Accommodation

For a while now, I've been saying that Republican senators and their conservative Democratic friends are lying when they say they oppose putting big progressive legislation in the budget because it doesn't allow enough time for debate. What they're really opposed to is progressive legislation itself (and, of course, losing the power that the de facto 60 vote requirement provides them). Why? Because if they wanted more time to debate the legislation, they could surely be accommodated in exchange for a promise not to block cloture. Well, here's how that would work:

House Democrats, in consultation with the White House, will give Republican lawmakers until September to reach a compromise on President Obama's signature health-care initiative -- otherwise, they will use a shortcut to move the measure through Congress without Republican votes....

Known as budget reconciliation, the shortcut would permit lawmakers to roll Obama's health-care proposals into a bill that cannot be filibustered, meaning Democrats could push it through the Senate with 51 votes, instead of the usual 60. Since Democrats control 58 seats in the Senate, they could approve a reconciliation bill without Republican votes or the support of some reluctant conservatives in their own party.

Of course, eight of those 58 Dems have signed a letter saying they oppose the budget option, and if they voted no, they might succeed in getting important health care legislation stripped from it. But as the intro to this post suggests, their stated grounds for objecting to the process is that it doesn't allow enough time for debate. Well, by my count there are about 3,178 hours between now and September. Let the debate begin!

Congressional politics and the bonus bill

Kevin Drum writes:

This is a little embarrassing to admit, but by yesterday I'd gotten so tired of the AIG story that I barely even noticed the details of the House bill to claw back all the bonuses. But it's a monster. Taxing the million-dollar bonuses is one thing — I may be a little ambivalent about that, but overall I don't think it's all that problematic — but the bill that passed last night taxes away bonuses from anyone with a household income over $250,000. That's a couple of mid-level analysts. This is likely to hit tens of thousands of fairly ordinary workers who had nothing to do with AIG's troubles and who simply don't deserve this kind of treatment.

I'm less troubled by this than Kevin. If I had a job at a magazine or newspaper and made $250,000 a year (Vanity Fair, say) and it went bankrupt and yet, thanks to the largess of the government, the magazine continued to exist and I got to keep my job, I'd be pretty relieved--even if it meant forgoing my bonus.

But assuming Kevin's right about this, I think it could actually prove to be a good move, intentionally or otherwise. After all, the next step in the process is the Senate, where legislation goes to be neutered moderated, and if the last several weeks have taught us anything it's that the House ought to err on the side of bravado when it takes the first stab at a bill

Friday video fun

I'm taking care of some business most of today (about which more later) but in the meantime, enjoy drunk squirrel:

High times at AIG

Tom Maguire thinks we're being too hard on the majority of the bonus recipients and quotes this LA Times story: "One administrative worker who was transferred to FP from another AIG unit said it had the reputation of "paying out huge bonuses." In her first year there, the woman's annual bonus jumped from $12,000 to $40,000."

The story's actually quite a bit more detailed:

In AIG circles, Financial Products was known as the pampered subsidiary, off on its own, former employees said.

One administrative worker who was transferred to FP from another AIG unit said it had the reputation of "paying out huge bonuses." In her first year there, the woman's annual bonus jumped from $12,000 to $40,000.

The company daily served breakfast, lunch and, for those who stayed after 7 p.m., dinner.

"Have you ever worked at a place that served lamb chops for lunch?" asked one former employee. "There was hot food every day and soup and sandwiches. There was always a fish dish -- sometimes we'd have sushi. There were days when they would set up a whole carving station with ham, turkey, flank steak. I had never eaten food like this."

Employees and their spouses also had access to a sauna and a gym.

And you know, if AIGFP was a responsible private company that put out a necessary product, and rewarded their overworked employees with a lot of perks, I wouldn't be blogging about it. But for all intents and purposes AIG went bankrupt. When regular firms go bankrupt, they take the saunas and lamb chops with them. But the government made the determination (we assume rightly) that AIG was not a regular firm and bought it. To me, that means its all of its employees ought to be treated like the employees of any other firm operating in bankruptcy, or, at the very lest, like government workers. That means a healthy salary and some vacation time, and some benefits, but no lamb chops and no $40,000 bonuses.

