Rortybomb

How Congress and the Courts Are Closing in on Dodd-Frank

Apr 4, 2013Mike Konczal

What are the serious threats to Dodd-Frank? Last month, Haley Sweetland Edwards wrote "He Who Makes the Rules" at the Washington Monthly, which is the best single piece on Dodd-Frank implementation I've seen. In it, she identifies "three main areas on this gauntlet where a rule can be sliced, diced, gouged, or otherwise weakened beyond recognition." The first is "the agency itself, where industry lobbyists enjoy outsized influence in meetings and comment letters, on rule makers’ access to vital information, and on the interpretation of the law itself." The second is the courts, "where industry groups can sue an agency and have a rule killed on a variety of grounds." And the third is Congress, "where an entire law can be retroactively gutted or poked through with loopholes."

How important have those three areas been? Looking at the first two and a half years of Dodd-Frank, the courts turned out to be the unexpected danger for financial reform. I have a piece in Bloomberg View today arguing this, as well as the fact that the courts are structurally biased against reform in some very crucial ways.

That's not to say the lobbying battle is going well. But when the bill passed, people understood that rulewriting would be a difficult battle, and some groups like Americans for Financial Reform and Better Markets could at least help balance the lobbying efforts of financial industry groups. What was less understood was that the D.C. Circuit Court would have so many vacancies, and thus tilted to the far right and a radical agenda. I hope you check out the piece.

But what about Congress? Erika Eichelberger at Mother Jones has an excellent piece about the ongoing, now biparistan, efforts to roll back parts of Dodd-Frank's derivative regulations that are starting up in the House Agriculture Committee. (I wrote about this effort for Wonkblog here.) This third area Edwards identifies, Congress, is only now becoming a serious battlefield. But isn't the timing off? President Obama and the Democrats lost in 2010 but won in 2012. Yet while the threat of Congress rolling back Dodd-Frank, one of President Obama's major achievements, with new bills wasn't on the radar in 2011, it may be in 2013. Isn't that backwards?
 
Part of the answer is that the rules are becoming clearer, so financial industry lobbyists have more concrete targets to bring to Congress. But there's a political dimension as well. The general shutdown and polarization that dominated Congress after 2010 made a congressional threat to Dodd-Frank less likely. And ironically, the rise of the Tea Party within the conservative movement, even with its anti-Obama and anti-regulatory zeal, made bills to weaken Dodd-Frank less likely to pass. One reason is that the Tea Party wanted a full repeal of the bill or to gut entire sections, rather than more targeted interventions. Another is that the biggest losers in the 2010 shellacking were centrist “new Democrats,” those that would be more responsive to the needs of the financial industry than the progressive caucus that gained in relative strength afterwards.
 
It’s possible many more centrist Democrats could have moved a bill through Congress weakening Dodd-Frank as it was being implemented, especially if conservatives were looking to compromise. But remaining centrist Democrats were not going to remove the FDIC's new resolution authority to end Too Big To Fail, which is what the Ryan budget calls for, or knee-cap the CFPB out the door, which is what the Senate GOP wants in exchange for nominating a director, or vote to repeal the bill in its entirety, which was a litmus test for the 2012 GOP presidental candidates. Especially after they just took a lot of heat to pass the bill. Deficit hysteria was the only thing that got momentum, with both parties doing serious damage by cutting the budget of the CFTC.
 
(The unpopularity of the financial industry probably didn't help either. The congressional change that the financial industry most wanted, the delay of a rule designed to limit the interchange fees associated with debit cards, failed to clear 60 votes in the Senate.)
 
Now that the GOP is realizing that Dodd-Frank is here to stay, we might see more effort to reach across the aisle to dismantle smaller pieces of it in accordance with what the financial industry wants. Health care is facing a similar situation, where conservatives policy entrepreneurs are currently debating whether or not to work within the framework of Obamacare or continue trying to repeal it. Sadly, conservatives will probably do far more damage if they get to the point of accepting that Dodd-Frank is the law of the land and try to do more targeted repeals rather than wage all-out war.
 
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What are the serious threats to Dodd-Frank? Last month, Haley Sweetland Edwards wrote "He Who Makes the Rules" at the Washington Monthly, which is the best single piece on Dodd-Frank implementation I've seen. In it, she identifies "three main areas on this gauntlet where a rule can be sliced, diced, gouged, or otherwise weakened beyond recognition." The first is "the agency itself, where industry lobbyists enjoy outsized influence in meetings and comment letters, on rule makers’ access to vital information, and on the interpretation of the law itself." The second is the courts, "where industry groups can sue an agency and have a rule killed on a variety of grounds." And the third is Congress, "where an entire law can be retroactively gutted or poked through with loopholes."

How important have those three areas been? Looking at the first two and a half years of Dodd-Frank, the courts turned out to be the unexpected danger for financial reform. I have a piece in Bloomberg View today arguing this, as well as the fact that the courts are structurally biased against reform in some very crucial ways.

That's not to say the lobbying battle is going well. But when the bill passed, people understood that rulewriting would be a difficult battle, and some groups like Americans for Financial Reform and Better Markets could at least help balance the lobbying efforts of financial industry groups. What was less understood was that the D.C. Circuit Court would have so many vacancies, and thus tilted to the far right and a radical agenda. I hope you check out the piece.

But what about Congress? Erika Eichelberger at Mother Jones has an excellent piece about the ongoing, now biparistan, efforts to roll back parts of Dodd-Frank's derivative regulations that are starting up in the House Agriculture Committee. (I wrote about this effort for Wonkblog here.) This third area Edwards identifies, Congress, is only now becoming a serious battlefield. But isn't the timing off? President Obama and the Democrats lost in 2010 but won in 2012. Yet while the threat of Congress rolling back Dodd-Frank, one of President Obama's major achievements, with new bills wasn't on the radar in 2011, it may be in 2013. Isn't that backwards?
 
Part of the answer is that the rules are becoming clearer, so financial industry lobbyists have more concrete targets to bring to Congress. But there's a political dimension as well. The general shutdown and polarization that dominated Congress after 2010 made a congressional threat to Dodd-Frank less likely. And ironically, the rise of the Tea Party within the conservative movement, even with its anti-Obama and anti-regulatory zeal, made bills to weaken Dodd-Frank less likely to pass. One reason is that the Tea Party wanted a full repeal of the bill or to gut entire sections, rather than more targeted interventions. Another is that the biggest losers in the 2010 shellacking were centrist “new Democrats,” those that would be more responsive to the needs of the financial industry than the progressive caucus that gained in relative strength afterwards.
 
It’s possible many more centrist Democrats could have moved a bill through Congress weakening Dodd-Frank as it was being implemented, especially if conservatives were looking to compromise. But remaining centrist Democrats were not going to remove the FDIC's new resolution authority to end Too Big To Fail, which is what the Ryan budget calls for, or knee-cap the CFPB out the door, which is what the Senate GOP wants in exchange for nominating a director, or vote to repeal the bill in its entirety, which was a litmus test for the 2012 GOP presidental candidates. Especially after they just took a lot of heat to pass the bill. Deficit hysteria was the only thing that got momentum, with both parties doing serious damage by cutting the budget of the CFTC.
 
