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George Zornick | The Nation

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George Zornick

George Zornick

Action and dysfunction in the Beltway swamp. E-mail tips to george@thenation.com

Nothing Ted Cruz Said About the ACA Today Is True


Senator Ted Cruz speaks to reporters on Wednesday, October 16, 2013, after news emerged that leaders had reached a last-minute agreement to avert a threatened Treasury default and reopen the government. Cruz said he would not try to block the agreement. (AP Photo/J. Scott Applewhite)

Wednesday morning, at the very same moment Senators Harry Reid and Mitch McConnell were on the floor announcing a deal to end the government shutdown and raise the debt ceiling, their colleague from Texas Senator Ted Cruz—one of the key actors in creating this crisis—was delivering a stem-winder to reporters outside the chamber. He blasted the “Washington establishment” and repeatedly lamented the “suffering” Americans felt because of the dreaded Obamacare.

Unfortunately, virtually everything he said about the healthcare law was either directly untrue, highly exaggerated or badly misleading.

Fact-checking Ted Cruz has become old hat at this point—but sadly, not for many mainstream media outlets, who have dutifully reported on the all-encompassing, government-shutting, market-riling debate over Obamacare without actually parsing who is right about the effects of the law.

So this morning’s moment is as useful as any to examine claims that the ACA is so bad, the government almost had to default in order to get rid of it. (You can find Cruz’s full remarks here; we will just excerpt the claims about the ACA.)

CRUZ: The deal that has been cut provides no relief to all the young people coming out of school who can’t find a job because of “Obamacare.” It provides no relief to all the single parents who have been forced into part-time work, struggling to feed their kids on twenty-nine hours a week.

Obamacare is a job-killer: that is an article of faith among many conservatives. Their claims, and particularly the one Cruz is making here, is centered around the employer mandate, which requires businesses with fifty or more full-time employees, defined as those that work more than thirty hours, to provide health insurance or face a penalty. (Incidentally, this is the mandate Obama delayed for one year.)

The theory is that businesses will slash hours or reduce positions to stay under the limits for providing health insurance. (Never mind criticizing the businesses for screwing over their employees in this fashion—it’s naturally the government’s fault for imposing health coverage requirements.) That’s why Cruz is mentioning young adults and single moms—aside from being highly sought-after voting demographics for the GOP, they are also among those most likely to be searching for jobs that straddle the line between part-time and full-time.

But this isn’t actually happening on any significant scale. If it were, one would have seen the number of workers putting in twenty-six to twenty-nine hours increase in 2013, as businesses prepared for the employer mandate before it was delayed. According to a study from the Center on Economic and Policy Priorities, however, the opposite actually happened: there were slightly fewer twenty-six- to twenty-nine-hour workers in 2013 as the mandate date approached. Despite whatever individual examples Republicans may trot out, no significant amount of people are being forced to work less hours because of the ACA.

And what of positions being slashed? That is also not borne out by employment data, which shows private-sector jobs increasing at expected rates. “Health care reform does not appear to be significantly hampering job growth, at least not so far. Job gains are broad based across industries and businesses of all sizes,” Mark Zandi of Moody’s Analytics said earlier this year.

Why is all this? In part, because 94 percent of the businesses that would be affected already give health insurance voluntarily, and also because many of the rest don’t think cutting jobs and cutting hours is a particularly good growth strategy.

CRUZ: It provides no relief to all the hard-working families who are facing skyrocketing health insurance premiums…. President Obama promised the American people “Obamacare” would lower your health insurance premiums. I would venture to say virtually every person across this country has seen exactly the opposite happen, has seen premiums going up and up and up, and everyone who clicks on “Obamacare” and sees the premiums sees the premiums going up and up and up.

This is another article of faith for Tea Party types—that the ACA will skyrocket premiums.

It’s important to note off the bat that the “rate shock” being described would apply only to people buying insurance on the individual market. People who get their insurance through large employers or are on Medicare or Medicaid (i.e., a vast majority of Americans) won’t see a significant change in premiums because of ACA—job-based health insurance cost for single people rose about 5 percent last year, which is the norm.

For people buying on the individual market, through the ACA exchanges, will premiums go up? The short answer is: for some yes, for some no, and there’s usually a significant reason when premiums do go up: much more coverage is being offered. Cruz is wildly overstating his case by saying “virtually every person across this country” has seen higher premiums.

Jonathan Cohn has a comprehensive breakdown of the three major studies that have been done on this so far. What they found: sure, it’s true the “sticker price” of many individual market plans will increase, but that’s because pre-ACA, many of the plans on the individual market offered very sparse coverage and were allowed to exclude people with pre-existing conditions. Since the law beefs up coverage requirements and outlaws pre-existing condition inclusions, the sticker price goes up.

But what will also happen under ACA is that many people will get subsidies to buy health insurance—so relatively few people will actually pay the higher sticker price. The subsidies are offered at the point of purchase, not after the fact, so there isn’t any short-term burden.

In the end, many people will pay less—for example, people who are older or sicker and looking for insurance on the individual market will pay less because the ACA stops insurance companies from charging them more. People with relatively low incomes will also pay less because of the federal subsidies. People with higher incomes (more than four times the federal poverty line) might pay more because they won’t get subsidies, and the young and healthy may as well, because they were benefiting from the health insurance market that existed before, where bare-bones plans that excluded a lot of sick people were offered.

It’s also useful to note that, already, overall, the ACA premiums are less than what was expected when the bill passed.

Cruz could have a real conversation about whether preserving lower prices for the relatively affluent, young and healthy folks on the individual market is worth the extra financial burden for the older, poorer and sicker Americans—but he seems uninterested in doing that. Saying “virtually every person across this country” is seeing higher prices is wildly, wildly overstating his argument. One might even call it a lie.

CRUZ: And [the deal] provides no relief to all the seniors, to all the people with disabilities who are right now getting in the mail notifications from their health insurance companies that they’re losing their health insurance because of “Obamacare.”

Seniors and the disabled are of course on Medicare plans. So what does Cruz mean?

