Monthly Archives: February 2010

President Obama today stages his latest attempt to advance the $950bn (€700bn, £616bn) 10-year healthcare reform bill, when he hosts a marathon televised summit in Washington with his Republican opponents.

This blog will host regular updates from Anna Fifield, US political correspondent.  Clive Crook will share his views on the summit later.

Read Clive Crook’s post – What is the health summit for?

Obama’s task at the healthcare summit. Ben Smith, Politico. Too many audiences.

Rearranging the seats at the summit. Anne Kornblut, Washington Post. It’s a sensitive issue.

Where the public now stands on healthcare reform. Kaiser Family Foundation. The message is mixed.

Dealing with the banks. Peter Boone and Simon Johnson, TNR. The Volcker rule is beside the point. Pile on the capital requirements instead. Quite right.

I followed James Fallows’ advice and read the OPR report on John Yoo. I agree with what I think is Jim’s main point–that parts of the document force the reader to confront the disgusting reality of “enhanced interrogation”, which is a salutary experience. But I can’t say the report persuaded me that, as it asserts, Yoo knowingly misled the government about the law. I can’t say the report even tries to support that charge.

Yoo’s view that methods like waterboarding and prolonged sleep deprivation are not “torture” so far as the law is concerned may be incorrect, as many experts say, but it is nonetheless legally defensible, and the report admits as much. Yoo seems to me consistent and sincere in his belief. His view that under the circumstances pertaining after 9/11, the law imposed no significant restraints on presidential power is even harder to defend–but again, this appears to be his considered, conscientious view.

Jim Fallows advises readers also to look at the memo by David Margolis, a respected career lawyer in the Justice Department, who overruled the OPR findings. If you do read the OPR report you should indeed read Margolis as well. The OPR report comes in for some serious criticism. (See also these letters on an earlier draft from Michael Mukasey and Mark Filip, and Ronald Rotunda.) It is not an exemplary piece of work. The good faith of its authors, it seems to me, is called into question.

Margolis faults Yoo for poor judgment, saying he “consistently took an expansive view of executive authority and narrowly construed the torture statute while often failing to expose (much less refute) countervailing arguments and overstating the certainty of [his] conclusions”. At the same time, Margolis says, “But as all that glitters is not gold, all flaws do not constitute professional misconduct.” He quotes Jack Goldsmith, whose fine book on the Office of Legal Counsel and the war on terror I have previously recommended.

All of these men wanted to push the law as far as it would allow. But none, I believe, thought he was violating the law. John Yoo certainly didn’t.

Goldsmith complains that the Bush administration worried too much about what was legal and not enough about what was moral or wise. I think that is correct, and it is why I question Jim’s assessment that Bush’s early policies on interrogation were, among other things, “lawless”. They were morally wrong and counter-productive, in my opinion. They were based on poor legal advice too, according to the scholarly consensus. They were not lawless.

The law itself was and is at fault. It is still not as clear as it should be, and Congress has let that state of affairs persist. The legal opinions and the policies have been changed, which is good, but this important lesson has yet to be learned.

Being unwise or evil does not make an act illegal. The OLC’s job is to advise on the law, not say what is wise or moral. Sometimes, the law is an ass. That is why you cannot leave policymaking to lawyers.

The healthcare proposal Obama announced on Monday plainly has Democratic unity, rather than detente with Republicans, in mind. It narrows some of the differences between the Senate and House bills, but offers no concessions at all to the other side. It adds a new federal regulator for insurance rates (in most cases duplicating the work of state regulators), which might be quite a popular idea, with insurance companies announcing big rate increases. And it rolls back the tax on Cadillac plans (raising the premium threshold, delaying the start date). That is a great pity, since this was one of the few real incentives for economy in the Senate measure. Overall, it’s a slightly worse design than the Senate bill, but still far better than nothing, so I hope it gets done.

It’s true that the proposal entrenches Democratic preferences rather than saying, “we are open to new ideas”. But Republicans can hardly complain. Who believes they would have brought open minds to the summit in any event? But if Obama has decided on a Democrats-only strategy, one interesting question is what purpose Thursday’s “bipartisan summit” is intended to serve.

The idea must be to put pressure on Democrats to fall into line–sweetening the pill of a measure many don’t like (for any number of reasons) by making Republicans look ill-prepared and obstructionist for the cameras. Democrats might decide this works for them, but the Republicans will have to screw up quite badly on Thursday for voters at large to buy it. Going in, the whole event now looks too much like an ambush. Obama needed a bipartisan gesture or two for camouflage–some sign of good faith, sure to be rebuffed. The thinking must be that any such gestures would have made Democratic unity impossible. In other words, get the reform passed first; worry about public opinion later. As I said, quite a gamble.

