“Good Cop, Bad Cop”: Conservative Think Tanks’ Responses To Default Is Another Reason To Kill The Debt Ceiling
House Republicans are looking to weaponize the debt ceiling again, while the Obama administration is trying to make removing the threat of default part of any agreement.
Here’s one reason why the debt ceiling needs to go: the conservative intellectual infrastructure cheered on a potential default. I had imagined that there would be a good cop/bad cop dynamic to the right. Very conservative political leaders would be the bad cop, saying that they weren’t afraid to default on the debt, while conservative think tanks would play a version of the good cop, warning of the dire consequences of a default for the economy if their bad cop friend didn’t get his way.
For instance, here’s bad cop Sen. Pat Toomey (R-PA) saying that the markets “would actually accept even a delay in interest payments on the Treasuries,” especially “if it meant that Congress would right this ship, address this fiscal imbalance, and put us on a sustainable path, and that the bond market would rally if it saw we were making real progress towards this.” Missing interest payments is fine; in fact, it is great for the country if it is used to pass the Ryan Plan.
Financial analysts, to put it mildly, disagreed. JP Morgan analysts wrote that “any delay in making a coupon or principal payment by Treasury would almost certainly have large systemic effects with long-term adverse consequences for Treasury finances and the US economy.”
Here’s where the think tanks are fascinating. You could imagine them saying “our partner Toomey is nuts, we can’t control him, and you’d better do what he says or there’s going to be real damage.” But that’s not what they did. It’s best to split the work they did on the debt ceiling in two directions:
1. Technical Default Ain’t No Thang. The first is arguing, like Toomey, that a “technical default” wouldn’t matter, and in fact it could be a great thing if the Ryan Plan passed as a result. How did James Pethokoukis, then of Fortune and now of AEI, deal with a Moody’s report arguing a “short-lived default” would hurt the economy? Pethokoukis: ”I guess I would care more about what Moody’s had to say if a) they hadn’t missed the whole financial crisis, b) didn’t want to see higher taxes as part of any fiscal fix and c) if they made any economic sense.” Default doesn’t matter because Pethokoukis doesn’t want taxes to go up, and there’s no economic sense because of an interview he read in the Wall Street Journal.
Others went even further, arguing that the real defaulters are those who, um, don’t want to default on the debt. Here’s the conservative think tank e21 with a staff editorial arguing that ”policymakers need to stay focused on the real default issue: whether the terms of the debt limit increase this summer will be sufficiently tough to ensure that the nation’s debt-to-GDP ratio is stabilized and eventually sharply reduced.” All these people who want a clean debt ceiling increase are causing the real default issue. As someone who used to do a lot of credit risk modeling, this is my favorite: “Indeed, those demanding the toughest concessions today actually have a strong pro-creditor bias.” S&P disagreed with whoever wrote that editorial and increased the credit risk (downgraded) based on the threat of this technical default.
The Heritage Foundation wrote a white paper saying that you could just “hold the debt limit in place, thereby forcing an immediate reduction in non-interest spending averaging about $125 billion each month,” and that “refusing to raise the debt limit would not, in and of itself, cause the United States to default on its public debt.” Dana Milbank noted that these kinds of shuffling plans would still leave the government short and likely cause a recession. Milbank: ”Without borrowing, we’d have to cut Obama’s budget for 2012 by $1.5 trillion. That means even if we shut down the military and stopped writing Social Security checks, the government would still come up about $200 billion short.” The Cato Institute also jumped in with the technical default crowd here.
But that was the reaction from the number-crunching analysts. What about the bosses?
2. Civilization Hangs in the Balance of the Debt Ceiling Fight. Here’s the president of AEI, Arthur C. Brooks, in July 2011: “The battle over the debt ceiling…is not a political fight between Republicans and Democrats; it is a fight against 50-year trends toward statism…No one deserves our political support today unless he or she is willing to work for as long as it takes to win the moral fight to steer our nation back toward enterprise and self-governance.”
Even better, the president of The Heritage Foundation, also in July 2011, compares Democrats to Japan during World War II and then argues: ”We must win this fight. The debate over raising the debt limit seems complicated, but it is really very simple. Look beyond the myriad details of the awkward compromises, and you see an epic struggle between two opposing camps….Congress should not raise the debt limit without getting spending under control.”
So the the conservative intellectual infrastructure, which consumes hundreds of millions of dollars a year, looked at the possibility of a debt default and determined it was both inconsequential and also the only way to stop statism in our lifetimes. No wonder the time period around the debt ceiling in 2011 was such a disaster for our economy, killing around 250,000 jobs that should have been created. There’s no reason to assume all the same players won’t play an even worse cop this time around.