Lessons learned

It's a little hard to tell, but I think Paul Krugman very tepidly supports the "give us that damn money back, AIG" bill and his thoughts echo mine. Like Krugman, I see no silver lining to this episode, but if there is one, I hope it's that Obama and company have learned a lesson about the politics of convenient but bad policy. This is just one of who knows how many possible embarrassments that emerged from a decision not to put banks into receivership and to set up an analogous process for AIG. What we're seeing happen is the government stepping in and bullying powerful private actors into behaving like public servants, and sweeping up the messes they create when they fail to do so. But even if the bonuses issue gets papered over, we've still got a bunch of private actors running the company with very little in the way of government checks and balances. Receivership would render that problem largely moot.

How much do the bonuses matter

So the House has passed the "give us that damn money back, AIG" bill by a wide margin. Later I'll go through and try to pick out the people (mostly Republican, but perhaps some Democratic), who voted for the bailout but against the bonus tax--the people, in other words, without the foggiest claim to principle.

But for now, let's reflect on what just happened. Because even assuming this thing gets signed into law and that the political controversy about these particular bonuses ends quickly, there are still a lot to consider. Will bailed out companies try to exploit loopholes in this law and award their executives yet more bonuses? Will Timothy Geithner and Barack Obama be able to seize the space that opens up when the mess gets swept away and restore public faith in their ability to address the many aspects of this crisis? Crucially, was the fact that these bonuses went through a fluke, or a symptom of the government's inability to control one rogue company among many in the way they need to? And, if it was a fluke, will the administration become more attuned to the political fact that these relatively small sums of money have come to hold very deep meaning to the vast majority of Americans who work very hard for modest salaries and think, perhaps rightly, that they're being conned?

They (and I'd include myself in 'they') will never know what it feels like to be a millionaire, let alone how it feels to be handed millions in lump sum. They will never be rewarded (excuse me, retained) if they fail in even a minor way. And they have placed trust in the government not just to fix the economy but to do so with minimal waste and, more importantly, in a way that destroys--not reinforces--the culture of rot that created the crisis in the first place. Collectively they have the power to take that trust away, and while that might spell economic doom for all of us, they might understandably (or rightly) conclude that the government's blowing it anyway, so why waste the extra few hundred billion dollars.

That's why I think that--though it's easy to place too much emphasis on this particular episode, and that doing so only makes it harder for the White House and Treasury to address the problem--there is an underlying issue here that matters quite a bit. It's not that the success of the bailout depends on what happens to these $160 million, but that these $160 million strongly suggest that some very rich, and, perhaps, very bad men have leveraged their way into control of the whole bailout process and the government's now following their lead. And their incentives are, to say the least, not in line with the best interests of the vast majority of taxpayers.

If that perception is correct, then it's hard to imagine the financial rescue succeeding. If that perception is incorrect, but still pervasive, it very much limits the tools Geithner et al. may need to complete the process, and in that sense, it's important for the administration to reverse the perception. Noam Scheiber writes:

I mean, however you feel about what Geithner knew about the bonuses and when he knew it, you have to concede that his far bigger concern throughout this time was preventing the global economy from self-immolating. As a substantive proposition, how much would we even want a Treasury secretary to focus on $165 million in bonus money while there were hundreds of billions of dollars in bailout money flowing to AIG and other companies? Doesn't seem like that would be a particularly good use of his time beyond a certain point.

[G]iven the information Geithner had available, it's hard to argue that he should have stopped the bonuses. The AIG retention payments were one-tenth of one percent of the money we've given AIG, much less the rest of the system. Whether Geithner knew of them early or late, he probably didn't consider them a priority.

And I think both badly underestimate the extent to which this was the manifestation a genuinely systemic problem. It's simply not the case that Geithner and other high-level economic officials were so concerned with the bigger picture that they outsourced the question of compensation to Congress entirely. On the contrary, they were extremely involved in resolving that very question. They were opposed to strict compensation limits. And even though they may not have winked and nodded at AIG specifically, or at this or that bonus package, they made a calculation and arrived at the conclusion that caving to the extortion of the very people who triggered this collapse was worth a few hundred million tax payer dollars.

It's hard to say exactly why they decided that. I'm sure that in part they underestimated the potential for political backlash, and now they've learned their lessons the hard way. But clearly they also thought that letting executives take home big fat piles of government money was either a matter of expedience or a matter of necessity. And either way it has huge implications for the success or failure of one of the most expensive and urgent government programs in the country's history.

