Capitolism

Why Should We Listen to Simon Johnson?

By Christopher Hayes

Simon Johnson, the former IMF economist has become the Lil Wayne of meltdown commentary. He's everywhere: This American Life, Fresh Air, TPM, etc. And I've found him incredibly persuasive and lucid on all things meltdown related. But there's something that's been nagging me. One of Johnson's standard lines about the crisis is that receivership/nationalization would be the standard IMF prescription in this case if it were any other country. But my sense-- and I know this is controversial terrain -- was that the IMF *really* screwed up its management of financial crises around the globe in the 1990s. when Johnson was working there. Which makes me not exactly heartened to hear that nationalization is the IMF prescription in our case. Thoughts?

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March 10, 2009

This Week On The Hill

By Christopher Hayes

Greg Kaufmann's got the preview:

This Week on the Hill

It's like the movie Groundhog Day -- only with Harry Reid trying to woo Republicans so he can finally get cloture -- as the Senate tries yet again to pass the $410 billion FY09 omnibus spending bill this week.

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March 9, 2009

Week in Review

By Christopher Hayes

Yet another very busy week on the Hill. Greg Kaufmann has the goods:

The House delayed its vote on the DC Voting Rights Bill due to the Senate's draconian gun amendment. Advocates are still hopeful a less extreme alternative can be agreed to in the House-version so that 600,000 DC residents will finally get a little voting representation to go along with their taxation.

In brighter news, the House passed Rep. John Conyers' "Helping Families Save Their Homes Act". The legislation allows bankruptcy judges to reduce the principal on mortgages. According to CongressDaily, Sen. Richard Durbin hopes to bring the bill to the floor before the April recess.

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March 6, 2009

Is the Obama Mortgage Plan Doomed To Fail?

By Christopher Hayes

In the short-term, I think the answer is no. As I argued in my column last week, the plan does fairly elegantly snatch some low-hanging fruit. But the problem is that there's just not enough fruit on the low branches to really get at the problem.

In the week or so since I've written the column, I've become more convinced that it's just not going to get the job done. Originally I had a graf in the column that said, more or less, that a useful way to think about the mortage problem is as an interest problem and a principal problem. That is, on the one hand the rates people are paying are too high, thanks to teaser rates, ARM's, fees, etc..., and on the other the prices of their homes are just over-valued. Alyssa Katz, explains just what this means in terms of the plan's shortcomings:

For many borrowers, a lower payment will be all the difference between staying in one's home and going into foreclosure -- for now. But the Obama plan is a short-term fix. It doesn't do the one thing that would actually help homeowners in the long haul, and that is reduce the amount of principal they owe. The loan mods that these brokers are selling, and that the Obama administration is now promoting, are new and improved variations on the exotic mortgages that seduce borrowers in the first place. They charge a manageable amount now, and then hit the borrower with higher costs down the road.

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March 5, 2009

Rich Lowry Is Making Sense

By Christopher Hayes

Over at the Corner he writes.

While some conservative bloggers plunge into depths of despair that Rush Limbaugh gave a speech at CPAC not up to their standards and the White House congratulates itself over its supposed cleverness in elevating Rush, can we all take a deep breath please? Barack Obama and the Democrats have the initiative. Until such time as their policies are perceived to have failed, it doesn't matter too much what Republicans do. Yes, they obviously should endeavor to be sober and creative--replenishing their policy arsenal for the day when the public is seriously paying attention to them again--but the big question in American politics right now is how Obama handles the financial crisis and the economy. In the grand scheme of things, everything else is commentary.

This is true across the political spectrum. It's very easy to get caught up in the cable-news cycle. And, indeed, one of the Obama crew's chief virtues in their determination to take the long view. Ultimately, the political success of the White House is going to depend on its performance in avoiding a depression. Of course, the arrow of causality doesn't run one way. Obama needs to be politically deft and imposing in order to pass an agenda that has a hope of forestalling said depression. But this isn't a campaign and it's not the Clinton years, despite the degree to which much of our political culture remains habituated to both.