There’s no good reason for the debt ceiling, and now there are really bad consequences for its existence. Time to end it.
By: Mike Konczal, The National Memo, December 6, 2012
“Leveraging Influence”: Why The Koch Brothers Want To Refine The Cato Institute
It seems that the effort by billionaires Charles and David Koch to take control of the libertarian Cato Institute is going poorly. “We are not acting in a partisan manner, we seek no ‘takeover’ and this is not a hostile action,” Charles Koch told Bloomberg News. When you are denying partisanship, takeover ambitions and hostile intentions in one sentence, you probably need to rethink your PR strategy.
The Koch brothers have long supported Cato, which they helped found in Washington in 1977. Recently, however, they have come to consider their creation politically unreliable. In a meeting with Robert Levy, the chairman of Cato’s board of directors, they expressed their intention to remake the institute into a party organ that would aid their effort to unseat President Obama. To do so, however, they need control of the board. They intend to get it by suing the widow of William Niskanen, a recently deceased board member, for control of Niskanen’s shares.
Whether they can pull off this coup is for the courts to decide. But the bigger question is: Why in the world would they want to?
In 2006, the first page of Cato’s annual report included an admiring quote from, well, me. “The libertarian Cato Institute is the foremost advocate for small-government principles in American life,” I wrote.
I am not exactly a libertarian. I’m a technocrat. I believe in the government’s ability, and occasionally its responsibility, to help solve problems that the market can’t or won’t resolve on its own. I find much of Cato’s hard-line libertarianism — to the point of purging Will Wilkinson and Brink Lindsey, libertarians who explored making common cause with liberals on select issues — naive, callous and occasionally absurd. And yet, it’s among a handful of think tanks whose work I regularly read and trust.
That’s because Cato is, well, “the foremost advocate for small-government principles in American life.” It advocates those principles when Democrats are in power, and when Republicans are in power. When I read Cato’s take on a policy question, I can trust that it is informed by more than partisan convenience. The same can’t be said for other think tanks in town.
The Heritage Foundation, for instance, is a conservative think tank that professes to pursue goals similar to Cato’s. Where Cato’s motto is “individual liberty, free markets, and peace,” Heritage’s mission is the advancement of “conservative public policies based on the principles of free enterprise, limited government, individual freedom, traditional American values, and a strong national defense.”
In practice, however, whatever the Republican Party wants, so does Heritage. In 1989, Heritage helped develop the idea of universal health care delivered by the private sector through an individual mandate. In the early 1990s, it helped Senate Republicans build that concept into a legislative alternative to President Bill Clinton’s proposed reforms. In the early 2000s, Heritage worked with then-Governor Mitt Romney to implement the plan in Massachusetts. Then, when Obama won office and Democrats adopted Heritage’s idea, Heritage promptly fell into step with the Republican Party and turned ferociously against it.
Similarly, when Rep. Paul Ryan (R-Wis.) was developing his budget and needed a friendly think tank to run the numbers, he turned to the Heritage Foundation. And boy, it made those numbers sprint. Heritage’s analysis showed Ryan’s budget driving down the unemployment rate to 2.8 percent. When the mockery that ensued proved too much for the think tank to bear, it quietly replaced the analysis with another that didn’t include unemployment predictions.
On policy, I probably agree more frequently with the Heritage Foundation than with Cato. But I can’t trust Heritage. I trust Cato. I don’t agree with its health-care expert, Michael Cannon, who considers universal coverage an absurd and deleterious goal. But I take his analysis seriously, and his critiques have informed my thinking. I’m certainly more skeptical of single-payer programs than I would have been without having read his arguments.
Similarly, I never considered myself particularly concerned with executive power, but in his book “The Cult of the Presidency,” Cato Vice President Gene Healy convinced me that “we begin by looking to the president as the solution to all our problems, and we end up believing he’s the source of all our problems,” contributing directly to Washington’s dysfunction. That has grown into a recurring theme in my writing. This column, for example, bears Healy’s imprint at the top. (I pause here to note that Cato is literally giving away Healy’s book, and you should absolutely accept the offer.)
I never had very strong views on intellectual property, but Cato’s Julian Sanchez — who is a friend — has convinced me that our intellectual-property system has become a protection racket for incumbent firms and is an impediment to innovation.
The list could go on, but the point is this: The Koch brothers’ fortune is estimated at more than $60 billion, a couple of thousand times Cato’s annual operating budget. The brothers have started many advocacy organizations, many of which spend their time — and the Kochs’ money — trying to influence the next election. They could begin another such group, one dedicated to providing campaign-season ammunition, without noticing the expense.