Boo!

Turns out wifi on the SUPERBUS isn't all that super.

En route...

...to DC on the SUPERBUS. That is, the wifi-enabled Bolt Bus. Posting will recommence once I'm on board.

The JournoList conundrum

Reihan Salam writes of JournoList, "I only wish right-of-center types could form something equally fun and stimulating and influential." Hmmm. If only there were a bright, young, well-connected person on the center-right with Ezra Klein-like levels of ambition and visibility to lay the groundwork for such a thing....

Private insurance for vets

I see Barack Obama couldn't take the heat and has scrapped a plan that would've required veterans' private health insurance companies to pay for the costs of treating certain combat-related illnesses and injuries. The plan was politically ludicrous from the start so this really comes as no surprise, and now we're back to the original plan, which is to shield veterans as much as possible from the horrors of the private health insurance market while forcing several dozen million Americans to buy in to it.

What was Gregg thinking?

Ezra Klein offers a tepid defense of Judd Gregg:

I actually don't think the fact that Judd Gregg supported using the 50-vote reconciliation process for ANWR but opposes using it for health reform is, on its face, a contradiction. Unless you're prepared to argue that supporting reconciliation for any legislation means consistency requires that you support it for all legislation, I'm not sure where this gets us. Health reform is different than oil drilling! Bigger and more complex!

That said, I think Gregg's position is, in fact, hypocrisy. He supported a rule requiring bare majority when that would maximize his power and opposed it when that would maximize his power. It just can't be proven.

Yes it can. As I noted, when Gregg supported using reconciliation to open up ANWR, he said "The president asked for it, and we're trying to do what the president asked for." Not "The president asked for it, and since the drilling issue falls below unwritten bigness and complication limits, we'll put it in the resolution." Now he says, "You're talking about the exact opposite of bipartisan. You're talking about running over the minority, putting them in cement and throwing them in the Chicago River."

Note, he says nothing about the complexity of health care and climate change legislation. His entire critique is based on the idea that a majority vote is undemocratic. He's not concerned about the length of the debate at all--if he were, he could probably be accommodated. He just wants to make sure that, when that debate's over, any decent bill will fail. And in so doing, he's contradicted himself.

The only consistency here is Gregg's willingness to use whatever means necessary to pass bad legislation.

Who neutered the bonus provision

You probably know the story by now, but the AIG bonuses went through in part because a Dodd provision to prevent such bonuses was significantly weakened in the stimulus conference committee. Dodd's language read:

(a) In General- Notwithstanding any other provision of law or agreement to the contrary, no person who is an officer, director, executive, or other employee of a financial institution or other entity that receives or has received funds under the Troubled Asset Relief Program...may receive annual compensation in excess of the amount of compensation paid to the President of the United States.

(b) Duration- The limitation in subsection (a) shall be a condition of the receipt of assistance under the TARP, and of any modification to such assistance that was received on or before the date of enactment of this Act, and shall remain in effect with respect to each financial institution or other entity that receives such assistance or modification for the duration of the assistance or obligation provided under the TARP.

The conference report added:

(iii) The prohibition required under clause (i) shall not be construed to prohibit any bonus payment required to be paid pursuant to a written employment contract executed on or before February 11, 2009, as such valid employment contracts are determined by the Secretary or the designee of the Secretary.

Good times. The stimulus conferees were, from the Senate: Democrats Harry Reid, Daniel Inouye, Max Baucus; and Republicans Thad Cochran, Chuck Grassley; and from the House, Democrats David Obey, Charles Rangel, Henry Waxman; and Republicans Dave Camp, and Jerry Lewis.

Old traditions

Steve Benen says, "There's a tradition that discourages former presidents from publicly criticizing sitting presidents. I'm glad to see George W. Bush honor this."

I'm not sure I get it. Bill Clinton, for instance, was a decent enough president and fairly popular. If he'd been allowed to run for a third term, he probably would've won. He was also significantly more competent than his successor, and frankly, if he knew that the incoming crew was packed with a bunch of ne'er do wells, and noticed at the time that they were doing a bad job, it might have made sense for him to speak up about it.