(The unpopularity of the financial industry probably didn't help either. The congressional change that the financial industry most wanted, the delay of a rule designed to limit the interchange fees associated with debit cards, failed to clear 60 votes in the Senate.)
 
Now that the GOP is realizing that Dodd-Frank is here to stay, we might see more effort to reach across the aisle to dismantle smaller pieces of it in accordance with what the financial industry wants. Health care is facing a similar situation, where conservatives policy entrepreneurs are currently debating whether or not to work within the framework of Obamacare or continue trying to repeal it. Sadly, conservatives will probably do far more damage if they get to the point of accepting that Dodd-Frank is the law of the land and try to do more targeted repeals rather than wage all-out war.
 
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The New Guard

Defunding Political Science Research is the Wrong Kind of Big Government

Mar 26, 2013Elizabeth Pearson

By cutting off research funding for ideological reasons, Republicans in Congress have turned themselves into thought police.

By cutting off research funding for ideological reasons, Republicans in Congress have turned themselves into thought police.

In a vote last Wednesday, the U.S. Senate took the unprecedented step of prohibiting the National Science Foundation (NSF) from funding political science research, except on topics “promoting national security or the economic interests of the United States.” The amendment’s sponsor, Tom Coburn of Oklahoma, frames the defunding of political science research as part of a broader deficit-reduction agenda, but in fact his approach to shrinking government only perpetuates the worst sort of big government: the kind that polices the ideas it doesn’t like.

Although the amendment’s passage came as somewhat of a surprise to observers — Republicans in Congress are long-time foes of political science, but previous efforts to limit NSF funding have been unsuccessful — scientists from a host of disciplines have been quick to condemn the dangerous implications of the vote.

The arguments against this assault on basic science research are many. The funding is a tiny portion of the federal budget but supports a huge portion of political science work. NSF-funded research in political science supports robust public debate by collecting comprehensive, high-quality data that is then accessible to the public and journalists. And, although some political scientists have expressed optimism that almost any piece of research could be framed to fall under the new mandate, Gregory Koger noted in a piece on The Monkey Cage the particular irony that “in order to receive support for careful scientific testing of causal claims one might have to make unsubstantiated claims about how one’s research is linked to U.S. economic or security interests.”

But the greatest harm done by the Senate’s approval of this amendment comes in the type of government that it promotes. The National Science Foundation represents exactly the type of “big government” worth embracing: a government that champions robust public investment in the advancement of knowledge while demanding that these knowledge claims be rigorously tested and peer-reviewed in order to deserve public dollars. NSF grants in political science clearly meet these standards, even funding the work of Nobel Prize laureates such as Elinor Ostrom. In an ironic testament to their democracy enhancing effects, NSF political science grants even helped produce some excellent research on congressional oversight cited by none other than Tom Coburn, who is apparently a fan of federally funded political science research when it serves his interests.

In fact, Coburn’s anti-science agenda represents the sort of big government actually worth fighting against. While cloaking their effort to starve political science research funding as a struggle against wasteful spending, Coburn and other Republicans who share his agenda promote a government that polices knowledge production and attacks ideas it finds threatening. (Coburn is particularly opposed to research on American’s attitudes toward the Senate, which he seems to think require no additional study, stating in his own press release on the amendment’s passage, “There is no reason to spend $251,000 studying Americans’ attitudes toward the U.S. Senate when citizens can figure that out for free.”)

Of course, Republicans attacking political science are quick to claim they support government investment in other types of science — the kind that can cure cancer and doesn’t criticize Congress in the process. This selectivity about which ideas should be supported and which are simply wasteful is short-sighted given the practical benefits of such research. But singling out specific types of research for divestment is more troubling for its ideological implications than for its practical flaws.

As a Nature editorial from last summer argued, when moves to cut off political science funding sponsored by Representative Jeff Flake were making their way through the House, “The fact that he [Flake] and his political allies seem to feel threatened by evidence-based studies of politics and society does not speak highly of their confidence in the objective case for their policies. Flake's amendment is no different in principle to the ideological infringements of academic freedom in Turkey or Iran. It has nothing to do with democracy.”

There are debates worth having about the value of academic research in society, and even about the merits of publicly funding particular research agendas. Clearly policymakers have a responsibility to argue over how to invest public funds most effectively. But let’s be clear: politicians are not interested in engaging in such a debate. The amendment cutting off NSF political science funding was included in a continuing resolution passed to avoid a government shutdown and passed by a voice vote. The whole story would be comical — Congress using arcane procedure studied only by political scientists to defund political science research — if it weren’t so troubling.

Such a move isn’t part of Congress’s legitimate role overseeing federal spending. Rather, it speaks to a willingness on the part of politicians to let ideological opponents of important research strengthen the kind of government we should all be worried about: one that decides in advance what kinds of ideas are worth public investment.

Elizabeth Pearson is a Roosevelt Institute | Pipeline Fellow and a PhD candidate at UC Berkeley.

 

Capitol dome image via Shutterstock.com.

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Why the GOP’s Efforts to Reach Out to Women Are Doomed to Fail

Mar 20, 2013Andrea Flynn

Why should women vote for a party that's actively working against their needs and interests?

Why should women vote for a party that's actively working against their needs and interests?

On Monday, the GOP released a report detailing its "Growth and Opportunity Project," a new initiative that explores reasons for the party’s November defeat and posits strategies for winning future elections. If it wasn’t evident before, it is now abundantly clear that the Republican establishment officially attributes its November loss to a failure in style, not substance. The 100-page report details the party’s inability to effectively communicate its policies and priorities to women, immigrants, young people, and people of color. It largely ignores the possibility that what motivated the majority of American voters, and in particular women, to give President Obama a second term was an aversion to the GOP’s outdated vision for the nation.

Acknowledging that Obama won the single women’s vote by a “whopping 36 percent,” the report’s authors suggest ways the party can be more inclusive of this critical voting bloc: Making a better effort to listen to female voters; fighting against the Democratic rhetoric against the “so-called War on Women"; doing a better job communicating the GOP’s policies and employing female spokespeople to do it; and using Women’s History Month to “remind voters of the Republican’s Party historical role in advancing the women’s rights movement.”

I’m glad they specified “historical” role in advancing the women’s rights movement, given that their current role seems squarely focused on rolling back women’s rights. It’s encouraging that GOP strategists in Washington want to spend more time listening to women voters, but there is no indication that Republican lawmakers will respond to that feedback. As Rachel Maddow said on her program this week, while Beltway leaders are “preaching about how to appear more reasonable to the women folk among us,” Republican governance has become a competition – a race – “to see who can get the most extreme the fastest.”

And a race it is.

This week Andrew Jenkins of RH Reality Check reported on some of the most recent Republican efforts to chip away at women’s access to care:

Arkansas just passed a bill banning abortions after 12 weeks of pregnancy, while South Dakota just passed a bill to expand its 72-hour waiting period, which was already one of the longest in the country, in a state with only one abortion clinic. The North Dakota Senate just approved a ban on abortions after six-weeks of pregnancy, the most restrictive in the country. And in Kansas, a state House committee just passed a 70-page bill that defines life at fertilization and requires that physicians lie to their patients.

That’s not all.

