James Pethokoukis

Politics and policy from inside Washington

Bernanke nomination in more trouble than you think

Dec 22, 2009 15:48 UTC

Ben Bernanke’s close escape from the Senate Banking Committee sets him up for a record number of final “no” votes on his renomination as Federal Reserve chairman. A second term is still overwhelmingly likely. But such unprecedented disapproval suggests Bernanke will be a 2010 campaign issue. That could make the Fed ever more susceptible to political pressure when it comes to tighten the easy money spigot.

Fed nominations typically glide through committee. When President Jimmy Carter nominated G. William Miller for the post in 1978, the lone dissenting voice was that of gadfly William Proxmire of Wisconsin. He called Miller a joke and said putting him on the Fed would be like sending ballet star Rudolf Nureyev against the heavyweight boxing champ. And despite widespread public blame for the recession in 1981-82 Paul Volcker received just two no committee votes in 1983.

So seven negative votes out of 23 is historically high – nor was it just a few cranky contrarians dissenting. The ranking Republican voted “nay.” So too did Kay Bailey Hutchinson, a soft conservative running in the Texas GOP gubernatorial primary against a hardliner. That’s a strong hint that baseline conservative Republicans plan an anti-Fed platform in midterm elections. And pro-Bernanke votes will be wielded by challengers to incumbents.

So expect many GOPers to abandon Bernanke next month when his job along with a smattering of nervous Democrats facing re-election. Maybe a fifth to a third of the full Senate could vote no, a startling number considering that the high-water mark is 16 final votes against Volcker in 1983. A simple voice vote was enough for Alan Greenspan in 1992 and 2004, and Bernanke himself in 2006.

Congress is already nibbling at Fed independence. An audit of the central bank could even be inserted into financial reforms. There’s also an effort to toss the hawkish regional bank presidents off the group that sets monetary policy. Bernanke’s tepid support in the Senate is another crack in the Fed’s political heat shield. It is also one more reason to question whether the Fed will have the institutional guts to withdraw monetary stimulus when it should, despite stubbornly high unemployment.

The bear case on healthcare reform

Dec 22, 2009 15:09 UTC

So now what? My pal Rich Lowry takes a crack at the bear case for healthcare reform. His main points:

1) Public opinion.  The bill was already under water in every major public-opinion poll, and opposed by a margin of almost 2 to 1 in the latest CNN poll. The latest NBC News/Wall Street Journal poll put its support at freezing, 32 percent. A few ticks downward and the bill will be in the 20s. … The Democrats have shown no inclination to let public opinion hold them back, but the stiff headwind makes everything a little harder and reduces an already-small margin for error. One subset of public opinion will be particularly important: Nebraska. If Ben Nelson is perceived to have made a career-defining choice that will end his designation as a conservative Democrat and a pro-lifer, and if he takes an immediate dive in the polls, it will cast a pall over other Blue Dogs inclined to play ball.

2) Abortion. After her initial 220–215 victory, Pelosi can afford to lose only two net votes. Bart Stupak has declared the Nelson language unacceptable and vows to oppose the final bill if it doesn’t include the restrictions contained in his amendment. As John McCormack points out, earlier in the year Stupak was part of a bloc of Democrats who wrote a letter to Pelosi saying they’d stand against “any health-care-reform proposal unless it explicitly excludes abortion from the scope of any government-defined or -subsidized health-insurance plan.” Eleven of those signatories voted for the House bill.

3) Money. The Senate relies on a so-called Cadillac tax on pricey insurance plans, the House on a surtax on the wealthy. The Senate long ago declared the surtax anathema, and the House is just as dismissive of the Cadillac tax. The unions hate the Cadillac tax, since they enjoy such plans themselves, the fruit of collective bargaining. If the House gives in, it will create even more unrest on the Left. If the Senate gives in, it could upset the fragile deal for 60. If this disagreement over financing doesn’t represent as dire a threat to the future of the bill as the other factors we are cataloguing, it’s still a stumbling block.

4) Blue Dogs. When Obamacare first passed the House, 28 Blue Dog Democrats, more than half of their 52-member coalition, were on board. This is a pool that surely includes some very nervous votes. As Michael Barone points out, nearly 70 percent of the Blue Dogs represent districts that voted for John McCain. A vote for this bill must look even more like a potentially career-ending decision now than it did the first time around.