This is another popular Republican myth, one frequently repeated by Senator Marco Rubio, as PolitiFact noted when it flogged him for “oversimplify[ing] matters and put[ting] too much blame on the health care law.”

The short explanation of the flim-flam: since the 1970s, seniors and the disabled have been able to choose between standard Medicare or private plans financed by the government, which has been called “Medicare Advantage” since 2003. Twenty-eight percent of seniors get their coverage through Medicare Advantage now.

The ACA cut $700 billion in excess payments through Medicare Advantage (you may remember that number from the 2012 elections). The idea was to bring the cost of the private plans more in line with the cheaper government plans over time. By tightening the payments, the ACA was challenging the private companies to manage their plans better.

And the thing is, it has worked: Medicare Advantage plans have seen premiums decrease by 10 percent since the ACA was passed, and 28 percent of the plans have been upgraded to a higher star rating since 2010, meaning they are offering better services. Seniors are responding: enrollment in Medicare is at an all-time high, up 30 percent since the ACA was enacted.

Now of course, some (but not many) health insurance companies have elected to dump seniors off their current plan and create a new one more in line with ACA requirements. That’s what Cruz is referring to, and it’s no doubt an inconvenience, but the net effect for Medicare Advantage customers, again, is cheaper plans with more services. The seniors and disabled losing their current Medicare Advantage plan can stay with the new plan being offered by their health insurance company, or chose from another Medicare Advantage plan during open enrollment, or just go on standard Medicare.

It’s not at all the situation being portrayed by Cruz, in which he warns of seniors “losing” their health insurance. He’s once again walking right up to the line of mendacity, and failing to explain what’s actually going on.

CRUZ: People all over this country are losing their health insurance. Fifteen thousand UPS employees got a notification in the mail that they were losing spousal coverage, that their husbands and wives were all losing the health insurance that they wanted and they liked. That is happening all over the country. It’s wrong.

Indeed, UPS said in August that it was ending spousal coverage for 15,000 employees and blamed, in part, the ACA. But Cruz isn’t telling even one-tenth of the story.

Once again, we turn to Jonathan Cohn. Here’s what’s important to understand: first, long before Obama became president, companies were jettisoning spousal coverage plans. That type of dual-coverage was a relic of the days when only one spouse (usually the man) worked, but as more women headed to the workplace, such plans became an increasingly expendable option.

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No doubt the health law is imposing some additional costs on employers, though once again Cruz elides any debate over the benefit trade-offs involved. But even UPS is emphasizing (not that Republicans will listen) that the ACA isn’t a controlling factor in ending spousal benefits. “One way of saying this is that we are restructuring our benefits ‘because of the ACA’—but that’s not accurate,” Andy McGowan, a UPS spokesman, told Cohn. “We are doing this because we are looking at many different factors adding to our costs, and ACA is one of them.”

Finally, you might have wondered if UPS only has 15,000 employees. It does not! The company is only ending the benefits of spouses who already have a job where they can get health insurance. In other words, not a single person is actually losing coverage because of this move. Cruz doesn’t mention that.

Zoë Carpenter on the Obamacare modification that’s part of the Senate’s new debt-ceiling deal.

Washington Finally Pays Attention to Afghanistan—for All the Wrong Reasons


A transfer case containing the remains of a soldier who died in the Paktia province of Afghanistan is moved at the Dover Air Force Base in Delaware on September 28, 2013. (AP Photo/Steve Ruark)

After years of neglect from politicians and the media, the war in Afghanistan finally sprung into public view this week.

At Tuesday’s presidential press conference in the White House, reporters shouted questions about the war to Obama as he left the podium. House Speaker John Boehner mentioned it in his own press conference only hours later, angrily dropping the word “disgraceful;” Senate Majority Leader Harry Reid also spoke about the families of fallen troops in a floor speech on Tuesday in which he used the phrase “shameful and embarrassing.” He was joined in a rare bipartisan colloquy by Senator John McCain, who exclaimed he too was “ashamed” and “embarrassed.”

Meanwhile, virtually every mainstream news outlet had a story this week about troops being killed in Afghanistan. Many included images of caskets coming off military transport planes at Dover Air Force Base, and were peppered with the words “disgusting” and “outrage.” Well-read blogs on both the right and the left were in on the story, too.

But the occasion wasn’t the twelfth anniversary of the invasion of Afghanistan, which happened to pass by on Monday virtually unnoticed: instead, the war has become a major talking point in the ongoing shutdown drama. Since the government is largely closed for business, the families of troops killed in Afghanistan aren’t receiving the standard death benefit payments, nor is the Pentagon paying for their trip to Dover to collect the remains of their loved one.

Indeed, it is outrageous that families of slain soldiers have to suffer this hardship on top of the monumental pain they must already feel. But perhaps the real outrage is that until now, nobody in Washington nor the media seemed to care much about their suffering.

The war in Afghanistan is in a particularly brutal phase. In eight years under President Bush, 630 American troops were killed in Afghanistan. But in less than five years under Obama, 1655 American troops have been killed. This year the 111 American fatalities already exceeds the total in every year under Bush except two. And as The Nation laid out in excruciating detail last month, the war has exacted a brutal toll on the civilian population of Afghanistan as well.

But as the war has ramped up, the media coverage has gone in the other direction. Even in 2010—the year in which more American troops were killed in Afghanistan than any other—the coverage of the war only occupied four percent of the nation’s news coverage from major outlets, according to the Project for Excellence in Journalism. “It’s never passed the threshold to be a big story week in, week out for Americans,” Mark Jurkowitz, the associate director of the project, said at the time. Now, the coverage has all but vanished.

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In Washington, Afghanistan has remained similarly taboo. There was literally no meaningful debate in Congress over Obama’s decision to surge troops into Afghanistan in 2009, with Democrats largely backing the president and Republicans never eager to sound like doves. Nor has there been any policy debate about the course of the war since—even as troops continue to be deployed. Afghanistan was an invisible issue in the presidential campaign. And it’s very difficult to find instances of the politicians now claiming outrage actually saying something substantial about the course of the war over the past several years.