Republicans in Texas remain hard at work leading national efforts in steamrolling access to women’s health care. Previous budget cuts and funding restrictions have already closed more than 50 clinics and are making it more difficult, if not impossible, for nearly 200,000 women to access care. Last week the Texas Senate Education Committee moved a bill forward that would ban Planned Parenthood and other organizations from providing sexuality education in schools, and the governor recently promised to advance a 20-week abortion ban.

In Wisconsin, four Planned Parenthood clinics closed as a result of a GOP-led ban that prevents the organization and other clinics from receiving state funds. In Oklahoma, a major Planned Parenthood facility closed after the state’s department of health cut off funding through the WIC program, forcing low-income women to go elsewhere to obtain vouchers for themselves and their children. Last month, Republicans in Michigan introduced a bill that would require women to get a vaginal ultrasound at least two hours before obtaining an abortion.

Mississippi is about to close its only abortion clinic thanks to a requirement that abortion doctors have admitting privileges at a local hospital (and local hospitals’ refusal to grant those privileges) – a move the Republican governor has applauded as being the first step in ending abortion in that state.  Earlier this year, a Republican (female!) representative in New Mexico proposed legislation that would have allowed for women who terminated pregnancies resulting from rape to be charged with a felony for tampering with evidence. (She promptly rescinded and then proposed a new bill that would instead charge abortion providers with facilitating the destruction of evidence.)

The new GOP report also suggested that Republicans “talk about people and families, not just numbers and statistics.” In releasing his 2014 budget proposal last week, Paul Ryan certainly provided an interesting perspective into how the GOP proposes taking care of women and families. According to the National Women’s Law Center (NWLC), the Ryan budget includes significant reductions for “child care and Head Start, K-12 education and Pell grants, job training, civil rights enforcement, women’s preventive health care, domestic violence prevention and more.” It would dismantle Medicaid, Medicare, and the food stamp program. It would repeal the Affordable Care Act (ACA), denying nearly 15 million women access to affordable health insurance and Medicaid and forcing women to pay more for prescription drugs, including family planning. As NWLC pointed out, repealing the ACA would “allow insurance companies to continue charging women higher premiums than men, deny coverage to women with so-called pre-existing conditions like domestic violence, and refuse to cover maternity care.”

The ACA is certainly providing fertile ground for GOP lawmakers to show how much they care about women. Twenty states now restrict abortion coverage in health insurance plans that will be offered through the insurance exchanges, and 18 states restrict abortion coverage in insurance plans for public employees. Nearly all of those states are Republican-led. Additionally, 14 Republican governors have reported they will not participate in the Medicaid expansion programs that are a critical part of the ACA, denying access to a broad range of health services to millions of women.

On top of all this, 22 Republican Senators and 138 Republican members of the House voted last month against the Violence Against Women Act, a critical piece of legislation that provides assistance to victims of domestic and sexual violence.

In their report, the GOP strategists recommended developing training programs in messaging, communications, and recruiting that address the best ways to communicate with women. “Our candidates, spokespeople and staff need to use language that addresses concerns that are on women’s minds in order to let them know we are fighting for them,” they state. Given the abovementioned pieces of legislation, the GOP will be hard-pressed to convince women the party is fighting for them. It’s patronizing to think that using different language, new messaging, and female spokespersons will convince women to support a party that is so clearly working against their best interests. Women are smart enough to know that a party that calls itself home to lawmakers relentlessly fighting to chip away at family planning and abortion access, food stamps, affordable health care, education, civil rights, and a social safety net providing tenuous stability to millions of marginalized individuals is not a party committed to truly understanding or addressing their priorities.

Maybe next year the GOP will attempt a more earnest effort at celebrating Women's History Month. Although, by that time, their state leaders might have alienated half the women in the country, and it will be too late. 

Andrea Flynn is a Fellow at the Roosevelt Institute. She researches and writes about access to reproductive health care in the United States and globally.

 

Portrait of woman covering her ears via Shutterstock.com.

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Paul Ryan’s Budget Would Kill Health Insurance Programs – and Thousands of Americans

Mar 14, 2013Richard Kirsch

Ryan's budget priorities expose a disregard for the fundamental right to a healthy life.

I know you are not supposed to write in hyperbole, but sometimes the truth needs to be told. Paul Ryan’s budget, which kills Obamacare and cripples Medicare and Medicaid, would kill tens of thousands of people. Every year.

Ryan's budget priorities expose a disregard for the fundamental right to a healthy life.

I know you are not supposed to write in hyperbole, but sometimes the truth needs to be told. Paul Ryan’s budget, which kills Obamacare and cripples Medicare and Medicaid, would kill tens of thousands of people. Every year.

I have trouble with putting policy glosses on proposals that would deny health care coverage to millions of people and make care much more expensive to millions more. Because when more people lack health coverage, more people die. And when health costs prevent people from getting the care they need, they get more seriously ill.

How many people are we talking about? Estimates of the number of people who will die because they are uninsured vary, from about 500 to 1,000 for every one million who lack coverage. Repealing Obamacare would block promised coverage for 32 million people, so that would mean somewhere from 16,000 to 32,000 each year who will die prematurely. Of course, since some Republican governors and legislatures are not implementing the expansion of Medicaid coverage in their states, some of those deaths are already on their hands.

Which leads us to the Ryan plan for slashing Medicaid. He replaces a program that now entitles low-income people to health coverage with a block grant to states to spend however they want on health care for the poor. The federal government would save money by decreasing what it pays to state governments and states would get to do the dirty work of cutting people’s health care. That will mean fewer people on the program, higher out-of-pocket costs, or a reduction in coverage of medically necessary care. And more people dying who would have lived if they had kept their previous health coverage.

In cutting Medicaid, Ryan is fulfilling the biggest concern that Republican governors say they have when they consider expanding Medicaid under Obamacare. A typical remark came from Arizona Governor Jan Brewer: “As I weighed this decision, I was troubled by the possibility that a future President and Congress may take steps to reduce federal matching rates, leaving states with a greater and greater share of health costs over time.”

Everyone is familiar by now with Ryan’s proposal to replace Medicare with vouchers to buy private insurance. The Ryan voucher plan is not about controlling health care costs; instead, it is intended to shift costs from the federal government to the seniors and the disabled who are covered by Medicare. When people can’t afford the care they need – and the CBO reported that the first Ryan voucher plan would have doubled the already high cost of health care to seniors – they will get sicker.

The parts of Obamacare that Ryan doesn’t repeal underscore his cynicism. Ryan would keep the $716 billion in Medicare spending reductions over a decade, which he railed against when he was running for vice president. In his debate with Joe Biden, Ryan called the Medicare changes a “piggybank” for Obamacare, which would cause hospitals and nursing homes to close and lead to seniors losing benefits. None of this is true, as Biden pointed out. So now Ryan is using that $716 billion in savings to help him reach his goal of balancing the federal budget instead of what those savings were intended for: increasing Medicare benefits under Obamacare and expanding coverage to millions of Americans.

Remarkably, Ryan also keeps the other tax increases in Obamacare, some $1 trillion raised mostly from upper income taxpayers and various medical providers and insurers. Ryan is using money raised to provide life-saving health coverage to millions of people, taxes he and other Republicans railed against, to meet his fantasy target of balancing the budget in 10 years.