Keep an eye especially on the Pennsylvanians. Rep. Patrick Murphy already has four GOP opponents in his suburban Philadelphia district. After supporting round one of Obamacare, the auto bailouts, TARP, and the stimulus, Murphy may be looking for a way back toward the center. Reps. Kathy Dahlkemper and Christopher Carney, both elected in the 2006 anti-Bush sweep, represent blue-collar districts in the Keystone State in which Obama failed to reach 50 percent last year. You can bet that trio is watching the polls. Other Blue Dogs are simply getting out. In the past month, Reps. Bart Gordon (D., Tenn.), Dennis Moore (D., Kan.), and John Tanner (D., Tenn.) have all announced their retirements.

5) Liberals. No fewer than 60 liberals in the House imprudently made a pledge to oppose a bill without a public option. Almost all of them can be expected to eat it. But what if one or two don’t? Public-option scold Rep. Anthony Weiner (D., N.Y.) is continuing to pressure Obama to move further left. “What we’re saying is now’s your moment, big guy, you’re the Mariano Rivera of this situation,” he said to MSNBC last week. “You’re going to come in at the end, and there’s still a chance to do it.” That’s not going to happen, but perhaps a few of Weiner’s colleagues are ideologically besotted enough to lash out at the president’s “betrayal” when he doesn’t “come in” the way they hope he will.

COMMENT

Shadow-boxing is only entertaining in situation comedy. The mainstream Democratic Party, like all its Republican brethren, has shown how uniformly serious it is about selling America out to zombie corporations on every single issue there is – banking, insurance, telecommunications, consumer and civil rights included.

So really, this laughable “detailed” analysis isn’t all that amusing right now. Neither of America’s major political parties is worth saving, or even listening to, any more.

There is only one thing to do with zombies. One.

Posted by HBC | Report as abusive

Rasmussen: Obama approval ratings at new low

Dec 22, 2009 14:49 UTC

Pollster Rasmussen indicates that healthcare is not helping the POTUS:

The Rasmussen Reports daily Presidential Tracking Poll for Tuesday shows that 25% of the nation’s voters Strongly Approve of the way that Barack Obama is performing his role as President. Forty-three percent (46%) Strongly Disapprove giving Obama a Presidential Approval Index rating of -21 That’s the lowest Approval Index rating yet recorded for this President. … For the second straight day, the update shows the highest level of Strong Disapproval yet recorded for this President. That negative rating had never topped 42% before yesterday. However, it has risen dramatically since the Senate found 60 votes to move forward with the proposed health care reform legislation. Most voters (55%) oppose the health care legislation and senior citizens are even more likely than younger voters to dislike the plan.

COMMENT

I have to say, james, I liked your blogging way more when you were at USN&WR — you actually wrote stuff and provided your always interesting, not just cut’n'paste stuff I get anyway. Is Reuters not letting you off the leash? Or are you working on bigger/more thoughtful pieces elsewhere?

Posted by Ghost of Keynes | Report as abusive

Copenhagen a eulogy for US cap-and-trade

Dec 22, 2009 14:44 UTC

I have been saying for some time that I do not think Congress is going to pass cap-and-trade in 2010, or probably ever. (I think the threat of EPA action is empty given the flurry of litigation that would surely follow.) My Reuters news pals seem to agree somewhat and paint an alternate scenario:

1) But the Copenhagen Accord did not include emissions targets. This will make it difficult for lawmakers to argue that the United States should have a cap while China, the world’s top emitter of greenhouse gases, and other big polluters are not legally required to act on climate. “We were previously of the view that cap and trade was becoming an increasingly hard sell in the U.S.,” said Paul McConnell, an energy markets analyst at Wood Mackenzie. “But I think the events in Copenhagen have probably made that even more difficult.”

2) Alternatives to cap and trade will emerge, such as mandates and incentives for increasing levels of energy from low-carbon sources like solar, wind and nuclear.

3) The healthcare debate has delayed U.S. Senate action on climate, and financial industry reform legislation will likely push back the cap-and-trade debate into early next year, analysts said. The longer the delay, the harder it will be to convince undecided Democratic senators to vote for a cap-and-trade plan. “For a lot of moderate Democrats who are up for reelection, they don’t want to be seen as closely attached to this because of the concerns about job losses and higher energy prices,” said Divya Reddy, an analyst at the Eurasia Group in Washington.

