservatives interested in the question of how to get non-white people to vote for conservative politicians would do well to take some lessons from the state of Florida, where the historical orientation of the Cuban-American community to fanatical anti-communism has created a bunch of politicians who are accustomed to winning Hispanic votes. As you’ll see, avoiding legislative initiatives that are likely to lead to massive racial discrimination is part of the strategy. Here’s Senator George LeMieux trying to avoid antagonizing the right while clearly condemning the law:

Representative Connie Mack, also a Florida Republican, condemned the law in harsher language. Marco Rubio doesn’t like it either. And I think that’s what you’ll see across the board. Note that Cubans, uniquely among all the world’s people, have an unrestricted right to move to the United States of America. So Cuban-Americans don’t have a personal concern with immigration issues per se. Obviously, though, the logic of anti-immigration policies is that Cubans’ right to move to the US ought to be restricted, and Cuban-Americans are liable to be caught up in whatever kind of discriminatory nonsense the Arizona legislature may intend to aim at folks from Mexico.

The Globalization Problem

An excellent point from Ezra Klein about the problems of a more globalized world:

So you get something like Greece where the bailout has to come from people who don’t think they care whether Greece fails, or you get something like a global bank tax where Canada refuses to go along because its banks don’t deserve to be punished with a tax. As domestic regulations and solutions become more vulnerable to international arbitrage and global problems, the needs for smooth international actions will become greater, but it’s not clear to me such things are actually becoming easier.

I actually think coordinated international action has arguably become harder as a result of the very same trends in economic policy. It used to be that you could hammer out an agreement and explain it to the Germany people one way in Bild another way on Greek television and a third way to the Financial Times and the Wall Street Journal. People tend to have an unduly zero-sum view of international interactions, so message-segmentation is often key to selling any kind of mutually beneficial agreement.

At any rate, this is a fairly general problem, but on the specific issue of financial regulation it strikes me as a fairly compelling reason to move back to some limited form of capital controls to allow countries to pursue tax and regulatory measures without everything with any teeth requiring near-universal international coordination.

Endgame

Lord I just don’t care:

— “Simulating Representation: Elite Mobilization and Political Power in Health Care Reform”.

— Principals matter a lot for school performance.

— You shouldn’t assume regulators will be perfect when designing your regulations.

— Michael Greenberger on derivatives.

— Senate Democrats’ immigration plan.

The XX remixes Florence and the Machine’s “You’ve Got the Love”

Ben Nelson and Berkshire Hathaway

Rachel Slajda flags Ben Nelson’s curious outburst against critics of his apparently Buffet-motivated filibuster of financial regulatory reform:

“To be absolutely clear, I did not vote no because of Berkshire Hathaway. Nor did the fact that I and my wife have owned Berkshire stock for 30+ years have anything to do with my vote. It has never been an issue. It isn’t now,” he said in a statement. “I voted no because of concerns about what is in the underlying bill drafted by Senator Dodd.”

He said he did support the exemption Berkshire wanted, as a matter of policy. To force existing contracts to conform to new rules, he said, would be unconstitutional.

So he wanted the same think Berkshire wanted, and he owns shares in Berkshire, and Berkshire is located in his home state, and he filibustered the bill, but he didn’t filibuster the bill because of Berkshire’s concerns. It’s just a big coincidence. Now we’re clear.

Meanwhile, the rule in question is clearly constitutional. In fact, if it were unconstitutional it probably wouldn’t bother Warren Buffet so much. He’s concerned precisely because the law would be enforced and he doesn’t want to comply with it.

The Falling Price of Computing Power

That computing power has been getting cheaper over time is of course something people know. But it’s really staggering when you see it staring you in the face. Here’s an amusing story about buying an Apple IIe to use as a Twitter terminal:

Actually the story begins another week or two earlier at the Silicon Valley Electronics Flea Market. I came across a guy with a bunch of Apple II computers stacked up and ended up buying an Apple //e and a disk drive for $20. His prices were $10 for an Apple //e and $25 for an Apple II+. The Apple II+ is technically the lesser machine – an earlier model that lacked the features of the Apple //e but is more expensive due to scarcity. The computer my parents purchased for me was the original Apple II, an even older and more rare model. I asked him if he had any of that model and he said no, but if he did they’d run a few hundred dollars.

The $798 price of the board-only Apple IIe 1980 dollars, by contrast, would be over $2,000 today—less than one percent of the contemporary price, despite the scarcity issue.

This is context that I think needs to be kept in mind when people talk about, for example, the growing share of the economy dedicated to providing health care services. The different sectors need to sum up to 100 percent of GDP and some stuff gets much cheaper thanks to technological progress. In part, that leads us to buy more and more of it—and we certainly buy a lot more computing power than we did 30 years ago. But in part it means that a bigger share of the economy winds up going to other things, like health care.