But now that the flag-draped coffins have become a good talking point, politicians are paying attention. No doubt cable news bookers have been trying to reach the families of the five troops killed in Afghanistan over the weekend to inquire about the temporary loss of federal death benefits.

Here is another question they could ask: would you rather the country debate whether the military death benefits should be restored, or why the soldier had to die in the first place?

Robert Scheer writes about the racism and cruelty that drives the GOP’s attack on the Affordable Care Act.

‘60 Minutes’ Gets Disability Insurance All Wrong

Perhaps the biggest enemy of the American social insurance system is the anecdote: the Walmart shopper using food stamps to pay for King Crab legs, the mother who keeps popping out kids just to ensure the benefit checks don’t stop or the infamous welfare queen rolling around town in a Cadillac. None represent anything close to reality for the vast majority of food stamp and welfare beneficiaries, but are nonetheless powerful and seemingly indestructible fables for millions of Americans.

60 Minutes added an impressive entry to the genre of bashing safety-net programs with anecdotal evidence on Sunday night with a segment on the Social Security Disability Insurance program, which provides benefits to workers who become disabled before the retirement age. The piece, entitled “Disability USA,” has advocates for the disabled outraged.

The report, by Steve Kroft, made big promises, purporting to reveal a “secret welfare system” with its own “disability industrial complex,” and an out-of-control bureaucracy “ravaged by waste and fraud.” Kroft also said SSDI might be “the first government benefits program to run out of money.” But when it came time to deliver, he didn’t have the goods.

To tell his story, Kroft interviewed Senator Tom Coburn, an austerity crusader who has held up spending bills on everything from veterans’ benefits to tornado relief for people in his own state. He has also characterized some Americans on government benefits as “the people sucking off the program.” (“So, where’d all those disabled people come from?” Coburn wondered glibly during the 60 Minutes segment.) Kroft also interviewed two administrative law judges who work with SSDI cases, two lawyers who used to work on behalf of SSDI applicants, and two low-level workers in a Social Security office in West Virginia.

Each person described a system run amok: one of the judges said that “if the American public knew what was going on in our system, half would be outraged and the other half would apply for benefits.” The former lawyers told Kroft their former firm “figured out the system and they’ve made it into a huge national firm that makes millions of dollars a year on Social Security disability.” The West Virginia office workers described seeing huge lines at local stores and traffic jams on the day the disability checks came out; also that they heard people using the phrase “getting on the check” to mean ripping off the SSDI system.

Kroft also attempted to interview a Kentucky lawyer, Eric Conn, who Coburn has accused of paying off doctors to give disability diagnoses so patients could win claims through his firm. Conn played the role of villain in the piece by refusing to be interviewed, and was aided by a rather unfortunate last name, given the context.

It certainly gave a frightening impression. But viewers got little valuable information about the actual fraud rates for SSDI. Kroft didn’t interview any policy experts, nor any spokespeople for the program nor anyone who actually receives benefits.

Had he done so, viewers might have learned the following:

  • According to the OECD, the United States has among the most restrictive and least generous disability benefit systems in the developed world—behind only South Korea.

  • Two-thirds of SSDI applicants are denied on the first application. More than 60 percent are denied even after all appeals are complete.

  • SSDI is funded through payroll tax contributions, and is provided to workers who have contributed enough through payroll taxes to be insured.

  • There is an answer to Coburn’s question of “where did all these disabled people come from?” Demographics explain nearly all of it, and this rise in SSDI applicants was predicted as far back as 1994. Growth in the US population, the baby-boom generation entering its high-disability years and the surge of women who entered the workplace in the 1970s and 1980s and became insured under SSDI all contributed to the natural rise in beneficiaries.

  • As baby boomers reach the retirement age, the SSDI growth has already begun to level off and will decline in coming years.

  • There will be a shortfall in SSDI benefits beginning in 2016, but the program can pay 79 to 80 percent of benefits through 2086.

  • To reach solvency, Congress would simply have to enact a modest reallocation of payroll taxes from the retirement side of Social Security to the disability side, as it has done eleven times in the past to respond to demographic changes.

In other words, SSDI is a very strict program that denies far more people than it accepts, and needs a modest congressional fix to stay at full solvency. An interesting issue, for certain—but nothing like the benefit-sucking dystopia portrayed by 60 Minutes.

Failing to mention any of the above pieces of critical context was unusual for a normally rigorous news program. The closest Kroft came to even attempting to actually quantify fraud in SSDI was to mention a report done by Coburn’s staff. This is how Kroft characterized it: “Last year, his staff randomly selected hundreds of disability files and found that 25 percent of them should never have been approved. Another 20 percent, he said, were highly questionable.”

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This doesn’t comport with the well-established scrutiny of the SSDI program, nor a rigorous University of Michigan study that suggested a problematic approval rate of less than 7 percent.

Why? Because Kroft mischaracterized Coburn’s study. Indeed, it found that in 22 percent of SSDI appeals that favored beneficiaries, there may have been a “procedural error.” But according to Rebecca Vallas, co-chair of the Social Security Task Force at the Consortium for Citizens with Disabilities, that could mean something as small as failing to cite a particular policy in one paragraph of the entire decision. It doesn’t mean the case was wrongly decided. In fact, “[Coburn’s] report did not contain any evidence that even one case was wrongly decided,” Vallas said. Yet Kroft’s whole piece hung nearly all of its anecdotal evidence on Coburn’s study.

Sadly, the 60 Minutes piece isn’t the first recent bit of journalism from a respected outlet to bash recipients of SSDI. NPR’s This American Life and the New York Times’s Nicholas Kristof both recently did similarly skewed reports.

Advocates like Vallas are naturally frustrated. “These media reports do a tremendous disservice to viewers as well as to people with disabilities,” she told The Nation. “Any misuse of these vital programs is unacceptable; however, it is unfortunate and disappointing when media reports mislead their viewers by painting entire programs with the brush of one or a few bad apples, without putting them in the context of the millions of individuals who receive benefits appropriately, and for whom they are a vital lifeline.”