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March 5, 2009

Encouraging Signs on Defense Contracting Cuts

By Christopher Hayes

Spencer Ackerman takes a look at the White House's new procurement guidelines and is pleasantly surprised:

Obama went further in remarks at the White House, calling it a "false choice" to say that protecting the country requires acquiescence to Pentagon waste. "In this time of great challenges," he said, "I recognize the real choice between investments that are designed to keep the American people safe and those that are designed to make a defense contractor rich." He also lent support to Sens. Carl Levin (D-Mich.) and former presidential rival John McCain's (R-Ariz.) legislation to create new procurement oversight positions at the Pentagon. "The days of giving defense contractors a blank check are over," Obama said.

...Obama has now placed defense-contracting reform at the center of his efforts at cutting wasteful spending, and he's put cutting wasteful spending at the core of his deficit-reduction approach; and both the press and the Republican Party will watch that deficit-reduction approach as a test of his presidency. That line from his YouTube address on Saturday about being ready for a fight with lobbyists over his budget? He might mean it.

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March 4, 2009

The Week In Review

By Christopher Hayes

This was a very busy week on Capitol Hill. Greg Kaufmann provides the highlights:

Obama's Big Week: Monday was the President's "fiscal responsibility summit." Tuesday was his big speech to the joint chamber of Congress, all of which was paving the way for Thursday's unveiling of the new budget. In it, Obama makes good on a lot of campaign promises -- including raising taxes on people earning more than $250,000, as well as multinationals, hedge funders, oil companies; cutting taxes for low- and middle-income people and businesses; raising revenues for clean energy technologies through a cap-and-trade system; making a $634 billion "downpayment" on healthcare reform over 10 years; and $47 billion towards education that includes $2.5 billion in new grants to help low-income students attend college, and expanding Head Start and Early Head Start…. The document makes some important strides in transparency, using a 10-year horizon instead of 5-year, and including the costs of the wars in Iraq and Afghanistan -- which previously were left off the books…other cool random items: no more Yucca Mountain -- time to get a new plan; $1 billion for child nutrition programs, including combating obesity which requires spending more money on healthy foods.

Rhetoric Preview: I loved this doozey from Jade West of the National Association of Wholesaler-Distributors, who told CongressDaily, "This budget clearly divides Americans by resurrecting tired old policies based on class envy and warfare, which punish success. This is a path to transforming the United States into Socialist Europe."

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February 27, 2009

We Lost Trillions

By Christopher Hayes

In this week's column on the Obama foreclosure plan I write:

This is all significant progress over the callous inaction of the Bush administration. But though the Obama foreclosure plan threads the needles of the various interests, there is still a lot of painful stitching left. The main problem at the heart of the real estate and financial crises is that hundreds of billions, perhaps trillions, of dollars that were once part of the economy now aren't.

Dean Baker writes in to gently chastise me for my hedging:

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February 27, 2009

Math Is Hard

By Christopher Hayes

Since I've been giving Gary Gensler such a hard time for refusing to admit a mistake, I thought it would be appropriate to pointed out just how colossally I screwed up the math in my column on the Pentagon budget. (Lucky for me it was behind the sub wall!)

The correction, which runs in this week's issue, is also behind a subwall, so I'll post below in all its mortifying glory:

Correction: Those Pesky Decimals

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February 26, 2009

Coming Soon: Universal Savings?

By Christopher Hayes

Just got off a briefing with OMB Director Pete Orszag. I asked him what part of the budget he was surprised hadn't gotten more attention. His answer: universal savings. One of the central planks of the whole nudge crowd of behavioral economists is automatic enrollment in 401k's. Turns out there's a huge difference between participation rates in pension plans when people are automatically enrolled and when they have to proactively enroll. But as Orszag pointed out, most low wage workers don't work at firms that even 401k's, so automatic enrollment doesn't help them. As part of the new budget proposal, almost every employer would have to automatically enroll every employee in an IRA. Only very small businesses would be exempt. This seems like a smart idea at first blush. And it's perfect example of the Obama folks' policy approach.

Some more thoughts on the budget TK.

UPDATE: Ben Smith has more.

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February 26, 2009