4) Kerry said in Copenhagen last week that the Senate bill may not contain cap and trade, and other options are being discussed. So-called “Plan B” alternatives to cap and trade could include carbon taxes and national mandates for power generators to produce higher levelof cleaner energy sources, Reddy said. A new climate strategy could also include elements of a “cap and dividend” plan recently introduced by two senators. That aims to cut Wall Street’s role in emissions markets by auctioning permits to polluters and delivering most of the proceeds to the general public. But Kevin Book, an analyst at Clearview Energy Partners, LLC, said many senators and many companies, like oil major ConocoPhillips and power generator Duke Energy Corp, are already sold on cap and trade. Some power companies that have invested in low-carbon electricity generation feel they could compete better against companies that burn mostly coal under a cap-and-trade regime.

COMMENT

No carbon bill of any kind will be passed by congress and EPA will not attempt to enforce carbon limits. That would be political suicide for Obama. He’s stupid, but he’s not that stupid.

Posted by Bill Boudreaux | Report as abusive

Political impact of surprisingly weak 3Q GDP

Dec 22, 2009 14:32 UTC

First, the Commerce Department:

Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 2.2 percent in the third quarter of2009, (that is, from the second quarter to the third quarter), according to the “third” estimatereleased by the Bureau of Economic Analysis. In the second quarter, real GDP decreased 0.7 percent. The GDP estimate released today is based on more complete source data than were available for the “second” estimate issued last month. In the second estimate, the increase in real GDP was 2.8 percent.

Me:  And, of course, the original estimate was 3.5 percent. Now  a few thoughts;

1) After such a nasty recession, the US economy should grow in the 6-8 percent range. The first seven quarters after the 1981-82 recession saw 7 percent average GDP growth.

2)  If that doesn’t happen soon, another sign that this recovery/expansion will different. And by different, I mean weaker than is typical.

3) And a weaker recovery, means weaker job growth. To drop unemployment by a full percentage point next year, it will take 4 percetn GDP growth generating 250k a month.

4) High unemployment and weaker growth means a higher level of danger for Democrat incumbents in the 2010 midterms. My working model translates 3 percent growth into typical losses of 25 seats in the House, 2 in the Senate. If growth comes in at closer to 2 percent, that is when you get the 1994-esque scenario with 40+ losses and 5+ Senate seats.

COMMENT

Not a bad deal if it means getting rid of a bunch of lefty politicians and shifting Nobama to the right. That’s what Bill Clinton did in 1994, and ya can’t argue with success.

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The political blowback from healthcare reform

Dec 18, 2009 19:20 UTC

Kim Strassel of the WSJ states her case:

1) Consider North Dakota. A recent Zogby poll showed 28% (you read that right) of state voters support “reform.” A full 40% said they’d be less likely to vote for Democratic Sen. Byron Dorgan next year if he supports a bill. In a theoretical matchup with Republican Gov. John Hoeven (who has yet to announce), Mr. Hoeven wins 55% to 36%. Mr. Dorgan has been in the Senate 17 years; he won his last election with 68% of the vote.

2) In Arkansas, 32% support this health-care legislation. Sen. Blanche Lincoln, also running next year, trails challengers by more than 50 points among the 56% of voters who strongly disapprove of the health plan.

3) Senate Majority Leader Harry Reid, the public face of health reform, can barely break 38% approval in Nevada.

4) In Colorado, where 55% of voters oppose a health bill, appointed Democratic Sen. Michael Bennet told CNN he’d vote for a bill even if it “cost him his job.”

5) In deep-blue Delaware, 46% oppose the health plan. Democrats pounded Delaware GOP Rep. Mike Castle, running for Senate, for voting against the House bill. That vote has in fact kept Mr. Castle leading his expected opponent, Beau Biden, the vice president’s son.

6)  In the past weeks, four well known House Democrats announced they will not run for re-election. All are longtime incumbents; one, Tennessee’s respected John Tanner, co-founded the Blue Dog coalition. These folks have seen the political handwriting on the wall.

