James Pethokoukis

Politics and policy from inside Washington

Afternoon speed round

Nov 17, 2009 21:34 UTC

Some of the best things I read today:

1) Tyler Cowen gives his version of healthcare reform. Ideas 3-10 are particularly strong.

2) Noam Scheiber agrees with Summers that budget deficits are not a big deal since less private borrowing mean no crowding out. I wouldn’t get too satisfied with this explantion.

3) IBD’s Jed Graham has  great post that speculates “come 2013, we might begin to see help wanted ads that emphasize the lack of employer-provided insurance as a perk.”

4) Matthew Yglesias looking how Republicans will try to roll back HC reform if it ever passes. The delayed-start will make this easier.

5) Joel Kotkin again show how California is doing everything wrong to boost growth. Just look at Northern California:

Indeed by some accounts, most embarrassingly in a recent Time magazine cover, the shift to green technologies has already created a “thriving” economy.

Time extols Google, Apple, Facebook, Twitter and the other Silicon Valley companies as exemplars leading to a glorious prosperity; somehow the article missed the empty factories, vacant offices and abandoned farms across the state.

For Apple’s Steve Jobs, Google’s Eric Schmidt and venture capitalists connected to Al Gore, these could well be the best of times. Fed policy prints money for investment bankers to speculate; stock prices rise as people have nowhere else to invest. And for the much celebrated venture community, there’s also an Energy Department that pours hundreds of millions into “green” start-ups that build things like expensive electric cars.

California’s high-tech greens may talk a liberal streak in terms of diversity and social justice, but their prescriptions offer little for those who would like to build a career and raise a family in 21st century California. Their policies in terms of land use regulation and greenhouse gas emissions will make it even harder for existing factories, warehouses, homebuilders and other traditional employers of the middle- or working class.

Yet the “greenest” parts of the country–places like the northern end of the Bay Area–are among the toughest places to build or manufacture anything, without huge public-sector subsidies. Indeed, California’s new green requirements, compared with places like Texas or China where manufacturing has other advantages, would further undermine an already struggling sector. Few businesspeople see much growth in the near future in office or residential construction.

How about some healthcare federalism?

Nov 17, 2009 20:06 UTC

From the astounding Arnold Kling:

The bill I would propose would be one that encourages experimentation at the state level. Offer to support an experiment that allows an individual state to adopt single-payer, while allowing another state to offer deregulated insurance and medical practice.

What is frustrating to me is that many people would agree that the Massachusetts health experiment failed, and yet that is the experiment that is being used as the model for the current bill. The original promise in Massachusetts was that by eliminating the “free-riding” of the uninsured and by setting up an efficient government insurance exchange, insurance costs would go down. Instead, insurance costs there soared.

The current health care bill is viewed skeptically by every reputable health care economist. My guess is that even someone like Peter Orszag, who obviously is not free to speak his mind, is somewhere between disappointed and appalled at what is coming down the pike.

It would make sense to try more state-level experiments before choosing a model for a national system.


I am tired of this administration feeling like they have a blank check book that they can utilize whenever they feel the need to without accountability to the ones paying the bill…” The Taxpayers”

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Is Obama planning a $3 trillion income tax increase?

Nov 17, 2009 19:51 UTC

Did I just see a trial balloon launched? Over at a Wall Street Journal conference, Christina Romer, chairman of President Obama’s Council of Economic Advisers had this to say about deficit reduction:

But the chairman of the president’s Council of Economic Advisers admitted that health reform and a growing economy isn’t enough to bring down the deficit. She did mention one other place that revenue could come from: letting the Bush tax cuts expire.

Me: Since Obama already wants to get rid of the income and capital gains tax cuts for wealthier Americans that expire at the end of 2010, clearly what Romer is referring to is the rest of the 2001 and 2003 Bush tax cuts. Letting all the 2001 cuts — rate reductions, child tax credit marriage penalty relief — expire would raise tax revenues by $2.5 trillion through 2019. (These CBO numbers assume no negative economic feedback impact from higher taxes.) And letting the 2003 tax cuts on capital gains and dividends expire would be tantamount to a $350 billion tax increase through 2019. And none of this includes possible plans for a VAT that could raise $400 billion a year more to close the huge projected gap — maybe 7 percentage points — between spending as a percentage of GDP and revenues as a percentage of GDP.


