Sunday, January 26, 2014

On Income Inequality - What Is a "Fair" Maximum Tax?

Income...And Wealth...Inequality
President Obama's latest State of the Union speech is upcoming (a bit of a tired constitutional requirement in the modern era, but still an important speech) and it is widely believed that one of the central themes of his speech will be about rising income inequality in the United States.  Liberal commentators have been all over this theme of late, especially with the outright gluttony on display at the Davos conference last week (essentially that conference has devolved into rich people talking about being rich.)

One of the big pieces of data that has been repeated over and over again is that the 85 richest individuals in the world have as much wealth as the bottom half of the world population.  While this story is slightly misplaced in the context of an income inequality discussion - income and wealth are two related but distinct concepts - it is certainly a jarring reminder of how the other half lives.

In the United States, income inequality looks like this (all figures are adjusted for inflation):
The 20th percentile in the US have household incomes averaging $20.3K per year, essentially flat to 20 years ago (up 0%)
The 50th percentile have household incomes averaging $50K, also essentially flat to 20 years ago (up 3%)
The 80th percentile have household incomes averaging $101.6K, up 11% from 20 years ago
The 95th percentile have household incomes average $186K, up 20% from 20 years ago

So, essentially 80 percent of the population has about the same income level that it did 20 years ago, whereas the further up the chain you go, the more you have benefitted from the past 20 years.

A couple of very big caveats to these numbers.  Measures of income exclude social benefits received from the government such as food stamps.  They also exclude the impact of changes in tax policy.

However, in many ways social benefits have become less generous in the past 20 years (welfare reform in the 1990s, for instance) and tax policy has become a little more friendly to the top of the house (Clinton-era reductions in capital gains taxes and the components of the Bush tax cuts that were extended by Obama), so if anything, these numbers probably understate how much the problem has grown.

So should we care?  One could make an argument that in a free-market system, by definition you have winners and losers.

Major league income inequality, however, is socially destabilizing.  In addition to the potential moral aspects of having a rich country with a lot of poor people, it is a political mess when the majority doesn't control much of the wealth - it leads to all kinds of punitive actions by governments and it leads to a lot of social unrest from people who feel excluded from the system.  A large, vibrant middle class is therefore the key to maintaining a stable economy and stable democracy.

So, what are the good and the bad solutions to this problem, if, in fact, you agree with me that it is a problem.

Good Solution - Reward Work
Solutions which encourage participation in the economy are always my first choice for solving the issue.  Those include hiking the minimum wage (which now seems to be gaining momentum, but regular readers know I have been talking about for years) and supporting and expanded the Earned Income Tax Credit, which is essentially a federal subsidy for those working at low incomes.

Bad Solution - Redistribute Wealth
Redistribution can be politically appealing.  And I'm certainly not saying that the rich shouldn't pay more taxes than the poor - they can afford to after all.  But simply transferring money creates class warfare and creates poor economic incentives - the poor aren't encouraged to work and the rich aren't encouraged to innovate.  While I've supported some tax hikes on the rich in the past, the top marginal rates on earned income are getting scary.  In California, the top tax rate is 12.3%.  Combined with a top federal rate of 39.6%, the Medicare Tax of 2.4% and the Obamacare tax of 0.9%, top earners in California pay a top rate of 55.2%.  Taking more than half of the money someone earns is getting to a dangerous level.

Good Solution - Increase Workforce Skills
One of the major drivers of income inequality has been the globalization of the workforce and the automation of manufacturing processes.  In the 50s and 60s, one could earn a nice middle-class lifestyle with a High School diploma and a job in auto manufacturing.  These days, there are a lot less of those jobs, partly because of the globalization of labor markets but more importantly because of automation.  You need about 10% of the people that you needed 50 years ago to make an equivalent number of cars.  It is therefore imperative that more people have skills beyond a High School Diploma, since I'm not sure that this can ever be a path to a middle-class lifestyle again.  Supporting post-secondary education, be it technical trade skills or degrees in science, math and engineering is a essential part of building a 21st century workforce that can be middle class.  Support should be targeted - majoring in Art History isn't going to give you the skills to compete.  Post-Secondary education should be viewed as job prep not some humanist period of discovery.  If you want discovery, that's fine, but we'll only PAY to support things which will build your job skills.