George Bush, by contrast, was a terrible president, and broadly unpopular, and almost nothing would make me happier than never having to hear from him again. But, unfortunately, we can't have separate sets of rules for popular and unpopular former presidents, so if Clinton should be allowed to run his mouth, so should he. And what would be the harm? If George Bush went on TV and criticized the new administration, it would probably cause a great number of people in the country to renew their faith in Obama's performance.

Gregg's changing idea of democracy

Kevin Drum and Matt Yglesias have rightly mocked Judd Gregg for describing the budget reconciliation process as mob rule. “That would be the Chicago approach to governing: Strong-arm it through.... You’re talking about running over the minority, putting them in cement and throwing them in the Chicago River.” Matt adds:

the idea that passing legislation my majority rule is some kind of mafia stunt is absurd. This is how bills pass in the House of Representatives, in the parliaments of the United Kingdom and Canada, in the state legislatures of the vast majority of American states. It’s how student council worked in my high school. It’s how New Hampshire town councils make decisions. You’re not talking about “running over” the minority, you’re talking about taking a vote in which the majority wins and the minority loses. That’s how we pick Senators! Judd Gregg doesn’t need 60 percent of the vote to stay in office.

But recall that for a couple of the Bush years, in addition to being perhaps the twerpiest member of the Senate, Gregg was... chairman of the budget committee! This led me to wonder if maybe he'd taken a softer view of the reconciliation process in the past, and lo and behold:

Republican leaders have been stymied for years in their effort to allow oil development on a 1.5 million-acre coastal strip of the Arctic National Wildlife Refuge (search) because they have been unable to muster the 60 votes needed to overcome a Democratic-led filibuster.

But a maneuver to avoid the filibuster is likely to come to a head in the next three weeks....

Budget Committee Chairman Judd Gregg (search), R-N.H. said Tuesday it was reasonable to assume ANWR would be part of the budget measure. "The president asked for it, and we're trying to do what the president asked for," Gregg said after meeting privately with Republicans on his panel.

Fifty votes for drilling in ANWR? Democracy at work. Fifty votes for much needed health and energy reforms? Mob rule.

Update: Jon Cohn noticed the same thing.

Blame Dodd

Read Jane and Glenn on the administration's attempts to pit the AIG bonus scandal on Chris Dodd. Glenn writes "The attempt to blame Dodd is based on a patently false claim that was first fed to The New York Times on Saturday by an "administration official" granted anonymity by Times reporters Edmund Andrew and Peter Baker (in violation, as usual, of the NYT anonymity policy, since all the official was doing was disseminating pro-administration spin)."

Here's a case where I think the problem isn't so much the granting of anonymity as the laziness of the reporting. After all, Jane took the anonymously leaked information and used it to get to the real story: That the administration is in part at fault for the scandal and is trying to deflect the blame by saying untrue things about Chris Dodd. But there's no reason Andrew and Baker couldn't have arrived at that same conclusion by doing a bit more work, and if they had, I wouldn't so much care that they'd granted anonymity to the person or people who lied. It wouldn't be ideal, maybe, but it would've been a good piece.

Now, though, we're left to wonder if the problem was laziness or a more intentional decision based on the understanding that access to the administration is more important than access to Dodd.

MAJOR STORY HERE!

A bit of inside baseball here: Yesterday, Politico's Mike Calderone wrote a fairly innocuous story about the existence and function of JournoList--an off the record email listserve that I belong to (Calderone missed that very, very crucial fact). I also belong to a few other off the record email listserves, but this story wasn't about those. It probably should have been, though. Some of them are pretty juicy! But Calderone picked JournoList, which is essentially a place where I can ask experts real questions and get a broad array of answers in one fell swoop instead of emailing them all individually, hoping they write back, amassing their responses, re-emailing with clarification questions, etc. It informs what I write in the same way old fashioned reporting and research does, but much more efficiently. Maybe there's a story there, but if there is, I'm not sure what it is. Certainly not a story my mother would read from top to bottom.

But the headline for the web version of the article read JOURNOLIST: INSIDE THE ECHO CHAMBER. That, of course, is why it got picked up on Drudge and cable news, which in turn ran with a different story they cooked up with the incorrect headline. Consumers misinformed? Check! Conservatives armed with talking point? Check. Good day for Politico's coffers? Check. And that's the game.