I’ve grown tired of providing a veneer of respectability to people in power – people with good health insurance, coverage that provides them with access to the best medical care, and pays most of their bills – who deny their constituents a basic human right. Governors and state legislatures who won’t expand Medicaid even though the federal government will pay virtually all of the cost. Members of Congress whose health coverage is largely paid for by their constituents who still make political hay by demagoging against Obamacare.

Fortunately for those whose lives are at risk, the Ryan budget is dead on arrival. But the debate about how to make the promise of Obamacare real is only just the beginning. States will continue to debate whether to expand Medicaid. And when Obamacare’s major provisions kick-in next January, there will be a new round of debates about whether families can afford the new coverage and whether employers and government should do more or less to assure that people get covered. What will not end is the real consequences in each of those decisions for people’s lives. 

Richard Kirsch is a Senior Fellow at the Roosevelt Institute, a Senior Adviser to USAction, and the author of Fighting for Our Health. He was National Campaign Manager of Health Care for America Now during the legislative battle to pass reform.

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Price Point

Sequestration: A Totally Avoidable Disaster That Was Bound to Happen

Feb 28, 2013Tim Price

Republicans have issued so many absurd economic threats that one of them was eventually going to come true.

Republicans have issued so many absurd economic threats that one of them was eventually going to come true.

Fingers are pointing in every direction as politicians and pundits assign blame for the automatic spending cuts that are scheduled to kick in tomorrow night. But in truth, it was a real team effort. And something this stupid didn’t just happen overnight; it took a few years of hard work and dedication. These high-stakes games of chicken have become a fixture of American politics during the Obama presidency. In the past, one side or the other has always blinked at the last minute. But the latest iteration looks like it will end in a head-on collision, and while the resulting wreck will be grisly, it might provide the shock to the system we need to steer our political debate back on course.

In this year’s State of the Union address, President Obama declared, “The greatest nation on Earth cannot keep conducting its business by drifting from one manufactured crisis to the next.” The key word there is “manufactured.” Facing mass unemployment, widening inequality, rising health care costs, the threat of climate change, and instability in the Middle East, just to name a few concerns, one would think our lawmakers had more than enough legitimate problems to worry about. But congressional Republicans have proven themselves to be entrepreneurial problem-makers since the night of Obama’s first inauguration, when they gathered to plot his downfall.

From the beginning, the Republican strategy has been one of total opposition, but that backfired once they regained control of the House of Representatives and were actually expected to govern. As a result, writes E.J. Dionne, “The country has been put through a series of destructive showdowns over budget issues we once resolved through the normal give-and-take of negotiations.” The situation reached a boiling point in summer 2011, when Republicans threatened to let the federal government hit the debt ceiling. (No, not that time. The time before that.) Although there’s been a lot of back and forth about whether the White House deserves some or all of the blame for creating the sequester in the first place, it’s worth remembering that the debt ceiling debacle basically forced Obama’s hand. The result was the Budget Control Act, which established a bipartisan and famously useless “Super Committee” to hammer out a long-term deficit reduction plan. The Sword of Damocles hanging over the committee’s heads was sequestration, a mixture of automatic budget cuts designed to be so unpalatable to both parties that they would be forced to find an alternative solution – until they didn’t. Whoops.

Aiding and abetting Republicans throughout this misadventure were the deficit hawks, who grew tired of hearing about the economic crisis almost as soon as it began. They wanted to get back to more serious topics of discussion, like why the Obama administration was suddenly spending so much money. (Could it be… the economic crisis?) Twelve million people unemployed? Meh. One in five children living below the poverty line? Boring. Debt-to-GDP ratio approaching 90 percent? Sweet Rogoff, it’s time to declare a state of emergency! This relentless elite-level concern trolling drove the political debate to the far right while supposedly giving voice to the moderate middle, enabling the GOP’s worst policy instincts.

Now that things are once again down to the wire, Congress is scrambling to find a last-minute fix, but this time it looks like they’ll come up short. A Republican proposal that would have given President Obama more discretion over how to implement the cuts failed after Obama rightly dismissed it as an attempt to keep all the cuts in place while shifting all the blame onto him. A Democratic proposal to replace the sequester with a more balanced package of cuts and revenue was dead on arrival. And no one seems willing or able to simply cancel the cuts and call the whole thing off. As Adam West once said, some days you just can’t get rid of a bomb.

The consequences of sequestration will almost certainly be dire. In a survey of top economists conducted by The New Republic, most predicted that it would slow our already anemic economic growth, while even the most positive assessment cast it as some sort of punishment that America has had coming for a long time due to our failure to don the hair shirt of austerity along with our European allies. The indiscriminate cuts will take a heavy toll on the poor, women and children in general, domestic violence victims in particular, people who eat food… you get the picture. And the fact that this pain is being inflicted by fiat only makes the sting worse.

On the other hand, while sequestration was entirely unnecessary and unwise, something like this was bound to happen once Republicans chose to throw caution and responsibility to the wind. You can win a game of Russian Roulette once, but you’re not likely to have a long reign as champion. Likewise, if you keep inventing fake crises to help you get your way, one of them is eventually going to become real. It’s tempting to hope that this is what it looks like when Congress hits bottom, although it seems to break through to previously unexplored depths each time. But if this is what it takes to wake more Americans up to how distorted our policy debate has become so that we can start rethinking our national priorities, the pain may just barely be worth it after all.

Tim Price is Deputy Editor of Next New Deal. Follow him on Twitter @txprice.

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The Fork in the Road Already Facing Obama's Second-Term Agenda

Feb 25, 2013Bo Cutter

President Obama has a limited amount of time to accomplish his second-term goals, so there's no time like the present to go big.

Admittedly it is absurdly early to be suggesting that President Obama's second term is at a crucial fork in the road. But I think that's where we are and here's why.

President Obama has a limited amount of time to accomplish his second-term goals, so there's no time like the present to go big.

Admittedly it is absurdly early to be suggesting that President Obama's second term is at a crucial fork in the road. But I think that's where we are and here's why.

Second presidential terms are two years, not four years. Second terms have rarely been resounding successes. Sometimes the reason is too specific to be generalized. More often, the reasons have included scar tissue, fatigue, and a dwindling bench. The American people get sick of the same faces, the old players are exhausted and have spent whatever intellectual capital they came with, and the new players aren't as good as the old players. But, always, the underlying direction is declining political capital. Senior American politicians, regardless of party, are as a class or caste the most self-referential, self-reverential, and self-regarding group our species has known in its roughly 100,000 years on the planet. They have an uncanny capacity to sniff out the exact nano-second that power begins to ebb, no matter how slightly, and then act to accelerate that ebbing. 

So President Obama has two years, not four, to get anything big accomplished, and that means he has to say what it is -- now.

There are three obvious mega strategies. Whether the president's political advisors know it or not, the choice between these three is the big decision they are making right now.

1. Beat up the Republican party with the hope of fracturing it completely or simply clobbering it in the 2014 Congressional elections. This seems to be the preferred direction right now.

2. Accomplish a series of individual policy wins -- pick among immigration reform, preschool education, a small infrastructure plan, or even a carbon tax.

3. Change the political/policy game in America and give the country a new story.

That first goal is an emotionally satisfying choice and no group deserves clobbering more than this era's Republicans right wing. But it may not be possible and it may not help achieve real policy goals as much as one might think. The Democratic left is nowhere near as unpleasant as the Republican right, but it is just as mired in a 60-year-old, outdated ideology. And this strategy doesn't constitute much of a legacy for President Obama.