Aura Bogado takes Janet Napolitano to task for her hypocrisy on immigration reform.

Congressional Liberals Mobilize to Keep Social Insurance Out of Shutdown Talks


Representative Keith Ellison and other members of Congress rally outside the US Capitol against cuts to social insurance programs on October 3, 2013. Photo by George Zornick.

We’ve seen this movie before: Republicans force a showdown in Congress over funding the government, the debt ceiling or, in the present case, both. Then a “grand bargain” is proposed to solve the impasse—one that includes serious reductions to social insurance programs.

That’s just how the GOP would like the current drama to play out. Wednesday, National Review’s Robert Costa reported that House Speaker John Boehner and Representative Paul Ryan are rallying nervous Republicans by telling them that while Obamacare may not end up getting defunded, GOP leadership is cooking up another big budget deal that includes cuts to the safety net so cherished by many conservative members. “It’s the return of the grand bargain,” one member told Costa. “Ryan is selling this to everybody; he’s getting back to his sweet spot,” said another.

In particular, Costa mentioned Chained CPI as one component of the emerging proposal. This, you may recall, is a cut to Social Security benefits dressed up as a ostensibly “more accurate” recalibration of the formula used to adjust benefits to inflation. (It’s not.)

Democrats, from the White House to Congress, are taking a hard line so far. President Obama reiterated this morning that he will not abide GOP hostage-taking, and wants a clean resolution to reopen the government and a clean increase of the debt ceiling. Senate majority leader Harry Reid and House minority leader Nancy Pelosi are on the same page.

But Obama also said he’s happy to engage in a broad budget deal once the stalemate is resolved, and Reid sent Boehner a letter on Wednesday pledging the same.

This has left some progressives a little nervous—a debt-ceiling increase with the promise of a grand bargain and a grand bargain that includes a debt-ceiling increase is a distinction without much difference, except the notable removal of some leverage from the GOP side. And President Obama has repeatedly proposed Chained CPI in the past, and it would clearly be in play once during any broad discussions of a deficit reduction package.

Thursday morning, more than twenty liberal members of the House gathered outside the US Capitol, along with a large group of retirees and other activists. The message was simple: they will not support cuts to Social Security or other safety net programs.

The press conference took on the air of a campaign event, with passionate speeches and colorful placards, and culminating in a “human chain” of members of Congress and retirees holding hands across the Capitol lawn and singing protest songs.

“Folks are scurrying around here, trying to figure out how to end the shutdown. And sometimes I’ve heard [Democrats] say ‘You know, maybe we should give them something.’” said Representative Keith Ellison, co-chair of the Congressional Progressive Caucus. “Some folks say ‘We’ll give you Chained CPI.’”

“No way! No way!” Ellison shouted into the microphones. “Open up the government. Put a clean CR on. Stop this austerity…. The way we hang together here is we make sure nobody, but nobody, gets sold out in exchange for Republicans doing their job, which is funding the government.”

Many of the members, now veterans of repeated standoffs and grand bargain proposals, said they believe the real prize for the GOP is safety net cuts.

“There is a basic, basic attack going on in this country against so-called entitlements. That’s what this fight is all about. That’s what the budget fight is all about,” said Representative Jerrold Nadler. “This has got to be fought, and it’s shameful if any Democrats, no matter where he or she may be, buys into any of this.”

Their efforts are being bolstered by renewed pushes from outside advocacy groups. On Wednesday, the National Committee to Preserve Social Security and Medicare released a study examining how much money Chained CPI might take away from seniors and people with disabilities—and also suck out of the economy. The study uses the Obama administration’s most recent proposal on Chained CPI, and found that it would reduce benefits nationwide by $23 billion by 2023. That translates to a loss of over $31 billion in economic output by that time.

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The study also breaks down the benefit cuts each congressional district—and also projects what the economic cost would be. The idea is to use the numbers as a cudgel against wavering members.

For example, in the Maryland district of Representative Steny Hoyer, who did not take a position on Chained CPI when Obama proposed it in his budget this spring, the report shows that $38.3 million in benefits would be taken from his constituents by 2023. That translates to as much as $80.5 million in lost output in that district alone.

The relatively large number of progressive members present at the event was significant because any budget deal is almost certain to face a razor-thin vote, with a chunk of Republicans likely to vote against any sort of deal endorsed by the president. The votes represented at the rally will be needed. But the members said they will not be forthcoming, neither in the shutdown talks nor afterwards.

“I will oppose and I will urge my colleagues to oppose a switch to the Chained CPI,” said Representative Elijah Cummings. “We should not reduce the retirement income that our seniors, retired veterans, and public service have earned and deserved—for any reason whatsoever.”

The Vast, Unregulated Online Gun Market


Listings for semi-automatic rifles on the popular online gun website Armslist.com, September 27, 2013.

Last October, while most of the country was obsessed with the presidential election only a week away, Radcliffe Haughton walked into a Wisconsin spa with an entirely different obsession. Earlier in the month, Zina Daniel, his estranged wife, obtained a restraining order against him after a long history of domestic abuse and stalking. She worked at the spa, and he had visited before—seventeen days prior, he slashed her car’s tires in the parking lot outside.

But now he came with more than a knife: Haughton had a .40 caliber semi-automatic Glock handgun with him. Immediately upon entering the store, he shot Zina dead—and then murdered one of her co-workers, and then another. He continued shooting, and four other people were wounded before he finally turned the gun on himself.

The judge’s restraining order specifically forbade Haughton from buying a gun, and had he gone to any licensed firearms dealer, he presumably would have been denied. Instead, Haugton went to the increasingly popular Armslist.com, where tens of thousands of guns are up for sale, and where the vast majority of the sellers are private citizens. Within days he had the Glock.

Armslist.com is only a part of the online gun marketplace, but it is a big part—there were almost 100,000 listings on the site in August. The site, and many others like it, went from being virtually unknown to hugely popular in a matter of months, as other mainstream online retail markets, like Craigslist, cracked down on gun listings:


Courtesy Mayors Against Illegal Guns

A new study by Mayors Against Illegal Guns has revealed that every thirtieth gun sold on Armslist.com was sold to someone who would have failed a background check. Of 607 would-be buyers in the sample, which stretched from February to May of this year, 3.3 percent were sold to someone who committed a crime that prohibited firearm possession under federal law.