So why the stubborn insistence on passing health reform? Think big. The liberal wing of the party—the Barney Franks, the David Obeys—are focused beyond November 2010, to the long-term political prize. They want a health-care program that inevitably leads to a value-added tax and a permanent welfare state. Big government then becomes fact, and another Ronald Reagan becomes impossible. See Continental Europe.

Me: Yup. Ds, who also no doubt think healthcare reform is good and moral policy, see a long-term political advantage.  Indeed, they often talk about the structure of reform as more important than details. Those can come later. But change the structure of 1/6th (and climbing) of the nation’s economy and you change its politics, too.

COMMENT

The truth is that Congress wants to escape any suggestion of having to pay for healthcare benefits, and would prefer that corporations pay the bill and “hide” the cost from consumers.

A more honest health policy was presented in detail by Ezekiel Emanuel, which would have paid for universal healthcare with a dedicated value-added tax. It would have been progressive in that the cost would have burdened citizens in proportion to their consumption which is directly related to their disposable income. And, since everyone would pay for healthcare this way, those who now receive free attention in hospital emergency rooms would also contribute.

The VAT would have put the focus on the direct cost of healthcare in the percentage level, so citizens would be aware that demands for increased services would have an impact on their ability to pay for other things. Healthcare expenditures are now around 17% of GDP and will represent fully one-fifth of GDP by 2018.

Replacing the direct corporate burden of healthcare premiums with a VAT would have removed a major cost disincentive to employment, and would also have made imports share the burden equally with domestically produced goods and services. And, because the VAT is a border-adjustable tax, so used for healthcare insurance, it would have been subtracted from exports making our products more competitive abroad as well as at home.

Too bad this plan did not receive more attention from the press as well as the Congress.

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A 2012 GOP presidential nomination ranking

Dec 18, 2009 18:07 UTC

Campaign consultant Mark McKinnon give his two cents, followed by mine in italics:

1. Mitt Romney “… if he runs his race like he did the last month of the last campaign, true to who he really is, he should be the nominee.”  Lots opposition by tea party types, but those folks also disliked McCain in 2008 and he won.

2. Sarah Palin
“… alleged cop-killer Maurice Clemmons, granted clemency in 2000 by Mike Huckabee, might have just given her [an open door] to walk through for 2012 … Republicans primary voters are notoriously law- and order-obsessed, so Palin has virtually an open field in Iowa, South Carolina, and other primary states dominated by Christian conservatives.” Huckabee really gave a boost to Sarah America who has improved her favorability. But the competence issue remains, though less so with conservatives.

3. Tim Pawlenty
“He could end up everyone’s second choice (assuming Romney and Palin both run) and that’s a heck of a place to be in a crowed and wild primary.” A few early missteps but could be the David Cameron of the GOP.

4. John Thune “If he would run, John Thune could be the Bob McDonnell of the 2012 GOP field.  … The senator from South Dakota’s got central-casting good looks and comes across as humble and quiet; he has a Gary Cooper sensibility about him.” Brief lobbying career could be a negative, but he does fit the suit. If it was certain he was running, he and Pawlenty would switch spots.

5. Mike Huckabee “Maybe he can create a serious conversation about the notions of redemption and forgiveness in our criminal justice system. Or not. In which case, he’ll probably always have a home at Fox News.”  The trend is not in the right direction

6. Joe Scarborough “The host of MSNBC’s Morning Joe, former Florida congressman Joe Scarborough, would be a terrific candidate. He’s young, articulate, and telegenic.”  A little high on the list, I think. But it might be a good year for an unconventional candidate.

7. Haley Barbour “Sure he’s a caricature of the classic Southern politician: old, large, white, honey-lipped, and a former lobbyist to boot. But if voters are really tired of Obama, they’ll be looking for the mirror opposite of the man occupying the Oval Office. And that would clearly be Haley.”  I think the caricature speaks for itself.

8. Newt Gingrich “But our bet is that while he may contribute in many ways and continue to tease, in the end he probably won’t go for the Full Monty.” I think that’s right.

9. Mitch Daniels “Daniels has been an extraordinarily successful and effective governor in Indiana, a state that has been recently more blue than red. A no-nonsense, tell-it-like-is conservative, Daniels cruised to re-election by 18 points last year when Obama was winning the state.”  Probably should be much higher on list. Both Daniels and Thune are really the anti-Obama’s on the list. Former WH folks love the guy.