Which is why I take a very different position on what Politico did with the story than does Ezra, who wrote: "The site got massive traffic. That's the lifeblood of the enterprise. As for the headline? I don't begrudge them it. It's all in the game." Maybe what he means is that the imbroglio hasn't been a huge pain in the ass for him--which is good as far as it goes, but it's also a perfect distillation of "the game", which is easily and often corrupted and Politico should be begrudged for playing it, and dragging the already fouled name of journalism deeper into the mud.

Change we voted for: more Blue Dogs

I'm not really sure the newly created anti-progressive caucus of Democrats will make the Senate any less progressive than it was when it had an informal anti-progressive caucus comprised of exactly the same members. Perhaps it will make some "moderates" a little bit more brave than they have been, but for the most part it sounds an awful lot like a clique deciding to give themselves a team name and get media attention for doing so.

Note that caucus chair Evan Bayh endorsed Barack Obama and claimed to support "change we could believe in." That was apparently before he realized there was a lot of money in holding reform hostage, because now he's leading the effort to obstruct the president's agenda, even though Obama won his state and he has little grounds on which to argue that saving his seat requires him to position himself to the right of the administration.

Giving away valuable things to rich people: regressive

David Roberts has everything you need to know about the CBO's analysis of various cap and trade systems. David's takeaway?

• Auctioning permits and rebating the revenue, compared to freely allocating permits, produces the same macroeconomic effect, but
• auction-and-rebate is vastly more progressive, favoring low-income taxpayers, while freely allocating permits overwhelmingly favors the rich.

Here are the graphs:

In a way, this is a little bit of dog bites man. We've all known for a long time that giving away valuable resources to rich industries was less progressive than selling them and giving the money to poor people, but at least now the government is saying so, too. We've also known for quite some time that giving away the allocations will welcome corruption and influence peddling and will needlessly harm small, but potentially flexible businesses, whereas an auction, like a real market place, will efficiently determine who needs the allocations the most, and, therefore, what the right price is for each.

But to hear members of the Senate talk about it, corrupt socialism for rich people is "moderate" while an efficient and just market is too radical to even be dignified with an up-or-down vote.

Stupid stories for no good reasons

Yes, Chip Reid and Rick Klein are behaving badly, and yes, this behavior is fairly typical. For those of you who aren't already aware, on Sunday, John King gave Dick Cheney a platform from which to claim that the Obama administration is putting the country in danger--because his opinion is respected and in high demand, right? Well, when asked about it, Robert Gibbs said, "I guess Rush Limbaugh was busy, so they trotted out the next most popular member of the Republican cabal," and the MSM is once again aghast that anybody from this administration would dare say anything unflattering about the previous administration. Reid said, "This is a former Vice President of the United States. Is that the attitude -- is that the sanctioned tone toward the former Vice President of the United States from this White House now?"

Unsurprisingly, this idea that the president and his spokesmen can't respond to unwarranted attacks by members of the old administration is entirely new, cooked up special for Barack Obama et al. But if it was a real convention, it would still be extremely odd. What exactly changes between the campaign season and the end of the transition? At what point does it become NOT OK to say you're in town to restore honor and dignity to the White House, as if the previous administration had treated it like a fraternity or a brothel? When exactly does the press expect the people who won the election to stop saying things like, "Vice President Cheney has been the most dangerous vice president we've had probably in American history."

I mean, that was the current Vice President that Biden was talking about! At the same time, if nobody criticized anybody during campaigns, nobody would have known whom to vote for or why. But if it was all fair play then, why not now? If Obama and Biden thought Bush and Cheney had done a good job, they probably wouldn't have run at all, or at least not on such an oppositional platform. And presumably their opinions of their predecessors haven't changed.

The real problem here, obviously, isn't with Cheney being Cheney, or Gibbs hitting back. It's with insipid journalists asking insipid questions, sometimes of people who, like Cheney, ought to be idling on a ranch somewhere.

Some white dudes dissent on Douthat

Here's Mike Tomasky. Here's Michael Kinsley. Here and here's Brad DeLong. And here and here's Mark Kleiman.

Responding to crisis

I'm not really a part of this conversation, but in a way I think Matt, Kevin, and Ezra are all correct. What I'd say is that the United States can respond much more quickly to immediate crises than to long-term ones, but, as Matt says, things could be much more streamlined than they are.