Yellen Touts “Maximum Employment”

Interesting catch from Annie Lowrey who notes that Janet Yellen put the Fed’s jobs mandate first when officially acknowledging her appointment as Vice Chair of the Board of Governors:

I’m honored that President Obama has asked me to serve in that capacity. If confirmed by the Senate, I am looking forward to working even more closely with Chairman Bernanke and the other governors, and continuing to collaborate with my colleagues throughout the Federal Reserve System to conduct policies that foster economic prosperity and ensure a stable financial system.

I am strongly committed to pursuing the dual goals that Congress has assigned us: maximum employment and price stability and, if confirmed, I will work to ensure that policy promotes job creation and keeps inflation in check.

Might mean nothing, might mean something. It’s probably worth observing that the dual mandate is arguably conceptually incoherent. In normal times, the Fed only uses one policy instrument so it can’t really be targeting two things. The main practical upshot of the dual mandate is that it’s impossible to say for sure whether or not the Fed is meeting it. If you gave the Fed a single clear mandate—keep M*V growing at a steady rate of approximately such-and-such then Congress and the President could specifically say whether or not the Fed was executing its mission.

Salt and Freedom

Monica Potts says FDA regulation of the salt content of prepared foods won’t impair our liberty:

Mario Rizzo missed the point yesterday when he wrote in the Christian Science Monitor that the government is trying to regulate how much salt we eat. Obviously, that’s not what it’s doing with this new FDA initiative. What it is trying to do is regulate the amount of salt companies put in a serving of food. People are as free to buy salt and add it to meals as they ever were. Many of the coming health-care reform provisions regulate companies, not people. The idea that that’s somehow bad for our ability to operate freely in the world is ridiculous.

“Ridiculous” seems too strong to me. Clearly, the goal here is to get people to eat less salt. And it’s true that once we accept that concern for public health is a legitimate public concern we are opening the door in principle to a lot of government activity. On the other hand, even though a lot of people have libertarian instincts about novel paternalistic measures relatively few people have a consistent view in the other direction. Government policy encourages vaccinations against infectious diseases and you never see anyone agitating for the right of poor people to use SNAP to buy tax-free cigarettes.

The basic issue with salt regulation, I think, is the one highlighted in Tom Slee’s No-one Makes You Shop at Wal-Mart. Once you get beyond a certain set of generic commodities, it’s just not the case that the free market provides you with an infinite array of choices. At my supermarket, you can buy cottage cheese with a lot of salt added or you can buy a disgusting no-salt-added alternative product. If what you really want is something with 85% of the salt of the high-salt version, you’re out of luck. Not because of any insidious corporate conspiracy, but because it doesn’t make economic sense to try to precisely meet an infinite variety of preferences.

In the case of salt, it’s a lot easier to add salt to something you find not quite salty enough, but hard to remove salt if you’d be happier (or equally happy) with less. But the market would punish a company whose product only tasted good to most people if you added extra salt of your own. The minority who prefers it with less salt is probably going to be out of luck. Force people onto the lower-salt equilibrium, meanwhile, and though some folks will add the salt back in many will probably find themselves cutting their sodium intake and not minding the difference at all. I think trying to sell this kind of “nudge” measure as somehow a form of libertarianism is pretty silly, but it’s worth emphasizing that the options facing consumers in the market for branded consumer goods is going to be pretty sharply constrained however public policy structures the market. Insofar as it’s possible for regulatory measures to create large public health gains (my understanding is that it’s actually unclear if cutting salt will do that) then that’s something I’m supportive of.

Too Hot for YouTube M.I.A. Video Leads to Surge of Publicity for M.I.A.

I was going to try to explain the situation around M.I.A.’s “Born Free” video, but Charli Carpenter’s economical explanation is better than mine:

Just a day after it was released earlier this week, the unnervingly violent anti-genocide music video, “Born Free,” was reportedly deleted by YouTube. Actually, as Wired has confirmed, it was only “buried” to make it much harder to find. But the video was simply posted on Vimeo and other sites, and the outrage over the “censorship” caused a viral response, such that the hit rate over the last few days has meant a version of it is again nearing the top of search lists on YouTube. In effect, the Internet has “routed around” this problem.

The interesting thing, of course, is that as is often the case this effort at semi-censorship has only made the video higher-profile than it otherwise would have been. Meanwhile, I’m actually a little bit surprised its taken M.I.A. this much time to land herself in a controversy of this sort—she’s always seemed to me to be deliberately pushing past the boundaries of acceptable discourse in order to get attention.

Can’t Pivot to the Economy With Magic

William Galston argues, sensibly, that the politically smartest thing for Democrats to do is neither climate nor immigration after Wall Street reform but instead they should “quickly pivot to the economy and would sustain that focus through the spring and summer.”

As a matter of political strategy, I agree with that. Nothing would do more to impact the midterms than improvements in the economy. But in legislative terms, what does that mean? The bad economy has led to a collapse in trust in public institutions, and the voters—falsely—believe that fiscal stimulus measures haven’t helped the economy. It would have been smart to simply ignore the voters’ half-assed macroeconomic theories back in February 2009 and pass a bigger and better-designed stimulus bill. But at this point, I think a wide range of incumbents (mostly Democrats, but also Bob Bennett) are simply going to have to lay in the bed they’ve already made.