That ratio is many magnitudes higher than the one for licensed gun dealers—based on the rate of background check denials, only 0.87 percent of would-be buyers at licensed dealers are prohibited purchasers. The report gives a troubling analogy for the Armslist.com marketplace: if one in every thirty passengers on a Boeing 747 were on the federal terror watch list, there would be twenty-two suspected terrorists on board.

And in fact, the ratio is likely much higher. Mayors Against Illegal Guns had a relatively simple methodology—the group examined 13,000 “want-to-buy” ads where the buyer entered a name and contact information, and then compared that information to publicly available criminal records.

So the one-in-thirty result is almost definitely an undercount, because it doesn’t include people who are precluded from gun ownership for other reasons: serious mental illness, immigration status, a history of drug abuse or other non-criminal criteria.

But more notably, only 5 percent of the people who place “want-to-buy” ads on Armslist.com disclose their name and contact information. So one could fairly assume that among the people who choose anonymity, the ratio of prohibited buyers is higher. The analysis also doesn’t, and couldn’t, take into account the people who simply respond to the sellers’ ads directly—another likely approach if someone knows they can’t buy a gun legally.

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And again, Armslist.com is only one part of the huge online gun marketplace; Mayors Against Illegal Guns is just scratching the surface here. But other investigations have borne similar results. In 2011, investigators working for New York City called 125 sellers in fourteen states advertising on ten different websites, including Armslist.com. The investigators plainly said they were unlikely to pass a background check—and 62 percent of the sellers agreed to transfer a weapon anyway. On Armslist.com the rate was 54 percent.

These are exactly the kinds of sales the Manchin-Toomey gun legislation that failed in the Senate earlier this year was designed to stop. Under that bill—which 90 percent of the public supported—a background check would be applied almost universally, including, crucially, for online sales.

“Loopholes in our federal gun laws have taken a devastating toll on communities and neighborhoods across America. Yet in April, a minority of US senators blocked the common-sense legislation that would have closed these deadly loopholes,” said Boston Mayor Thomas Menino when the study was released. (He is a co-chair of Mayors Against Illegal Guns.) “It’s time for our leaders in Washington to put public safety first and pass sensible gun laws that will help save lives.”

The common refrain from pro-gun activists is that criminals will avoid background checks anyway—which, as this study shows, is true. But maybe we shouldn’t make it so easy for them.

Marie Myung-Ok Lee on breaking the cycle of anger.

Wall Street’s Odd Calm About a Debt-Ceiling Breach


Wall Street sign outside the New York Stock Exchange. (Press Association via AP Images)

When Senator Elizabeth Warren addressed members of the Financial Services Roundtable in Washington on Thursday, she began by recounting the first time she spoke to the trade group, representing the country’s largest banking and financial interests, in 2010.

At the time, the Dodd-Frank bill had just been passed after bruising battles with the industry, and she was in the process of setting up the Consumer Financial Protection Bureau, which the financial sector and its allies in Congress loathed and would repeatedly try to defang. “When [Chairman] Richard Davis introduced me, he said that in the interest of safety, all knives had been removed from the tables,” Warren recalled. “It was a joke—or at least I hope it was.”

Indeed, Warren is very familiar with Wall Street’s awesome power to influence the policy process in Washington. Which is why she came to them with a plea: please do more to avert a debt-ceiling breach and the potential calamity that would result.

You protect your interests every day in Washington. Ending this destructive notion of politics by hostage-taking is in your interests. And preventing an actual default—a self-inflicted wound that could cause a spike in interest rates and a freeze in our credit markets—is clearly in your interests.

I know that many of you have already spoken out, and I’m grateful for that. But please keep at it. For those of you who haven’t, please start now. Speak up publicly and write op-eds and give interviews. One conversation won’t get this done. Think of it this way: it took years of effort—press conferences and op-eds and town halls and hearings—for the debt-ceiling hardliners to raise this issue in the public consciousness, and now almost half of the country thinks that Congress should not raise the debt ceiling. It will take that kind of effort to reverse the tide.

What’s odd is that she had to say anything. One would think the financial sector would be applying a full-court press to stop a devastating fiscal meltdown that would wreak havoc on the Street (and most everywhere else). But implicit in Warren’s plea was that bankers haven’t been doing nearly enough.

Sure, some have spoken out, as she noted—like Goldman Sachs CEO Lloyd Blankfein at the Clinton Global Initiative yesterday. But the pleas have been soft, and virtually no pressure is actually being exerted in Washington. There’s nothing like the coordinated campaign that almost stopped the CFPB from actually having a director.

Why? The most obvious explanation is that Wall Street as a whole simply doesn’t believe the country will default. As always, the financial sector lets its money do the loudest talking, and the markets clearly are not anticipating a default. Goldman just released a report that found no discernible reaction in the S&P 500 to a potential debt-ceiling breach. “Complacency is even more pronounced on stocks with high government exposure,” wrote Goldman analysts. “Fear priced into options on these stocks dropped over the past few months to new lows.”

This all seems to be based in a belief that lawmakers will find their way to a deal—that the risks are so high, it is just a foregone conclusion. “DC always gets very close to the edge and then in the end finds an eleventh-hour solution,” Goldman’s chief economist told Politico last month. Another analyst told Business Insider this week that “I tend to think Wall Street has gotten numb to the antics out of a very partisan DC process.”

This attitude was more colorfully described by a trader in another Business Insider story: “I’m just here looking at my charts minding my own business you know what I’m saying? I don’t have time to worry about debt ceilings and the government. These people are a hot mess. I can’t…. You got a bunch of clowns reading each other Dr. Seuss. Why should I worry about what they’re doing, or not doing?”

Wall Street should care, however—a lot. As Ezra Klein noted earlier this week, the dynamics of this showdown are uniquely dangerous, much more so than what happened in 2011.