10. Rick Perry “He’s already the longest-serving governor in Texas history and may be headed for his third term next fall.”
in 2012.” McKinnon wonders why he doesn’t usually land on these sorts of lists. Maybe there is a reason for that.

COMMENT

Ron Paul supporters turn to Gary Johnson. Congressman Paul will not run and endorse Gary Johnson. Guarantee it.

Posted by Jake Redder | Report as abusive

While Obama talks in Copenhagen, support in US crumbles

Dec 18, 2009 14:29 UTC

Here is what the POTUS told COP15:

I believe we can act boldly, and decisively, in the face of a common threat. That’s why I come here today — not to talk, but to act.

But back in America, it’s the Senate that’s acting — and not in a way that Obama likes. First, Maria Cantwell and Susan Collins have come up with a cap-and-dividend alternative that could steal support away from the cap-and-trade efforts of the White House and Kerry-Boxer-Lieberman-Graham. And now there is also an effort in the Senate to negate the Environmental Protection Agency’s finding that greenhouse gas emissions endanger health and the environment. It’s the EPA ruling that is supposed to be the catalyst for action on climate since most everyone agrees that EPA regulation would be even more ham-handed and onerous that congressional action.

Greenspan agrees with me: Save the stock market, save the world

Dec 18, 2009 00:56 UTC

All year I have been saying a great way to boost the economy is to boost the stock market. Make it easier to raise capital and restores net worth. Now Alan Greenspan is saying the same thing:

“The stimulus is only a third spent, and its order of magnitude is not large enough to compare with the strength and power of the remarkable global equity increase that’s occurred since early March,” Greenspan, 83, said in a telephone interview yesterday from Washington. “Capital gains have proved a far greater stimulus than one can attribute to the $787 billion program that has been only partially spent.”

COMMENT

Does stock that pays special dividend always go down by the amount of the dividend?

What healthcare reform 2.0 might look like

Dec 16, 2009 13:57 UTC

Let’s assume, for the moment, that the latest version of the shape-shifting U.S. healthcare reform legislation may not worsen U.S. finances in the short term. But do the deficit math, and it doesn’t reduce long-term spending enough. The curve won’t get bent.

The proposed legislation would reduce the U.S. budget shortfall by a cumulative $100 billion or so over the next decade compared with the current baseline forecast, according to the Congressional Budget Office (CBO).  And in the decade beyond that, the changes would reduce federal budget deficits by about one-quarter percent of GDP against the no-reform case.

For the long term, though, that’s not nearly enough. Budget deficits are likely to average somewhere near $1 trillion annually over the next decade, with long-term structural deficits of at least 7 percent of GDP (maybe much more), which is currently $14.3 trillion.

By comparison, the post-World War Two average deficit in the United States is 2 percent of GDP. Healthcare costs are currently projected to account for roughly half of total government spending, or nearly a quarter of GDP, over the coming decades.

To narrow the deficit, healthcare spending cuts would therefore need to be substantial. Unfortunately, the reforms currently envisaged don’t contemplate that kind of surgery. For instance, the money saved from big cuts in Medicare, the U.S. government’s post-retirement healthcare program, is earmarked for expanding coverage rather than reducing overall costs. Yes, the Senate bill is filled with all manner of pilot programs means to change the healthcare payment system and the incentives it creates for overuse of pricey premium. But whether these programs will eventually blossom is pure guesswork.

Here’s what isn’t guesswork: Pressures will eventually mount, whether from creditors of the United States or, if successive governments choose to print money to fund their deficits, from citizens weary of inflation. It’s hard to see how hefty healthcare cuts could then be avoided.

But maybe such a crisis will finally prompt some smart policy that moves America away from an unaffordable,  central planning approach. One possible result might be a healthcare system with a minimalist public safety net and lots of add-ons paid for by users. Or perhaps a more market-driven fully private insurance system with government subsidies for the poor. The CBO has actually scored approaches like these and found that they could help close the long-term budget shortfall, reducing total long-term government healthcare spending by half from current projected levels.

Unfortunately, today’s reforms are just kicking the cost problem down the road. It will be the next round of healthcare reform that has to explore more radical options.

COMMENT

By the time this healthcare legislation passes there won’t be anything left in it worth passing.

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