The second goal is highly worthwhile and may be all anyone can accomplish in today's dysfunctional Washington. If President Obama achieved significant legislation in each of the four areas I named above, he would have achieved more than any of the last three, maybe four, second-term presidents going back at least 50 years.

The third goal -- a new vision or story of America -- sounds so over-reaching as to be preposterous. But I believe we are at a moment when this is possible: a time of immense global change, an improving economy with better prospects than any other developed economy in the world, a gridlocked political environment locked into interminable debate over the wrong issues, a high level of American citizen dissatisfaction with our politics, and a popular second term president with room to maneuver. We are unlikely to see this confluence of circumstances again for another 50 years. 

Two points about these mega strategies: They are in part mutually exclusive and path dependent. And only a president can outline them and carry them out. Certainly strategy 1, on the one side, and strategies 2 or 3 are mutually exclusive. In terms of how politics and human beings work, the president cannot decide to beat the Republicans up for a time and then change gears and directions. But strategies 2 and 3 are not mutually exclusive. President Obama could present a new American story and then move to a set of specific policies. In fact, this might be the best course for accomplishing anything. 

I believe that right now, the president could do two big things that, if successful, would make his second term successful, have high odds of being successful, and would have low costs if they aren't successful. First, he could offer a real deal to stop sequestration and, second, he could define the next era.

Lets start with sequestration. This is a manufactured crisis -- a set of automatic budget cuts that will make our defense, international, and domestic programs worse (in fact, the set was designed to make everything worse) but on the other hand will do next to nothing about our long-run debt and deficit problem. It was a last-ditch, desperate effort 18 months ago to look as though something was being accomplished. Its big flaw -- other than being completely irresponsible -- was that if it were going to force a real resolution, it always depended on the president defining a deal. Congress is not capable of doing that. All Congress can ever really do is the short-term, kick it down the road for three months efforts being thrown out today. These are worthless.

Now is the moment for the president to put forward a real deal, with real entitlement reform. This means reductions in the long-term rate of growth in entitlement spending, some further defense cuts (I don't think we should cut normal regular domestic spending, but it should certainly be rearranged), income tax reform where possible (but not much is possible), and a new source of revenues -- a new tax. We cannot solve our debt/deficit problem and pay for the government we all know we are going to have without new revenues. I've always been a proponent of a highly defined, progressive value added tax (a VAT), and still am. But I think that a carbon tax would be the better choice right now. Why not raise $1 trillion over the next decade and simultaneously begin to solve our most pressing environmental problems?

But the president should define such a deal not as the be-all-and-end-all of his administration, but rather as a necessary step toward an era of safer, higher, more sustainable, more equitable growth. He could explain how achieving this growth is possible and why it requires both fiscal reform and investments in the future. He could demonstrate easily how the specific policies he stressed in his State of the Union fit into this long-run direction. He could show a deeper understanding of the real private sector. And he could emphasize that we have time to adjust to change if we start now. As an example, a real and credible 10-year debt/deficit plan is what we need, not an economy-breaking one or two year slash and burn plan.

I believe that a deal is there, waiting to be made. The adults in the Republican party know they are in a trap. Americans would support a deal (all the polls show that the American people are far less polarized on these issues than Washington is). Most Democrats would rather be talking about solutions and growth than waging these interminable budget wars. The president could get 1) a deal, 2) an agreement to stop the incessant budget warfare (by permanently canceling the sequestration and ending the constant debt ceiling threats), 3) the chance to create the coalitions necessary to accomplish his policies without constantly fighting the budget battles, and (4) an actual shot at defining the contours of America's next era. 

But the president has to decide and act. What strategy is he pursuing? What does the country need? What are second terms for? 

Roosevelt Institute Senior Fellow Bo Cutter is formerly a managing partner of Warburg Pincus, a major global private equity firm. Recently, he served as the leader of President Obama’s Office of Management and Budget (OMB) transition team. He has also served in senior roles in the White Houses of two Democratic Presidents.

 

Obama image via mistydawnphoto / Shutterstock.com.

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Women Are Less Safe in Gayle Trotter’s World

Feb 4, 2013Andrea Flynn

The right is borrowing pro-choice language to push back on regulations that could save women's lives.

The right is borrowing pro-choice language to push back on regulations that could save women's lives.

Just when we thought the gun lobby’s approach to ending gun violence couldn’t get any more ridiculous, last week we were introduced to Gayle Trotter. A fellow at the conservative Independent Women's Forum, Trotter unveiled to the Senate Judiciary Committee the latest canard that curbing access to guns would create an "undue burden" for women who would "choose" to defend themselves from violence. Her assertions are illogical at best and downright dangerous at worst. Two aspects of her testimony are particularly troubling: the appropriation and misapplication of pro-choice language to describe the need for unfettered access to weapons and the notion that guns make the world a safer place for women.

It’s puzzling that Trotter decided to use the loaded language of choice and undue burden to argue that women must have access to assault weapons and high-capacity magazines. The concept of undue burden has done more to roll back access to abortion than perhaps any other legislation. It’s derived from the Supreme Court’s 1992 decision in Planned Parenthood v. Casey, which gave states the right to restrict abortion as long as their laws didn’t create an “undue burden” for women. Over the past two decades, we have watched as states across the country have determined that there are actually very few burdens that are undue: 72-hour waiting periods; mandated parental or court consent; involuntary, and sometimes invasive, ultrasounds; lectures based on factual inaccuracies and disproven pseudoscience; and travelling hundreds of miles from home to access care.

In many parts of the country it is far easier to obtain a gun than it is an abortion. In 35 states women are required to receive counseling before an abortion is performed and 26 of them require women to wait at least 24 hours before obtaining the procedure, meaning at least two separate trips to the clinic. Only 12 states require some type of waiting period between the purchase and acquisition of a gun, and in some cases those laws only apply to federally licensed dealers. How’s that for a pro-life agenda?

Before she wielded such historically charged language, Trotter should have made sure it would actually help make her case. Is she suggesting the courts apply the same extremely low undue burden standard to guns that they have applied to reproductive health care? By that logic, mandatory background checks and restrictions on high capacity magazines and battlefield-appropriate automatic weapons should hardly be contentious.

But as a woman and a sensible human, what I find even more troubling – and outright erroneous – is the claim that a society with more guns is a society safer for women. A growing chorus of gun advocates have dusted off outdated gender stereotypes of women as vulnerable and defenseless, exploiting them to make the case for fewer restrictions on guns. Arguing that without guns women will be less safe perpetuates the notion that violence against women at the hands of men is an inevitable reality of our culture. It suggests that attempting to stem violence at its root is futile and the only solution is to go “all in” on guns—arm everyone. I am offended and frightened by the notion that what is needed to keep women and children safe is an increased presence of the very weapons responsible for so many deaths of women and children every year.

This claim falls along the dangerous spectrum of (il)logic that says we simply should dress more modestly, drink less, stay at home after dark, and arm ourselves with mace and self-defense skills to avoid being the victims of violence. But if those things don’t work, we should just tuck an automatic weapon in our purse or under our pillow for when we inevitably will have to fend off a band of heavily armed attackers.