Goldilocks Obama and the Left’s Persuasion Problem

The latest Washington Post poll is full of terrible news for congressional Democrats, but also a reminder of Barack Obama’s fundamentally strong political position:

My prediction is for huge Republican gains in the midterms followed by lots of talk about conservatism on the upswing and Obama’s need to readjust followed by a bunch of gridlock and Obama cruising to re-election.

That said, the other thing we see here is something that those of us who think Obama is too conservative don’t like to confront. You see a lot of talk about “guts” and being “tough” and “brave” and “bold” but fundamentally we’ve done a terrible job of persuading people in the public that we’re right and there are many issues on which Obama should be more progressive. As Chris Bowers likes to point out, the most credible most beloved messenger on the left is—wait for it—Barack Obama, which tends to make Obama immune to criticism from the left. This is a fundamental problem for shifting the country in a progressive direction. Indeed, in a lot of ways it’s even a problem for Obama himself. But it’s fundamentally a problem of persuasion rather than a problem of Obama’s character.

The Freedom Agenda Comes to Iraq

New Human Rights Watch report into how that democracy, whiskey, sexy is going:

Detainees in a secret Baghdad detention facility were hung upside-down, deprived of air, kicked, whipped, beaten, given electric shocks, and sodomized, Human Rights Watch said today. Iraq should thoroughly investigate and prosecute all government and security officials responsible, Human Rights Watch said. [...] The men’s stories were credible and consistent. Most of the 300 displayed fresh scars and injuries they said were a result of routine and systematic torture they had experienced at the hands of interrogators at Muthanna. All were accused of aiding and abetting terrorism, and many said they were forced to sign false confessions.

I’m old enough to remember when the existence of torture chambers and rape rooms was considered by the right to be sufficient casus belli for invading Iraq, irrespective of bogus WMD intelligence. Then came the revolution in conservative thinking whereby torture became virtuous, and something only socialists would oppose. And now Bush seems to be surpassed by his proteges in Iraq.

Bad Amendments to Fear

Let’s maybe take a moment to appreciate the fact that the much-criticized Harry Reid not only succeeded at shepherding a health care bill to passage in the face of relentless obstructionism, he now scored a big strategic win in breaking down the GOP filibuster of the motion to consider the financial regulation bill. For someone I’m constantly hearing derided, he seems to be accomplishing an awful lot.

Next up, Tim Fernholz tells us we should worry about bad amendments:

Republicans will bring up their own amendments; this will likely include exemptions for specific industries — auto dealers, payday lenders — from consumer protection rules, federal preemption of state regulators, new loopholes in derivatives regulation, weaker prudential standards, and even radical re-designs as part of the bill. While it won’t be easy for Republicans to pass amendments in the face of a united Democratic caucus, playing to regional interests could result in a few successful poison pills. Republicans may even offer new language on Fannie Mae and Freddie Mac, and issue Democrats are reluctant to talk about — they want to want to deal with it separately from the current legislation.

I think it’s most important to worry about loopholes, and also that Tim is being a bit too partisan here. One of the fundamental dynamics in congress is that everyone’s a whore for his home-state industries. So for any possible loophole, there are going to be a number of possible Democratic votes. What’s more, there’s a problematic public opinion dynamic here in that support for regulatory reform is strong but seems specifically linked to invocations of “Wall Street”:

This leaves politicians a lot of room to define their loophole as for something other than bad old Wall Street. For example, I saw Saxby Chambliss on MSNBC this morning complaining that the bill would treat “small community banks” in just the same way as “Wall Street banks.” He didn’t offer a concrete legislative proposal, but you could imagine some giant loopholes under this rubric. Is my bank, PNC Bank with $270 billion in assets, just a wee little community bank because it happens to be located in Pittsburgh?

We also especially need to worry about the dynamic that can be unleashed because people are allowed to vote for amendments even with no intention of voting for the underlying bill. You can have a coalition of Republicans and moderate Democrats load the bill down with amendments liberals oppose. Then the Republicans can vote no anyway. At which point maybe the liberals vote no too, and now the bill can’t pass. And this time it’s hard to mobilize public outrage against the obstructionists, because it’s nobody’s fault in particular.

Obama Makes Fed Nominations!

At last:

President Barack Obama on Thursday plans to name San Francisco Federal Reserve Bank President Janet Yellen to be vice chairman of the U.S. central bank and two others to fill Fed board vacancies, sources familiar with the process said on Wednesday.

In addition to Yellen, Obama intends to name MIT economist Peter Diamond and Maryland state bank regulator Sarah Raskin to the Fed, the sources said. All three would have to be confirmed by the Senate.

As you know, I’ve been waiting for this for some time. Yellen is a Fed veteran, Raskin a specialist in consumer protection issues, and though Diamond is best known for his work on pension issues he’s one of the most highly regarded economists out there doing policy-relevant work in academia.