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On gold and asset bubbles and inflation

Nov 17, 2009 18:56 UTC

The great David Goldman. First on the US asset bubble:

BOTH bond and stock prices are driven by the dollar. 17.5% unemployment by the broad measure keeps wages down and keeps the CPI low, despite the surge in commodity prices, while the cheap dollar makes US assets a bargain. Well, not exactly: the enormous reserve growth on the part of Asian central banks means that the Treasury’s debt-buying program has been outsourced to America’s Asian trading partners! No-one dares pop the bubble. It’s like what Woody Allen said about death. He wasn’t afraid of it; he just didn’t want to be there when it happened.

Now on gold:

What’s the price of the last ticket on last train out of Paris on the night the Germans march in? Whoever is carrying the most cash will get it, and that will be the price.  … As I have tried to show in several recent articles, most recently this Sept. 15 essay at Asia Times, gold is a hedge against the collapse of America’s central role in world affairs.

What is the correct price? Central banks alone own about 4.8 million tons of gold. The world produces about 2,200 tons. Suppose that central banks wished to increase their gold holdings by 1 percent. That’s 48,000 tons or so, or more than 20 times annual mining production. What’s the price elasicity on that sort of thing?  How badly do you need that ticket out of Paris? … If the whole world, including the Asian central banks, man the bucket brigade–except with kerosene in the buckets rather water–the prices of real assets are going to rise. The best real assets to hold are the ones most sensitive to the degradation of the dollar.

Senate prepares cap-and-trade obituary

Nov 17, 2009 18:32 UTC

Carbon cap-and-trade legislation appears to be Dead Policy Walking in Washington.The devaluation of the Copenhagen climate summit reflects the emerging political reality in the United States. Yes, a bill did pass the House of Representatives in June. And the Senate Environment and Public Works committee passed a version earlier this month. So President Barack Obama won’t go to the talks in Denmark with empty pockets next month.But it is hard to get a major bill passed in a Democrat-controlled Senate when the Democratic majority leader of the Senate wants the bill to go away. And have no doubt that Senator Harry Reid would like to see cap-and-trade go away — or at least disappear until after 2010.This explains why as many as five different Senate committees will consider the bill, the same recipe for legislative inaction that bogged down healthcare reform. It’s politics. The 2010 midterm elections are shaping up to be tough contests for many Democrats thanks to the anti-incumbent mood of a recession-weary electorate. And most signs point to a sustained level of high unemployment.A new Gallup poll finds that 51 percent of Americans see the weak economy or high unemployment as their biggest concerns. Barely 3 percent mention the environment. And Democrats have been unable to sell cap-and-trade as a job creator. At worst, the public sees it as a jobs killer or a costly energy tax.That charge has particular weight in Reid’s home state, Nevada, a high energy-use state. (All those air conditioners!) So Reid doesn’t want to have to vote for it, which he would be compelled to do as majority leader. And neither do moderates like Mary Landrieu, Blanche Lincoln, Mark Pryor, Debbie Stabenow and Jim Webb. They noticed the heat that centrist House members who voted for cap-and-trade took from constituents during Congress’ summer break.Webb of Virginia may point to one path forward with a new bill he is co-sponsoring with Lamar Alexander, a Tennessee Republican. It would spend $20 billion on five mini-Manhattan Projects to study various clean energy technologies, including nuclear.It’s a plan that seems more likely to create jobs, grow the economy and help the environment — at least more so than one completely out of sync with the electorate. And it is one also more likely to make it into law.

6 reasons healthcare reform might fail in the Senate

Nov 17, 2009 18:05 UTC

“We no longer expect Congress to pass impactful health reform legislation this year, or even in this political cycle.” That is the opinion of Sector & Sovereign analyst Richard Evans:

1. Voter attitudes are shifting away from both Democrats and health-reform; placing the considerable number of Dems from conservative states and districts in increasingly untenable positions.

2. Substantial time should pass before a vote on final legislation; the Senate is unlikely to vote on a bill by year end, and a final vote on a conference bill is virtually impossible before late January. If trends in voter opinion continue, this is almost certainly too late.

3. On top of this, efforts to keep abortion as a neutral issue have failed. 20 pro-life House Dems have put the issue ahead of health reform, refusing to support legislation that does not completely bar abortion coverage in plans that receive Federal funding.

4. Pro-choice House Dems outnumber their pro-life House Democratic peers nearly 8 to 1. As any final legislation will certainly be well to the right of the House bill, this means House progressives may be asked to support a final bill whose healthcare provisions they find lacking in appeal, and to surrender ground on choice in the process. We bet at least a few refuse.