Will stage one–just vote this thing through–succeed? Jonathan Chait, rejoicing over the coming conservative freakout, seems to think it will. Well, anyway, healthcare reform is “very far from dead,” he says. Megan McArdle disagrees. I’m in between. I’m hoping Obama succeeds on this, but I don’t see how the chances can be better than 50-50, bearing in mind the Democratic splits, the delays that reconciliation will introduce, and the fast-diminishing interval between now and the electoral consequences.

But perhaps, now I think of it, this is Chait’s position too.

[T]he legislative door to health care reform is wide open, and Democrats simply need to walk through it. By no means is it clear that they’ll succeed.

Like I said, 50-50 at best. Democrats really struggle with those wide open doors.

In praise of Rahm Emanuel (seriously). Dana Milbank, Washington Post. Obama’s problem is not Emanuel, whose good advice has been ignored, but cult-followers Jarrett, Axelrod and Gibbs, who “believe [the president] is a transformational figure who needn’t dirty his hands in politics”. Emanuel now has “his own small press operation,” says Milbank. Evidently. I agree with Milbank about Gibbs, though. The man is a disaster. I cringe every time I see him.

Profile of Paul Krugman. Larissa MacFarquhar, New Yorker. Very nice piece. Gets a lot right about what is so good, and what is so hard to take, about the NYT’s “belligerently, obsessively political” Nobel laureate. (“Krugman has a peculiar blind spot when it comes to scorn.”) I say, give Robin Wells a share of his byline, for beefing up the outrage and recalcitrance–so crucial to the brand. Next time Paul says he is on the point of despair (won’t be long) I shall think of him looking bleak on the beach in St Croix, pina colada in hand. Don’t miss Loudun Wainwright’s Krugman Blues, by the way.

Teachers v Obama. Mickey Kaus, Kausfiles. It’s not just teachers. See The Economist on the same subject.

In the never-ending struggle over US healthcare reform, this is a big week. On Thursday, the White House plans a televised meeting of Democrats and Republicans to explore, it says, the possibility of last-minute compromise. Meanwhile, according to Kathleen Sebelius, the health secretary, the administration is preparing to announce a plan that Democrats can pass without Republican votes, if need be.

Read the rest of the column and leave comments on it here.

Back in November I wrote glowingly in a column for the FT about Creating an Opportunity Society, a new book by Isabel Sawhill and Ron Haskins. Earlier this week I attended a dinner with other journalists, scholars, and policy-makers to talk over some of its ideas. The conversation (off the record, in any event) was frustrating, because the budgetary obstacles to any action requiring outlays are so severe at the moment. If nothing else, though, it moved me to recommend the book again. It’s the best thing of its kind I’ve read for a long time.

The finding that would surprise most Americans is that the American dream is something of a fraud. Intergenerational social mobility–your chances of moving up from poverty, or down from great wealth–are lower in the US than in most of Europe. This is something I have written about before. Research suggests plenty of mobility in the middle part of US income distribution, but not much at the ends. The American dream is a kind of opportunity club, and the very poor and very rich aren’t members.

Why not? The American Idea exalts equality of opportunity over equality of outcomes. A related notion is that you must look out for yourself: society does not owe you a living. In anti-poverty policy, this expresses itself as a strong preference for conditional (EITC) or in-kind (food stamps) benefits over European-style welfare payments. My instincts are strongly in favour of this approach. The problem is, equality of opportunity and equality of outcome are not neatly separable. In America, if you are born into a very poor family, your opportunities are shut down too–more than in other countries. In other words, anti-poverty measures that succeed up to some minimum may be a condition for membership of the opportunity club.

Perhaps that seems obvious. But the question then becomes, why do Americans tolerate their striking inequality of opportunity? My speculation would be, for two related reasons. The first is the political and cultural invisibility of the American underclass. Washington DC is a poor city, but members of the wide middle class (and the genteel poor) would never know it. They never see the housing projects. This is an economically segregated town. The same is true across the country. European cities are more integrated: the European poor are more in the faces of the middle class, and harder to ignore.

Speaking of segregation, is this invisibility really all about race? To many that will seem obvious too but, myself, I doubt it. My impression is that white Americans are less given to racism than white Europeans. (See who they elected president.) They are more prejudiced against poverty than they are against black people. The idea of the “deserving poor” has little purchase in American culture. If you are poor, it is probably your fault, says the culture: it might be better all round if you and the other losers live together and stay out of our way. The poor seem willing to put up with it.