How is this the answer to our epidemic of violence against women? Shouldn’t we be demanding changes to a culture that normalizes violence, instead of trying to convince people that we’d be safer if more of us were armed with deadly weapons?

In her testimony, Trotter referenced women who used guns to defend themselves against violent intruders—guns that would not be banned under the proposed legislation. Trotter’s anecdotes can be compelling. But you know what else is compelling? Evidence! Research! Logic!

In an editorial over the weekend, the New York Times called into question Trotter’s suggestion that bands of armed home intruders are a common problem facing women and provided a wealth of statistics to illustrate that the presence of guns greatly increases the risk of lethal violence against women. Mayor Bloomberg’s Mayors Against Illegal Guns campaign will soon release statistics that illustrate how much less safe guns make women. Trotter conveniently ignored the research that shows that in states that that require a background check for every handgun sale, 38 percent fewer women are shot to death by intimate partners. She failed to mention that in the United States, women are 11 times more likely to be murdered than women in other high-income countries with sensible gun restrictions. She didn’t tell us that the presence of a gun in a domestic violence situation increases the risk of homicide for women by 500 percent.

As Bloomberg’s campaign points out, Trotter attached a list of 21 self-defense incidents that occurred over the course of two years and four months to her written testimony. In that same period, 1,900 women were murdered with guns by current or former intimate partners. The women Trotter speaks of are outliers in a society where women are far more likely to be injured or killed by someone they know. More guns won't fix this. The proposed gun legislation alone won't rid us of our culture of violence, but it is a critical step in the right direction. And for that matter, so is passing the Violence Against Women Act (VAWA), a legal commitment to protecting women from assault, adequately punishing those who harm them, and demanding an end to a culture where women are the all too frequent victims of violence. Trotter puzzlingly opposes this legislation.

Fight firearms with firearms? Makes sense if you want to sell more guns, but not if you want to protect women.

Andrea Flynn is a Fellow at the Roosevelt Institute.

 

Woman with gun image via Shutterstock.com.

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Is the Right Shifting Course on Dodd-Frank?

Feb 4, 2013Mike Konczal

During the 2012 election, conservatives' main goal was to either repeal Dodd-Frank completely or remove such large sections of it that it was a completely different bill. There was very little engagement with the content of Dodd-Frank itself and how to make them work better. One important example was Republican candidates like Jon Huntsman calling for bold new financial reforms that were already part of Dodd-Frank. 

It now appears that the flagship policy journal on the right, National Affairs, is moving towards a reform rather than replace agenda for Dodd-Frank and financial reform. The latest issue featured an large, 7,000+ word article, "Against Casino Finance," by Eric Posner and E. Glen Weyl of University of Chicago law school. What's fascinating about the piece is less the authors' counter proposals for reform, which are lacking, than the fact that they accept two of the ideas put forward by financial reformers that have generally been resisted on the right. The first is that derivatives require regulation and the second is that prudential regulation of the largest systemically risky financial firms is necessary.

Let's take those in order. First the authors argue, "[I]n today's derivatives market...no such sensible restriction exists to separate the use of the instruments as insurance from their use as gambling devices." They describe these instruments as "pure gambling," or a transaction in which "one party loses exactly what the other party gains, and both are made worse off by the additional risk they take on in this bargain." They argue that these instruments can increase pure risks and are zero-sum, differentiating them from other trades. They go as far as to argue against the Commodity Futures Modernization Act of 2000.

It isn't clear what they think of the general Dodd-Frank approach to derivatives, which emphasizes transparency through exchanges and clearinghouses, capital adequacy, private enforcement, and regulation of intermediaries. Their focus is partially on the "insurable interest doctrine" of common law as it relates to insurance, which requires that a party to an insurance contract have a stake in the event. If you can't buy fire insurance on your neighbor's house, why can you buy credit insurance on his business if you don't have an ownership claim on it? That's a dog whistle for either banning so-called "naked" derivatives or running them under state-level insurance law. The vote to ban naked credit default swaps, proposed in the Senate by Bryan Dorgan, failed (and was generally opposed on the right). 

The other regulations relate to bailouts and prudential regulations. As they put it:

When banks fail, the government must act as lender of last resort.

Today, the government serves this role in two ways. First, it compels banks to buy government-supplied deposit insurance, which covers depositors up to $250,000. Second, it provides emergency loans at below-market rates -- bailouts -- to any financial institution whose collapse would take down enough banks with it to endanger the entire economy.

Few seriously doubt that governments must play this role.

Bagehot’s rule is usually summarized as, “Lend without limit, to solvent firms, against good collateral, at high rates." In exchange for this, certain regulations are necessary. Dodd-Frank includes higher capital and liquidity requirements for larger and riskier firms, as well as certain organizational requirements (loosely referred to under the term "living wills") to help with collapsing the company in question via FDIC's resolution powers.

Again, it would be interesting if they addressed the specific reforms to lender of last resort functions included in Dodd-Frank, or the combination of regulation and resolution. Section 13(3) of the Federal Reserve Act was amended so that "any emergency lending program or facility is for the purpose of providing liquidity to the financial system, and not to aid a failing financial company." and any such lending program has to have "broad-based eligibility.” Some have argued this is too loose to deal with a liquidity crisis. Do these authors agree? Are the regulations and FDIC's resolution powers sufficient in this case, or do we need a different approach?

Their specific recommendations for how the right should tackle Dodd-Frank, which is the last third of the piece, involve applying stricter cost-benefit analysis to all rules. There's no talk about repeal, or huge changes to the framework, or long court battles. Cost-benefit has significant problems, but that's a debate for another day. Conceptually, it is tinkering with Dodd-Frank rather than repealing it, which has dominated the conversation on the right. Will this signal a larger change?

Follow or contact the Rortybomb blog:

  

During the 2012 election, conservatives' main goal was to either repeal Dodd-Frank completely or remove such large sections of it that it was a completely different bill. There was very little engagement with the content of Dodd-Frank itself and how to make them work better. One important example was Republican candidates like Jon Huntsman calling for bold new financial reforms that were already part of Dodd-Frank. 

It now appears that the flagship policy journal on the right, National Affairs, is moving towards a reform rather than replace agenda for Dodd-Frank and financial reform. The latest issue featured an large, 7,000+ word article, "Against Casino Finance," by Eric Posner and E. Glen Weyl of University of Chicago law school. What's fascinating about the piece is less the authors' counter proposals for reform, which are lacking, than the fact that they accept two of the ideas put forward by financial reformers that have generally been resisted on the right. The first is that derivatives require regulation and the second is that prudential regulation of the largest systemically risky financial firms is necessary.

Let's take those in order. First the authors argue, "[I]n today's derivatives market...no such sensible restriction exists to separate the use of the instruments as insurance from their use as gambling devices." They describe these instruments as "pure gambling," or a transaction in which "one party loses exactly what the other party gains, and both are made worse off by the additional risk they take on in this bargain." They argue that these instruments can increase pure risks and are zero-sum, differentiating them from other trades. They go as far as to argue against the Commodity Futures Modernization Act of 2000.