Then, at least both sides agreed there had to be a deal on the debt ceiling. Now, Obama is refusing to negotiate on it (much to his credit, of course—the country can’t keep playing chicken with calamity) and Republicans not only want to negotiate, but many members insist on pie-in-the-sky demands Obama cannot and will not honor even if he wanted to negotiate. That’s alongside the non-trivial number of members in the House who want to vote against raising the debt ceiling almost regardless of any deal, just to teach the country a “lesson” about debt.

If John Boehner can’t put together enough votes to make all these members with wildly disparate imperatives by October 17—at the latest—the country really might default. And the damage would be catastrophic.

The country did actually default briefly once before, by accident, due in part to a word-processing error. As Pema Levy wrote this week, that brief blip cost investors about $12 billion. A prolonged and purposeful default could create a real calamity in the financial markets. “I disagree incredibly strongly with the notion that breaching the debt ceiling would not have major, catastrophic consequences,” economist Mark Zandi told Levy.

Warren informed the Financial Services Roundtable’s guests, in case they didn’t already know, that it would be quite bad. “If the government’s borrowing costs go up, your costs will go up. And if consumer confidence drops, your customers will spend less. The debt ceiling isn’t a Washington problem; it is an American problem,” she said.

But it could be worse. Much worse—the sort of disaster on Wall Street that sees CNBC footage traders clutching their belongings in a box outside their firm, which just went belly-up with no warning. Then a domino effect of failed financial institutions and a global economic crisis.

Former Representative Brad Miller, a Democrat who served on the Financial Services Committee until retiring last year, persuasively sounded that alarm in Politico this week in a piece titled “How Congress Could Blow Up the Economy.”

He observed that Wall Street’s shadow banking system is particularly vulnerable to a default. It’s a system based on so-called “repo lending,” which is short-term lending outside the commercial banking system. Basically, a financial institution sells an asset to another institution with a contract to repurchase it the next day.

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The lender keeps that asset as collateral, and as long as that collateral exists and is trusted by all the market players, everything might be fine. Which is good, because the Federal Reserve estimates $4.6 trillion changes hands in repurchase agreements every day, and it touches most all corners of the financial system.

But the most common form of collateral in these arrangements are US Treasury notes—and their value would naturally be called into question if the Treasury stops paying debts because of a default. Their value could be called into question even if that prospect suddenly appears real. Lenders would start asking for more collateral, on a scale that many institutions might not be able to meet.

Miller warns that a sudden flood of demands for more collateral is the stuff of massive institutional collapse—it could destroy this massive shadow banking system. A sudden demand for collateral is largely what created the 2008 financial crisis.

More recently, Miller notes, it’s what sunk the infamous MF Global, which bought a bunch of Italian sovereign debt through repurchase agreements, at low prices, and gambled the debt would be repaid in full eventually. The firm would make a killing in that case. But doubts were then raised about the stability of the Italian financial system, the firm’s shadow bank lenders demanded more collateral, and boom—the firm went under.

Miller charges that Congress simply doesn’t realize how real, and dangerous, this possibility is. “MF Global’s failure to anticipate demands for more collateral was perplexing, since they were thought to be smart and to have a sophisticated understanding of the financial system,” he wrote. “Does anyone think that about Congress?”

Few do. So here is a situation with the debt ceiling where members of Congress are blasé about risks to the financial sector and world economy, while meanwhile people in the financial sector are blasé about the very real chance Congress can’t reach a deal. And a economic calamity awaits.

That’s why Warren made her plea today—there isn’t much hope that the Ted Cruzes of the world will suddenly wise up. So Wall Street should probably stop fiddling.

John Nichols wonders if they House GOP forgot who won the election in 2012.

The GOP’s No Good, Very Bad Food Stamp Cuts


A sign announcing the acceptance of electronic Benefit Transfer cards at a farmers market in Roseville, California. (AP Photo/Rich Pedroncelli)

As expected, Republicans in the House of Representatives passed a measure Thursday night that cuts nearly $40 billion from the Supplemental Nutrition Assistance Program. If signed into law, the bill would push at least 4 million people off food stamps over the next ten years, including many poor and unemployed Americans.

In case you haven’t been following the extensive food stamp debate in Congress this year, here’s the basic rundown: Republicans proposed a farm bill in the spring with deep food stamp cuts: about $20 billion dollars over ten years. That wasn’t enough for hard-core conservatives, who helped kill the bill in June while demanding deeper cuts.

So Thursday night House leadership came back with double the reductions, and passed it this time.

We’ve covered (over and again) the cruelty of these cuts, but it’s worth rehashing quickly how bad they are—and how dishonest the arguments marshaled for them have been.

The Republican argument is based on the premise that food stamp funding has exploded over the past few years mainly because people are ripping off the system, and mainly because the “food stamp president,” in the nomenclature of Newt Gingrich, is letting them.

Said Representative Rick Crawford, a Republican from Arkansas, on the House floor Thursday: “Throughout the Obama presidency, we’ve seen the food stamp program grow exponentially because the government continues to turn a blind eye to a system fraught with abuse.”

But that’s just not true. The program has a rigorous payment error oversight program; 98 percent of SNAP benefits were issued to eligible households in 2011. Food stamp use, and thus expenditures, boomed because of the great recession:

And the program is scheduled to reduce outlays all by itself over the next several years, as the economy recovers:

Still, Republicans press on. Aside from plain fraud, the GOP argument is that lazy folks who just don’t want to work are taking advantage of the program. Even if some people technically qualify, they’re probably using the program as a crutch instead of finding work.

“When did America trade the dignity of a job for a culture of permanent dependency?” asked Representative Mike Cramer of North Dakota yesterday. He then theatrically read a passage from Theodore Roosevelt’s autobiography: “ ‘We knew toil and hardship, hunger and thirst. But we felt the beat of the hearty life in our veins because ours was the glory of work, and the joy of living.’ Madam president, I say let’s encourage the dignity of work again, and let’s pass these modest reforms.”