The second reason may just be an illustration of the first. The American left, it seems to me, is much more energised by the injustice of wealth than the injustice of poverty. It often appears that, in their view, the remedy for any social injustice is to tax the rich. Consider the energy spent on that issue in the past few years, and compare it with demands from the left for bigger cash benefits for the poor. (What demands, you might say?) Bear in mind that the US income tax system is already highly progressive by international standards. The American anomaly is not the way high incomes are taxed, but the way very low incomes are supported. (This was true both before and after welfare reform.)

I think that left-liberal equivocation over school choice–a cause that unites conservatives and many urban blacks–is another instance of this mindset.

A prejudice against poverty–if I am right to say there is one–would support effort, ambition, and economic growth, of course. It might make the country a great success, on average, and serve the interests of the wide middle class very well. Politically speaking, it could dig in and get entrenched. But if you are born too poor to join the opportunity club, tough luck.

Brookings’ Bob Litan has written a paper that takes a refreshingly cool and even-handed look at financial innovation, trying harder than anything else I’ve read to sort the good, the not-so-good, and the bad. His assessments are debatable, of course, but given the currently prevailing view, endorsed even by luminaries such as Paul Volcker, that most financial innovation is rent-seeking if not actually corrupt, Litan has performed a very valuable service.

In this essay, I take up Volcker’s challenge [to produce evidence that innovation has promoted growth]. I do so by highlighting many, perhaps most, of the key… innovations since the 1960s that have changed the way finance carries out its four economic functions: enabling parties to pay each other; mobilizing society’s savings; channeling those savings toward productive investments; and allocating financial risks to those most willing and able to bear them. Admittedly, my analysis is more qualitative than quantitative, reflecting the difficulty of putting numbers to the impacts (a follow-on project I hope to undertake). But I nonetheless assert that logic and reason can lead to lead to certain meaningful conclusions.

… I find that there is a mix between good and bad financial innovations, although on balance I find more good ones than bad ones.  Individually and collectively, these innovations have improved access to credit, made life more convenient, and in some cases probably allowed the economy to grow faster. But some innovations (notably, CDOs and Structured Investment Vehicles, or SIVs) were poorly designed, while others were misused (CDS, adjustable rate mortgages or ARMs, and home equity lines of credit or HELOCs) and contributed to the financial crisis and/or amplified the downturn in the economy when it started.

Along the way, I also address two of the main critiques of financial innovation… The fact that many financial innovations have been and continue to be designed to “get around” financial regulation does not automatically make them bad. Indeed, the opposite is true if the regulations are impeding productive activity. Indeed, I argue that a number of financial innovations of this sort have been socially useful for this reason.

Volcker’s observation that because economic times were good in the 1950s and 1960s… does not prove, by itself, that those innovations, when they came, added no social value. Events or trends in the real world, notably the growth of productivity, typically have many causes. For that reason, one cannot simply compare the performance of productivity or total output in two different time periods – without, and later with, modern financial innovations – and conclude that any difference in those measures can be attributed to the presence (or absence) just of financial innovation. The appropriate question to ask is what productivity or total output, or as I will also argue, other measures of net welfare, would have been “but for” any particular financial innovation or group of innovations.

What’s gone wrong in Washington? The Economist. Blame Obama more than the system. I agree.

Republicans need a better plan. Michael Barone, Washington Examiner

Palin and the media’s mutual loathing. George Will, RCP

Why Sanctions Won’t Beat Iran’s Revolutionary Guards. Robert Baer, Time. Negotiation is the best way to deal with a military dictatorship, argues Baer.

Iran could be making a nuclear warhead. Julian Borger, Guardian. So says the new head of the IAEA.

The case for boredom. Colin Bisset, Philosophy Now. Doing nothing is the key to getting somewhere. (Thanks A&L.)

My new column for National Journal asks whether the US might soon face a similar crisis of confidence.

It depends on what you mean by “soon.” At the moment, the United States is borrowing with no great sign of stress. Far from coming under pressure, the dollar is still strong, and the cost of U.S. government borrowing (the interest rate on Treasury bonds) shows no sign of spiking. Greece, to be sure, has some problems all its own. Where it leads, the United States need not follow. Yet one should not dismiss the parallel too blithely. Sentiment in financial markets can change abruptly, and the differences between Greece’s financial condition and America’s are not as vast as one would wish.

Clive Crook’s blog

This blog is no longer updated but it remains open as an archive.

I have been the FT's Washington columnist since April 2007. I moved from Britain to the US in 2005 to write for the Atlantic Monthly and the National Journal after 20 years working at the Economist, most recently as deputy editor. I write mainly about the intersection of politics and economics.

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