It isn't clear what they think of the general Dodd-Frank approach to derivatives, which emphasizes transparency through exchanges and clearinghouses, capital adequacy, private enforcement, and regulation of intermediaries. Their focus is partially on the "insurable interest doctrine" of common law as it relates to insurance, which requires that a party to an insurance contract have a stake in the event. If you can't buy fire insurance on your neighbor's house, why can you buy credit insurance on his business if you don't have an ownership claim on it? That's a dog whistle for either banning so-called "naked" derivatives or running them under state-level insurance law. The vote to ban naked credit default swaps, proposed in the Senate by Bryan Dorgan, failed (and was generally opposed on the right). 

The other regulations relate to bailouts and prudential regulations. As they put it:

When banks fail, the government must act as lender of last resort.

Today, the government serves this role in two ways. First, it compels banks to buy government-supplied deposit insurance, which covers depositors up to $250,000. Second, it provides emergency loans at below-market rates -- bailouts -- to any financial institution whose collapse would take down enough banks with it to endanger the entire economy.

Few seriously doubt that governments must play this role.

Bagehot’s rule is usually summarized as, “Lend without limit, to solvent firms, against good collateral, at high rates." In exchange for this, certain regulations are necessary. Dodd-Frank includes higher capital and liquidity requirements for larger and riskier firms, as well as certain organizational requirements (loosely referred to under the term "living wills") to help with collapsing the company in question via FDIC's resolution powers.

Again, it would be interesting if they addressed the specific reforms to lender of last resort functions included in Dodd-Frank, or the combination of regulation and resolution. Section 13(3) of the Federal Reserve Act was amended so that "any emergency lending program or facility is for the purpose of providing liquidity to the financial system, and not to aid a failing financial company." and any such lending program has to have "broad-based eligibility.” Some have argued this is too loose to deal with a liquidity crisis. Do these authors agree? Are the regulations and FDIC's resolution powers sufficient in this case, or do we need a different approach?

Their specific recommendations for how the right should tackle Dodd-Frank, which is the last third of the piece, involve applying stricter cost-benefit analysis to all rules. There's no talk about repeal, or huge changes to the framework, or long court battles. Cost-benefit has significant problems, but that's a debate for another day. Conceptually, it is tinkering with Dodd-Frank rather than repealing it, which has dominated the conversation on the right. Will this signal a larger change?

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Obama’s Second Inaugural Should Reject the “Job Creators” Vision of Capitalism

Jan 18, 2013John Paul Rollert

Now is the time to articulate a vision of capitalism that doesn't rely on the Visible Hand.

An inaugural address finds presidents at their most philosophical. Policy prescriptions are neither expected nor desired, and the solemnity of the occasion lends itself to reflection.

Now is the time to articulate a vision of capitalism that doesn't rely on the Visible Hand.

An inaugural address finds presidents at their most philosophical. Policy prescriptions are neither expected nor desired, and the solemnity of the occasion lends itself to reflection.

But a second inaugural address differs from the first in one important way, for it must respond to recent history. A newly installed president, without any real responsibility for the larger events that saw his election, can indulge in hopeful prophecy, but a re-elected president owns the immediate past. It, and not his address, is prologue to a second term, and so, especially in troubled times, his speech must take shape around present challenges.

The financial crisis cast a long shadow over President Obama’s first term.  Yet in his battle to deliver the economy from a steep financial downturn, he stumbled into a war of sorts over how capitalism works. This is a conflict the president would no doubt have rather avoided—the presidency is challenging enough without having to convince a substantial portion of the electorate that your aim is not to subvert capitalism but to save it from itself. However, the deep disagreement over how the crisis came about, much less how it might be resolved, made an ideological debate over the very nature of capitalism all but unavoidable.

What exactly is the nub of the disagreement? During the election, everything Republicans believed to be wrong with the president’s approach to economic policy was epitomized by the “You didn’t build that” remark. The remark came amid off-the-cuff comments President Obama made at a campaign rally in July. A first-time listener might be forgiven for mistaking the endlessly disputed that, but a review of the transcript clearly shows it refers to public infrastructure—roads, bridges, educational institutions, and the like—that is necessary, if not sufficient, for a private enterprise to thrive.

At the time, some Republicans tried to twist the remark to suggest that Obama believed that business owners don’t actually have a hand in building their own businesses, a contention that was not implausible so much as incoherent. However, shrewder observers insisted that the significance of the remark lay beyond its plain meaning. “It’s an explanation,” Paul Ryan declared in a campaign stop at the site of the remark. “It tells us why our economy is not growing like it should. It tells us the mindset that he’s using to lead our government. It tells us that he believes in a government-centered society and a government-driven economy.” For Ryan and others, it suggested that President Obama rejected the “job creators” vision of economic development favored by Republicans, or what one might call the Visible Hand theory of capitalism.

This theory finds its first and most formidable expression in the work of Joseph Schumpeter, the mid-20th century Austrian economist who cast the entrepreneur as the action hero of economic growth. As far back as Adam Smith, economists had regarded the serene stasis of perfect competition as a kind of endpoint for capitalism. But Schumpeter believed this ideal blinded them not only to the chaotic reality of capitalism but to the revolutionary power of instability to pull or, more accurately, yank an economy ahead.

“Economic progress, in capitalist society, means turmoil,” he declared in his classic work Capitalism, Socialism, and Democracy. The system “is incessantly being revolutionized from within by new enterprise, i.e., by the intrusion of new commodities or new methods of production or new commercial opportunities into the industrial structure.” The people who fomented such destabilizing changes were Schumpeter’s entrepreneurs. Their efforts constituted a “distinct economic function,” one that gave rise to new possibilities in the capitalist order even as they foreclosed old ones.

Especially in Schumpeter’s early writings, the entrepreneurial class embodies the Visible Hand of capitalism. In his first book, The Theory of Economic Development, Schumpeter celebrates the entrepreneur as a “man of action,” a larger than life individual whose keen intellect, swashbuckling spirit, and stubborn irreverence toward the commercial status quo made his activity “the greatest and most splendid element that economic life offers to the observer.”

But though he never yielded pride of place in Schumpeter’s system, the entrepreneur evolved from a class of superman, distinct and identifiable, to a spirit of sorts that animated capitalism. That evolution is captured by the very way in which Schumpeter emphasized the impact of the entrepreneur. Early on he terms it “creative construction” before changing to the always-capitalized “Creative Destruction,” a subtle revision that prized the secondary consequences of entrepreneurial endeavors over their self-conscious aims.

The shift in emphasis coincided with a greater awareness by Schumpeter of what he called the “cultural performance” of capitalism, its tendency to subvert traditional ways of life and undermine social cohesion. “[O]ne may care less for the efficiency of the capitalist process in producing economic and cultural values,” he candidly admitted, “than for the kind of human beings that it turns out and then leaves to their own devices, free to a make a mess of their lives.”

Ayn Rand’s radical individualism made her the natural person to adopt Schumpeter’s vision and relieve it of its social qualms. Though she never acknowledged her debt to Schumpeter, Rand also locates the engine of capitalism in an “exceptional minority who lift the whole of a free society to the level of their own achievements.”

This passage comes from What Is Capitalism?, an essay published in 1965, 15 years after Schumpeter’s death. In it, Rand provides an eye-opening description of the just deserts implied by her vision of capitalism:

The man at the top of the intellectual pyramid contributes the most to all those below him, but gets nothing except his material payment, receiving no intellectual bonus from others to add to the value of his time. The man at the bottom who, left to himself, would starve in his hopeless ineptitude, contributes nothing to those above him, but receives the bonus of all their brains.