5. Immigration is a less potent but still meaningful wild-card; 20 House votes rely on the Senate ultimately agreeing to loosen its language and let illegal immigrants purchase coverage on the exchanges with their own money, and to extend subsidies not only to citizens, but to anyone who is in the US legally. 15 Senate Democrats hail from states that Obama either lost, or carried with a 5 percent margin or less. These swing-votes hold inordinate power, and are much more conservative on immigration than their blue-state peers; we believe they may balk at these House provisions.

6. The House bill’s largest source of funding is an incremental tax on the wealthy, which the aforementioned 15 Democratic Senators from red- or swing-states cannot support. The Senate Bill’s largest source of funding is taxes on relatively more expensive ‘Cadillac’ health plans, which the union friendly House cannot support. In effect, each has settled on a plan that the other cannot pass.

Me: Never underestimate the power of numbers. And the Ds do have a big majority in the Senate. And what do they fear more, passing the bill or not passing it? Obama might still sign something, but it might not resemble comprehensive healthcare reform anymore. We await the CBO score ….


Defeat of the anti-heathcare people control bill is essential for the defeat of the collectivist liberals in 2010 who have killed the once great democratic party and now occupy it’s corpse like some demon Parasite in a B grade SI-FI movie. This an attempt to take over another one sixth of the American ecconomy. Make no mistake about it, this is a full blown coup in progress to distroy the American economy and force the transformation the United States into a Fabian Socialist/Communitarian Totalitarist State. The don’t give a damn about people, just power. As Cicero said “Power Corupts, Absolute Power Corupts” Absolutely… The sad thing is that they are not truly dedicated social revolutionary cadres, just corrupt evil people. Real revolitionaries don’t try to make themselves rich on the backs of the people as Al Gore is! They are behaving just like the Laissez-faire Capitalist they want to replace!

Posted by Padraigs Ghost | Report as abusive

Who stabilized the U.S. economy, Obama or Bernanke?

Nov 17, 2009 14:15 UTC

Ed Yardeni votes for The Chairman, but now he thinks the Federal Reserve need to change course:

I believe that the Fed did in fact avert a financial meltdown and an economic depression by flooding the financial system with liquidity, and by lowering the federal funds rate to zero. I believe that all the efforts to deal with the financial crisis by the White House and Congress–including TARP, PPIP, and ARRA-were counterproductive and offset some of the effectiveness of the Fed’s responses. On PBS NewsHour last Friday, Sheila Bair, the level-headed head of the FDIC, said that TARP was a huge mistake: “I think at the time it sounded like the right thing to do…but I just see all the problems it’s created.” She implied that had she been consulted by Hank Paulson and Ben Bernanke, she would have tried to dissuade them from pursuing this approach.

I think that the Fed should raise the federal funds rate to 1.0% to demonstrate some confidence in the economic recovery. A zero rate was justified by the effort to avert a financial meltdown and a depression. Now it may be doing more harm than good.


What are you smoking? Our Economy is tubed and Obama and his cronies are throwing it lead weights.. Everything Obama is doing despite what he says is to tank our economy to usher in George Soro’s plans for a new world economy…

Posted by Ballistic45 | Report as abusive

Here’s what happened to cap-and-trade, and why it’s in deep trouble

Nov 17, 2009 14:03 UTC

I am writing a column on this for later today, but I wanted to toss out a few quick thoughts on the state of cap-and-trade. Other than the die-hard greenies, Dems don’t want this bill anymore than Republicans. It is too easy to frame cap-and-trade as both a jobs killer and a distraction from job creation. Actually, some Rs would love for Dems to push this bill since it makes such a great election issue.

But it’s not happening in 2010, which means it not happening during Obama’s term since even under the most optimistic scenario, the Ds will have less control of Congress in 2011 and 2012 than they do now. And under more dire scenarios for the Dems, they lose maybe 4 Senate seats. Do not underestimate the extent to which the Great Recession has affected the issues agenda and political situation in Washington. And an extended period of high unemployment will only exacerbate that. (Bernanke’s speech yesterday was another indication how this is now the new Washington consensus.) The New Normal in economics means a New Normal in politics, too.


Well Obama also sees the writing on the wall in 2012 and will move to use Executive Orders and Agency regulations to circumvent congress on Many issues including Cap and Trade.. The EPA will be used in controlling Carbon without Congressional oversite or approval. Like Muslims, don’t believe a word that comes out of their mouths, watch what they do.. Like Muslims their playbook also tells them to lie to unbelievers

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