Once again, there’s a complete disconnect from reality. The average daily food stamp benefit is about $4 per person per day, and if you think that paltry amount isn’t enough to keep people from seeking work, you would be right:

Specifically, Republicans are cutting the program by instituting so-called “work requirements.” For a lengthy debunking, read Robert Greenstein of the Center on Budget and Policy Priorities. The short version is that SNAP already kicks people off benefits after three months if they aren’t employed or in a job-training program. But the law also allows governors to waive these requirements, and forty-five governors, both Democrat and Republican, have done that in recent years—since we are in the middle of one of the worst economies in modern American history. The House bill passed last night simply ends all such waivers.

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The real kicker is that many people aren’t in job-training programs because states don’t have enough slots—and the House budget and appropriation bills also cut funding even further for job-training programs.

In short, Republicans want to cut $40 billion from SNAP because of waste that isn’t happening, and because people are failing to find jobs that don’t exist. They also want to cut job-training programs, and then cut people’s food stamps because they are unable to enroll in job-training programs.

This is no small deal—SNAP benefits lifted a record number of people out of poverty in 2012:

And finally, it’s worth noting that for all the paeans to the virtues and dignity of hard work emanating from the House floor yesterday, here is a running counter of how many jobs bills the Republican House has passed:

Sasha Abramsky on the Census Bureau’s latest poverty figures.

SEC Makes Important Move Towards Reining In CEO Pay


(Securities and Exchange Commission/Flickr)

It is not often federal regulators stand up to pressure from Wall Street, applied with millions of dollars and all sorts of seen and unseen lobbying. But this week provided a rare example: on Wednesday, the Securities and Exchange Commission voted 3-2 to release a rule on executive pay that the corporate sector tried desperately to avoid or water down.

The new rule would require US corporations to disclose how the paychecks of their CEOs compare to the paychecks of the median worker at the company. Since the 1990s, executive pay at US companies has doubled, and top executives at large public companies now take home an average of 10 percent of their company’s profits each year, or 343 times worker pay.

The proposed rule—which was mandated by Section 935b of the Dodd-Frank financial reform act—is of course somewhat modest. It just mandates disclosure of the median worker/CEO pay rate for each company, and doesn’t actually impose any legal limits.

But massive corporate and trade groups, including the US Chamber of Commerce, the Retail Industry Leaders Association (RILA) and the Center on Executive Compensation spent millions trying to get the rule watered down, and deployed a small army of expert lobbyists to Washington. (A Public Citizen analysis breaks down the specific efforts, down to the names of some lobbyists.)

Publicly, those in the corporate sector argued that the rule was basically useless, a “name-and-shame” provision meant to embarrass them. But they didn’t spend millions of dollars just to avoid a tough Ed Schultz segment on MSNBC. The real concern is that investors will have their hands on this CEO pay data—and an increasing body of research, also available to investors, indicates that top-heavy compensation schemes indicates mediocre performance and ultimately a bad investment.

An excellent report from the AFL-CIO has summed up the research. It notes the work of Jim Collins of the Stanford Business School, who analyzed “great” companies, meaning, in his definition, those that over a fifteen-year period generated cumulative stock returns that exceeded the market by at least three times.

He came up with 1,500 companies—and not one had a highly paid, so-called “celebrity CEO.” Collins concluded that exorbitant CEO compensation sapped motivation and creativity from lower-level executives and transformed the management structure into “one genius with 1,000 helpers.”

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Several other studies have demonstrated a decline in morale, high turnover and a significant deterioration in the quality of products produced at companies with a high disparity in CEO pay. One study in the Academy of Management Journal found that at companies with highly disproportionate CEO pay, the negative impacts extended ten levels down the chain of command.

In other words, CEO pay ratios are material information for investors when choosing where to put their money. The trade groups fighting this measure tried to have the ratios watered down in all sorts of ways—by allowing corporations to exclude, for example, foreign, part-time or seasonal workers.

But the SEC stood firm, and passed out the rule with no exceptions. If they finalize the rule, it could create real market pressure against top-heavy compensation schemes—which is exactly what the lobbying groups feared.

Lee Fang on the Koch brothers new anti-Obamacare front group.

Navy Yard Shooting: A Jarring Reminder of America’s Gun Problem


Police block off the M Street, SE, as they respond to a shooting at the Washington Navy Yard in Washington, September 16, 2013. (Reuters/Joshua Roberts)

At least thirteen people were killed at the Washington Navy Yard on Monday, including a suspected gunman, in the latest iteration of a now-familiar US news event: a mass shooting that claims victims apparently at random.

As the streets of DC came to life Monday morning, reports emerged around 8:20 am that shots were fired at the naval facility on the city’s southeast waterfront, less than two miles from the US Capitol. It quickly became clear that multiple people had been shot during a rampage, and at a 2 pm news conference on the perimeter of the crime scene, police confirmed that twelve people lay dead inside. The number was later updated to thirteen.

During a press briefing at the MedStar Washington Hospital Center not long after the shootings, a spokeswoman speculated that “it had to be a semi-automatic [weapon],” based on witness descriptions of gunshots heard in “rapid succession.” Authorities later confirmed that indeed the suspected gunman had an assault rifle as well as a pistol.

Police identified the deceased suspected shooter as Aaron Alexis, a 34-year-old man from Fort Worth, Texas, who reportedly worked at some point as a contractor for the Navy.

In the context of increasingly frequent mass shootings and a highly visible congressional debate on gun control, any further mass gun violence is sure to become a political issue—all the more so when it happens in Washington itself.

Had the scene outside the Navy Yard been in a movie about a fictional gun control debate, it probably would have been rejected as too didactic.

The Capitol dome was part of the nearby skyline as reporters, television cameras, scattered passerby and law enforcement officers converged on M Street Southeast at the western edge of the perimeter set up by police. To the east, all one could see was a small army of emergency responders in the street; the sidewalk-to-sidewalk flashing lights made individual vehicles almost indistinguishable. A US Park Police helicopter flew in tight circles extremely low overhead.