In other words, to the victors can’t go spoils enough.

Rand’s ethics of achievement, together with Schumpeter’s opinion of the essential place of the entrepreneur, provide the Visible Hand its moral license and theoretical integrity. In the 2012 campaign, it found an impassioned spokesman in Paul Ryan, whose speech at the Republican National Convention was a celebration of this vision. “With tax fairness and regulatory reform,” he pledged, “we'll put government back on the side of the men and women who create jobs, and the men and women who need jobs.”

Yet even among those sympathetic to the Republican ticket, the unavoidable elitism of the Visible Hand left some feeling cold. “In Ryan’s intellectual bubble, there are job creators and entrepreneurs on one side and parasites on the other,” wrote Scott Galupo of The American Conservative the morning after Ryan’s speech. “There is no account of the vast gray expanse of janitors, waitresses, hotel front-desk clerks, nurses, highway maintenance workers, airport baggage handlers and taxi-drivers. They work hard, but at the end of the day, what can they be said to have ‘built’?”  

The answer, of course, is nothing—at least nothing essential to economic development. What so struck Adam Smith about the commercial system he described, “the assistance and co-operation of many thousands,” is entirely taken for granted. The daily labors of a nation are a mere fait accompli to the executive decisions of a few.

Such a vision sits uncomfortably amid democratic values of equality, empathy, and the inherent dignity of the individual, but it becomes intolerable when the theory underpinning it becomes a pretense for naked privilege. Whatever the merits of Schumpeter’s theory of entrepreneurship, his “job creators” were a class defined by spirit, not tax status. To the degree that Republicans conflate the two, they make a travesty of Visible Hand.

An aristocracy of talents is no doubt preferable to the politics of plutocracy, but neither one is commensurate with a vision of capitalism that takes as its point of departure, and its final destination, a concern for the common good. President Obama recognizes this. “Ever since” the financial crisis began, he said in his most powerful speech of the 2012 campaign, “there has been a raging debate over the best way to restore growth and prosperity; balance and fairness.” This isn’t “just another political debate,” he continued. “This is the defining issue of our time.”

And it will only continue to be, what with the upcoming battles over the sequester and the debt ceiling in addition to ongoing debates over entitlement reform, budget deficits, and tax rates. President Obama’s second inaugural address provides him a unique opportunity to describe the challenges of a common capitalism and to put forward a vision of economic development that doesn’t see us waiting on the deliverance of an enlightened few, but one in which there is dignity and place for everyone to lend a hand. 

John Paul Rollert is an Adjunct Assistant Professor of Behavioral Science at the University of Chicago Booth School of Business.

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The Platinum Coin is as Absurd as the Problem It Solves, and That's a Good Thing

Jan 10, 2013Tim Price

President Obama can beat Republicans in the debt celing standoff by turning their own tactics against them.

President Obama can beat Republicans in the debt celing standoff by turning their own tactics against them.

Not since Samuel L. Jackson announced his desire to have the snakes removed from his passenger flight has a single sentence thrilled the Internet as much as Chuck Todd’s question at yesterday’s White House press briefing: “Do you guys have a position on this trillion-dollar coin business?” At the same time, one could hear the collective groan of critics who hoped the whole coin idea would stay buried in online obscurity rather than become a topic of discussion for people with actual influence. It’s understandable that the silliness of the trillion-dollar coin rubs its opponents the wrong way, but it’s that very silliness that makes it the perfect response to the ridiculous state of American politics.

The precise origins of the trillion-dollar coin are a matter of debate (some credit blog commenter “beowulf” for the idea, while others trace its inspiration to nuclear energy magnate Montgomery Burns), but in the last week it’s become a preoccupation of the economic blogosphere. The particulars have been covered in exhaustive detail elsewhere (see The Atlantic’s Matthew O’Brien for a good overview), but the short version is this: due to a loophole in commemorative coin law, the Treasury Department technically has the power to mint a platinum coin with a face value of $1 trillion, deposit that coin in the Federal Reserve, and use the funds to pay its debts if Congress fails to raise the debt ceiling in time to avoid default.

I don’t intend to get into the legal foundation for the platinum coin approach (though experts including Harvard professor Laurence Tribe and the co-author of the law believe it’s sound) or even to suggest that the president might actually go for it. No matter what garbled signals his press secretary sends, Barack Obama is a serious man who doesn’t like stunts. After spending more than four years cultivating an image as the only grown-up in the room, he’s probably not going to step out into the Rose Garden, pull an oversized novelty coin from his pocket, and announce that he just ended the debt ceiling standoff before it started. But that’s too bad, because he totally should.

Non-legal arguments against the coin share a common theme: it’s stupid, and its supporters are sinking to the GOP’s level. Kevin Drum of Mother Jones writes, “This whole thing is not just a ridiculous idea, it's a bad idea too.” Ross Douthat at The New York Times argues that it would be “trying to match the Republicans irresponsibility for irresponsibility, in a constantly escalating game of ‘can you top this?’” Republicans, Drum notes, “seem willing to set the country on fire to please their increasingly fever-swampish base, and eventually they'll pay a price for that at the polls,” so Democrats should just sit back and wait for them to self-destruct. One might have thought that happened in November, when they lost the presidential election, several Senate seats, and the popular vote in the House, but two months later, they’re still in control of the House and still threatening to trigger a global depression out of spite. How’s that working out?

Even supporters of the trillion-dollar coin admit that it’s all very silly, but that’s sort of the point. Republicans’ debt ceiling antics are utterly ridiculous; under the guise of curtailing future spending, they’re threatening to refuse to make good on debts the U.S. already owes because of spending Congress already authorized. They’re so concerned about the health of the U.S. economy that they claim they’re willing to destroy it. It may all be empty posturing, but it only gets them what they want if Obama agrees to play straight man to the clowns and accept a pie in his face for the good of the republic. And as we’ve seen time and again during the president’s first term, pretending that elected Republicans are grown-ups who take their responsibility to govern seriously doesn’t cause them to live up to expectations. Instead, it seems to embolden them to behave even more radically, since they know they can count on someone else to keep the country afloat while they’re busy running around with their pants on their heads.

So yes, President Obama could continue to act as if Republicans are negotiating in good faith and either allow them to extract more painful, unnecessary budget cuts or risk the possibility that they’ll reject his overtures and destroy the U.S.’s credit rating for no particular reason. Or he could flip the script so that the joke’s on them for once. As Jamelle Bouie writes, “The $1 trillion coin is a ridiculous idea. But it’s no less ridiculous than the debt ceiling, and in the big scheme of things, it’s far preferable to defaulting on our obligations.” Minting the coin wouldn’t lower the president to the GOP’s level; it would prevent the GOP from dragging the entire country down with it. If the U.S. had a functioning government and a healthy political debate, we wouldn’t be talking about the debt ceiling or the coin, but it doesn’t, so we are. Pretending that everything’s just fine on Capitol Hill won’t bring Mr. Smith back to Washington, but acknowledging and heightening the absurdity could hasten the exit of the current gang of malcontents and allow more reasonable and responsible leaders to take their place. So if you take policy seriously, it’s time to treat politics as farce. 

Tim Price is Deputy Editor of Next New Deal. Follow him on Twitter at @txprice.

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