What’s puzzling is why the Kochs started this campaign in the first place. It’s easy enough to see what they hoped to achieve: They would quietly take control of Cato and then leverage its credibility to help elect a Republican president. Unfortunately for them, the cries from inside Cato made the “quietly” part impossible. But it would have been impossible in any case: Cato’s credibility is derived from its independence; it wouldn’t last long separated from it.
What the Kochs have in Cato is an advocacy organization that matters in the years between elections, even when the brothers’ preferred candidate doesn’t win, even to people who don’t share their ideology. Cato is an organization that can have more than a marginal impact on elections. It can have a significant impact on policy and governance.
That’s a level of influence that even the Kochs can’t buy. When two of the right wing’s most influential funders don’t recognize that, it should cheer liberals immensely.
Privatization: The Road To Hell
Billionaires are different from you and me, for obvious reasons, including the fact that they buy much pricier baubles than we do.
A sleek car costing $100,000? Why, for them, that’s just an easy impulse purchase. A few million bucks for a Matisse original? Go ahead — it’ll liven up the hallway. How about throwing a fat wad of cash at a university to get an academic chair named for you? Sure, it’s all part of the fun of living in BillionaireLand.
Then there is the top crust of the upper-crust — such megalomaniacal megabillionaires as the Koch brothers. Using money from their industrial conglomerate, their foundation and their personal fortunes, these two far-out, laissez-faire extremists are literally buying public policy. Their purchases of everything from politicians to the tea party help them push the privatization of all things public and the elimination of pesky regulations and taxes that crimp their style.
To advance their plutocratic privatization cause, brother Charles has even gone on a shopping spree for an invaluable bauble that most of us didn’t even know was for sale: academic freedom. And it’s surprisingly cheap!
For only $1.5 million, Koch bought a big chunk of the economics department of Florida State University a couple of years ago. His donation gives him control of a new “academic” program at this public institution to indoctrinate students in his self-serving political theories.
The billionaire gets to screen all applicants, veto any he deems insufficiently ideological, and sign off on all new hires. Also, the department head must submit yearly reports to Koch about the faculty’s speeches, publications and classes, and he evaluates the faculty based on “objectives” that he sets.
Charles has made similar purchases of academic freedom at two other state universities, Clemson and West Virginia. Also, in a May 20 piece at Alternet.org, investigative researcher Lee Fang reveals that Koch has paid $419,000 to buy into Brown University’s “political theory project,” $3.6 million to establish Troy University’s “center for political economy” and $700,000 for a piece of Utah State’s Huntsman School of Business, which now has the “Charles G.
Koch Professor of Political Economy.”
Imagine the screams of outrage we’d hear from the Kochs if a labor union were doing this.
A recent article in The Onion, the satirical newsweekly, printed a downsize-big-government spoof that Charles and David would love to turn into reality. The parody disclosed that President Obama had come up with a surefire plan to balance the federal budget: Rob Fort Knox! “I’ve got the blueprints,” Obama is quoted as saying, “and I think I found a way out through a drainage pipe.”
Unfortunately, with today’s political climate dominated by howling winds from the far-right fringe, there’s no longer any room in American culture for satire. Sure enough, some laissez-faire extremists at such Koch-funded corporate fronts as Cato Institute and Heritage Foundation are presently howling for the government to sell all of America’s gold stored in Fort Knox. Noting that we have billions worth of bullion in the vaults, a fellow from Heritage made this keen observation: “It’s just sort of sitting there.”
Uh, yeah, professor. Like Mount Rushmore, the Grand Canyon, the Lincoln Memorial and other national assets — being there is the point.
Yet these ivory tower ideologues are using the current brouhaha over the budget deficit as an opening to push their loopiest fantasies of selling off all of America’s public properties, facilities, systems and treasures to create a no-government, plutocratic paradise. Just spread our public goods out on tables, like a flea market from hell, and invite the global rich to buy it all.
For example, a fellow from another Koch-funded front, the American Enterprise Institute, observes that the government could raise billions of dollars to retire that pesky deficit simply by selling our interstate highway system. Americans would then have to pay tolls forever to the corporate owners, but hey, he exclaims, remember that tolls “work for the River Styx, why not the Beltway?”
What a perfect metaphor for privatization! In ancient mythology, dead souls must pay a toll to be ferried across the River Styx and enter the depths of hell.
By: Jim Hightower, CommonDreams.org/Creators.com, May 25, 2011
Put-up-Or-Shut-up Time For Republicans On Health-Care Reform
It’s put-up-or-shut-up time for Republicans. They managed to make it through the health-care debate without offering serious solutions of their own, and — perhaps more impressive — through the election by promising to tell us their solutions after they’d won. But the jig is up. They need a health-care plan — and quickly.