In isolation it was not that unusual of a sight in DC: it looked like perhaps one of the many motorcades that criss-cross the city from time to time. But people on the street were unusually quiet and unsettled, because of course there was no dark limousine nor group of dignitaries in the middle of the chaos but rather the scene of a grisly multiple murder.

Many of the reporters at the scene wore congressional press credentials and might have otherwise been covering a comparatively dry budget debate, but instead scoured around for witnesses to the shooting. Blocks away, Senate office buildings were placed on a two-hour lockdown, with staffers unable to exit or enter, and intimidating military-style vehicles surrounded the Capitol complex.

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In that fictional movie, this is where a dysfunctional Congress finally springs into action and helps solve the problem. The very same staffers who worked behind the scenes to scuttle this year’s big gun control legislation, now trapped in their offices because a mass shooter might be on the loose, suddenly see the light and pull the Manchin-Toomey legislation out of their desk drawers.

But will that happen here? While it’s clearly very early on, and the gun control debate has taken some surprising turns in the past year, this scenario seems unlikely. Senator Manchin already told reporters Monday afternoon he still didn’t have the votes to get his gun control legislation passed; no previously opposed members suddenly announced a new position. Only hours before the shootings, members of Congress and gun control advocates were bemoaning a recent loss of momentum in Congress thanks to recall elections in Colorado that cost two longtime legislators their jobs because they supported tighter gun rules earlier this year.

Continued inaction seems likely because the gun control debate has never suffered for an absence of bloodshed. Manchin-Toomey didn’t fail because the slayings at Sandy Hook Elementary School weren’t quite tragic enough. More indiscriminate killings—even right in the backyard of Congress—probably won’t change the fundamental calculus made by Senators to sidestep the wrath of the National Rifle Association (on display in Colorado just last week) and extremely pro-gun conservative voters, who value “gun rights” to the exclusion of almost any other issue.

That said, the gun control package was only a couple of votes short in the Senate this year. Maybe more shootings will finally convince someone to change his or her vote. But more likely, until the fundamentals of the debate change, this mass bloodshed will only serve as gruesome illustrations of a problem nobody in Washington can seem to solve—nor even meangingfully address.

Beware the New Senate Bill on Syria

Protesters against US military action in Syria march to Capitol Hill from the White House in Washington, Saturday, September 7, 2013. (AP Photo/Carolyn Kaster)

Events are moving at a rapid pace, but it appears in the past twenty-four hours that the international community moved towards a diplomatic response to the use of chemical weapons in Syria. Russia’ potential embrace of a United Nations Security Council resolution condemning Syria’s the use of chemical weapons in Syria, coupled with a deadline for UN control of Syria’s stockpiles, might avert US military intervention.

Accordingly, yet another “Gang of 8” senators is crafting a resolution more in line with the new dynamic. It would, in practice, supplant the resolution passed by the Senate Foreign Relations Committee last week, which was already losing momentum. (Senate Minority Leader Mitch McConnell said Tuesday he would not support it, as did a raft of other senators, from Rob Portman to Ed Markey.)

The new “Gang” bill, according to news reports, would authorize US military force in Syria if the Security Council can’t pass a workable resolution, or if Syria fails to comply with it. The New York Times reported the details are “far from complete.”

In theory, this sounds good—it’s roughly similar to a compromise floated by Senator Joe Manchin last week; both would give Syria an opportunity to comply with international chemical weapons bans before military action occurs.

But Manchin’s bill was short and direct, and tried to force a number of safeguards that would limit the chances of military action, including a strategic plan from the White House with specific benchmarks.

A quick look at the gang working on the new Senate bill would indicate the new resolution is unlikely to be similarly limited. The members are, according to the Times: Republican Senators John McCain, Lindsey Graham, Kelly Ayotte and Saxby Chambliss, along with Democratic Senators Carl Levin, Charles E. Schumer and Chris Coons. Senator Bob Menendez chairman of the Foreign Relations Committee, is reportedly “in consultations” with the group.

Notably, while some remained uncommitted on intervention, like Ayotte, no members of the group oppose it. And some, like McCain and Graham, are extreme hawks on the issue, and favor all-out regime change, not just limiting chemical weapons use.

McCain’s role on the Foreign Relations Committee last week was instructive. He held out his support for the final bill until language was added expressing that the goal of the mission is regime change. The new language—and the corresponding expansion of the target list by the Pentagon—made the bill “too broad” for many to support. Both Franken (who is still undecided) and Markey cited concerns about the scope of the authorization.*

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Now, McCain is a key player in the new “Gang,” and the final language deserves an enormous amount of scrutiny. This compromise bill is still ultimately an authorization for use of military force, and if McCain, Graham et al. work in language that lowers the bar for intervening or expands the mission’s goals—or both—it’s potentially quite dangerous. The system has worked to this point because Congress hasn’t authorized an unpopular and potentially unnecessary military operation, and thus prevented it from happening; a real diplomatic breakthrough shouldn’t allow hawks in the Senate to backdoor a use-of-force resolution that the administration can rely on down the road.

Similarly, the administration is privately making the case that the potential breakthrough at the UN should prompt Democrats to vote for the original use-of-force resolution from the Foreign Relations Committee, according to Greg Sargent at The Washington Post.

That, too, rushes Congress along in a way it doesn’t need to be rushed. Authorizing military force is an enormous decision, and one that’s hard to revoke—as we learn every time the September 11–era authorizations are cited for some recent and only very lightly related operation.

Already, some are pressing the case that there’s no need for any force authorization until the UN process concludes. “What’s clear is that the diplomatic resolutions to the crisis in Syria have not been exhausted and, until they are, the president should not continue to press Congress for authorization for the use of military force,” said Jim Dean, chair of Democracy for America.

Whether Obama presses forward with that request tonight, and what final language might ultimately emerge, is of massive importance.

*Correction: An earlier version of this story said Senator Al Franken opposes the legistation that came out of the Foreign Relations committee last week. While he has expressed some concerns about the bill, he has not said how he would vote.

​Stephen F. Cohen and Katrina vanden Heuvel on the diplomatic alternative to war in Syria.

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