I should add, though, that I think Matt discounts the extent to which the Fed and the modern 'consensus' about executive power during war do at times remove many of the usual veto points from day-to-day government, and that Kevin (in a followup post) is conflating the idea that American institutions make progress difficult with the idea that America's wealth and power allow it to take steps that look huge to the rest of the world.

On a totally different note, one thing Ezra wrote seemed very true to me: "Incumbents often don't survive depressions". And in reminding myself of the vast electoral turnover that occurred during the Great Depression, I came upon this fact:

The Republicans won a narrow majority of House seats in the fall elections, but the deaths of 19 Members-elect before the opening of the 72nd Congress (1931–1933) allowed the Democrats to gain a majority after a series of special elections. Texas Representative John Nance Garner was elected Speaker of the House.

WTF? Nineteen members? This was well before WWII and well after the Spanish Flu. What happened? Bus crash? Weird pneumonia outbreak in the chamber? Seems like an awful lot of dead representatives.

Grassley to AIG: "Go kill yourself"

I normally don't post stuff like this--people screw up when they speak off the cuff, even trained politicians. But here's what Chuck Grassley said to AIG executives:

I would suggest the first thing that would make me feel a little bit better toward them if they'd follow the Japanese example and come before the American people and take that deep bow and say, I'm sorry, and then either do one of two things: resign or go commit suicide.

I'm not sure, but I think he's talking about this, which is itself drawn from Bushido, the samurais' code of conduct. And he was just on MSNBC again saying these executives should learn a thing or two from the Japanese. Perhaps he means these executives should "apologize" and "return the money", and I'd agree, but those are things people are forced by their cultures to do everywhere, not just in pre-modern Japan, where one option was self-evisceration.

Don't forget the establishment

Ezra Klein and Tyler Cowen offer up their thoughts on the conventional ideas of influential people. I think they're both right, and, in particular, Ezra makes a good point about the dynamics of influence. But, somewhat oddly, neither uses the word "establishment". I'd argue that it's not the case that influential people have conventional ideas per se, but that they have establishmentarian ideas, many of which (preventive war, the death penalty, private health insurance) are or have been pretty radical by at least some standards. Some of them are subject to debate within the establishment, but others are not, and plenty of perfectly bland ideas are just completely outside the sphere of legitimate debate.

Inhabiting that space are radicals and total whack jobs, but also some perfectly reasonable dissidents. Some of them have views that, in an empirical sense, or when compared to prevailing views in other countries, are actually quite conventional. Some others are just as widely read or listened to as establishmentarians, but by people who lack the power to drag their ideas closer to conventional wisdom (whatever you think of his views, Noam Chomsky comes to mind here)

And I think people who sympathize with unacceptable ideas but who also find the establishment enticing find it much easier quite often to rise within that order by conforming (or otherwise playing nice) than by sticking to their guns. But that just reinforces reinforces the dynamic that makes it very difficult to be influential from the outside.

Don't pay?

Matt Yglesias asks, "couldn’t the administration just . . . not pay the AIG bonuses?"

As in, rather than direct Tim Geithner to find a way to not pay them, just order AIG to not pay them. Order first. Let the AIGsters sue. Then while the suit is playing out, have some lawyers somewhere try to come up with a reason why the government’s position is right. It’ll take a while for the suit to play out. Maybe the government will win, and maybe the government will lose. But either way, the administration will have thrown its punch at this outrage for the short-term and we can move on to other things.

This is sort of like saying it's easier to beg forgiveness than to get permission, and as a matter of principle I think it'd be a good way to go. But as I understand it, these bonuses were paid out on Friday. Now I've never received a check nearly as large as some of these checks reportedly were, and I don't suppose somebody like myself would be well positioned to withhold the money from the government if it came looking to recoup my bonus. But these people aren't like me. And if I'd just destroyed the global economy and strongly suspected I'd not be seeing enormous compensation for a long time to come, I'm pretty sure I'd put my bonus check some place safe.

Maybe they'll be shamed in to giving the money back voluntarily, or maybe their bonuses will be taxed at 100 percent, or maybe they'll flee to Venezuela. I'd be fine with just about any of these outcomes, but none of them involves the government asserting its legal power over the payment of these bonuses--which by all accounts they should have negotiated as a condition of the very first bailout.

Recouping losses

New York Congresswoman, Democrat Caroline Maloney has an idea:

The radical center. Via.