The GOP knew this day would come. In May 2009, Republican message-maestro Frank Luntz released a polling memo warning that “if the dynamic becomes ‘President Obama is on the side of reform and Republicans are against it,’ then the battle is lost.” Repeal, Luntz argued, wouldn’t be good enough. It would have to be “repeal and replace.” And so it was.
That, however, is easier said than done.
To understand the trouble the Republicans find themselves in, you need to understand the party’s history with health-care reform. For much of the 20th century, Democrats fought for a single-payer system, and Republicans countered with calls for an employer-based system. In February 1974, President Richard Nixon made it official. “Comprehensive health insurance is an idea whose time has come in America,” he said, announcing a plan in which “every employer would be required to offer all full-time employees the Comprehensive Health Insurance Plan.”
In a moment of historically bad judgment — Ted Kennedy later called it his greatest political regret — Democrats turned him down. They thought they could still get single payer. They were wrong.
By the 1990s, they had learned from their mistake. Bill Clinton took office and, after a wrenching year of negotiations, announced legislation similar to Nixon’s.
”Under this health-care security plan,” Clinton said, “every employer and every individual will be asked to contribute something to health care.”
But Republicans again balked, calling instead for a system of “individual responsibility.” Senate Republicans quickly offered two bills — the horribly named Health Equity and Access Reform Act and the Consumer Choice Health Security Act — based on the idea that every person who has the means to buy health insurance should have to do so. We now call that concept “the individual mandate.”
Both bills attracted 20 or more co-sponsors. Neither passed, as Republicans yanked their compromise legislation the moment Democrats became desperate enough to consider it. The individual mandate, however, didn’t go away. It kicked around conservative health-care policy circles, racking up endorsements from the conservative Heritage Foundation and the libertarian magazine Reason. A year later, the mandate showed up in a law that then-Gov. Mitt Romney signed in Massachusetts. And then it was in the bipartisan proposal that Utah Republican Bob Bennett and Oregon Democrat Ron Wyden introduced in the Senate. And next, it was the centerpiece of the Democrats’ health-care reform push. Consensus, it seemed, was at hand.
Or not. Republicans turned on the individual mandate again. Senators who’d had their names on a bill that included an individual mandate — Orrin Hatch, Chuck Grassley, Bob Bennett, Mike Crapo, Bob Corker, Lamar Alexander, Olympia Snowe and Kit Bond, to name a few — voted to object, calling the policy “unconstitutional.” Romney had to explain away his signature accomplishment as governor of Massachusetts. And Republicans found themselves without a fallback.
The party’s current mood on health-care policy is perhaps best expressed by the efforts that Michael Cannon, an influential health-care wonk at the libertarian Cato Institute, has made to enlist members in his “anti-universal coverage club.”
Enter Wyden-Brown, an Affordable Care Act amendment that the White House has made a big show of endorsing: It says that any state that can produce a credible plan to cover as many people, with as comprehensive insurance, at as low a cost as the Affordable Care Act can wriggle out of all the law’s mandates but still receive all the law’s money. Vermont’s governor, for one, is stoked: He wants to try a single-payer proposal.
Most conservatives have been actively hostile. They make some fair technical points. The law envisions the secretary of Health and Human Services handing out the waivers, while the Heritage Foundation’s Stuart Butler would prefer to see a bipartisan commission in charge. But most take aim at the proposal’s basic goals: that care has to be as universal, as good and as cheap.
Cannon, for instance, frets that there’s no conservative policy that “would cover as many people as a law that forces them to buy coverage under penalty of law.” Butler worries that it “locks the states into guaranteeing a generous and costly level of benefits.”
But as the New Republic’s Jonathan Cohn points out, under the Affordable Care Act, a family of four could shell out $12,500 out of pocket for medical costs. How much stingier should the insurance be?
And Cannon is right that conservatives don’t have solutions to provide coverage as universal as what the Affordable Care Act would. But whose fault is that?
Conservatives once offered solutions competitive with what the Democrats were proposing, but over the past 30 years, they’ve abandoned each and every one of them to stymie Democratic presidents. Confronted with a challenge to provide broader access to better health care at a lower cost, they’re reduced to complaining that those aren’t the right goals for health-care reform. But we’ve yet to see how “less comprehensive insurance for fewer people” would play in Peoria. My hunch is it wouldn’t play very well.
For decades, Republicans have chosen stopping Democratic presidents over reforming the American health-care system. Now that reform has passed, the solution for members of the GOP is to press the rewind button. They’re about to find out that it’s not enough.
On that much, Luntz and I agree: If the public comes to see the GOP as opposed to reform, “the battle is lost” — at least if you believe “the battle” is to beat the Democrats rather than provide quality health insurance to every American.
By: Ezra Klein, Columnist, The Washington Post, March 8, 2011
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