Bad Solution - Cut Taxes on Investment
A popular conservative solution to income inequality is that if you cut taxes on investment income, it would encourage more investment which would in turn create more middle class jobs.  This is belied by two inarguable facts - the first is that corporations have TONS of cash already on their balance sheets that they could deploy if they saw attractive uses for it.  The second is that the ways to generate the highest returns on capital are often not the same things that create middle-class jobs.  The key is making investments in US jobs pay off better, not simply taxed less.

Good Solution - Build Better Infrastructure
Our transit infrastructure needs a lot of work - bridges, roads, tunnels, mass transit are all dated and many in poor condition.  Our electric grid and power generation is also out of date - our grid is inefficient and vulnerable and we need to build capacity to make less power with coal.  All of these investments are a two-fer - they provide middle class, blue collar jobs now to construct the infrastructure of tomorrow and they have a huge multiplier effect that will make private investment more attractive in the future.

Let's hope President Obama proposes some common-sense solutions in his SOTU speech and not simply a bunch of initiatives aimed to divide the classes.  And let's hope the GOP is willing to work with him on this issue - shunning every one of Obama's initiative is a bit tired since the GOP will never have a chance to defeat him at the polls again.  We'd just as soon see everybody work on solving problems.

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Monday, January 20, 2014

Chris Christie - Scandal or Unholy Media Alliance?, What Does Obamacare Success Look Like?

Chris Christie, New Jersey Politician
Just as the narrative was going the way Chris Christie wanted it - a resounding re-election of a relatively conservative Republican in the blue state of New Jersey, bipartisan praise for his efforts around Hurricane Sandy, the national media beginning to talk about him as the presumptive frontrunner for the GOP nomination in 2016, things took an ugly turn.

It started with the Fort Lee bridge scandal.  Christie crony David Wildstein, who had been appointed to a senior role at the Port Authority has been revealed to have intentionally caused traffic jams in Fort Lee by closing lanes on the George Washington Bridge in order to get back at the Democratic Mayor of Fort Lee for not endorsing Christie.

This story has several complex dimensions, so let me lead with some of my major observations:
First, that Wildstein intentionally took action to harm Fort Lee for political reasons is unquestionable based on the communications that have gone public.  It is also unquestionable that Wildstein is a close ally of Christie and that the role in the Port Authority was created for him as a reward for his loyalty.

What is not clear - and may never be clear - is whether Christie himself was aware of the actions being taken at the Port Authority.  Christie had a very well run press conference where he apologized, expressed embarrassment, fired Wildstein and promised full disclosure and reform.  All correct actions.

If all that is ever proven is that Christie appointed Wildstein as a political appointee and that Wildstein went rogue ordering the bridge delays, then it is a small mark against Christie for choosing poor friends, but hardly a major scandal.  That Wildstein was a political crony may be blown up, but the fact is, most political appointees are loyalists to the politicians that appoint them, so this is nothing new.  Some Democrats have argued that Christie created an environment where such actions were viewed as okay - this may or may not be true but it is a pretty thin argument absent any evidence of Christie's involvement in these types of operations.

So, by itself, Fort Lee as it stands will probably not have legs into the spring and summer.

The allegations made this weekend by the Mayor of Hoboken are a different animal.  Her allegation was that she received a direct message from Lt. Governor Kim Guadagno that Hoboken would not receive promised Hurricane Sandy relief unless she supported a private development deal supported by the Governor.

Mayor Zimmer's allegations have not yet been proven, but if true, are much worse than the Fort Lee mess for a few reasons.  One, she is claiming direct involvement of the Governor.  Second, what she alleges would essentially mean the Governor's office was leveraging public funds to support private investments of his friends, a far more serious allegation than simple political payback.  Third, it strikes at the heart of one of Christie's signature achievements, Hurricane Sandy restoration.

We have much to learn - as things stand now, there is no direct evidence of the Governor's involvement in either scandal.  Absent some form of proof, these allegations carry little more weight than conspiracy theories.  But rest assured, every media outlet in the country is looking for such proof.

The most fascinating angle of these stories is the amount of national attention that has been paid to these stories - they have been lead stories for national news outlets across the political spectrum for weeks.  Why?

One of the reasons is journalistically reasonable - that Christie is the presumptive front-runner for the GOP nomination and therefore scandals involving him elevate from local to national news.  But there is something else going on here - an unholy (or holy, depending on your point of view) alliance between the hard right and the hard left.  You see, Christie is a target from both sides of the political spectrum.  The right wing dislikes him because he is a relative political moderate in the party these days and doesn't want to see him get the 2016 nod, favoring more conservative candidates such as Rand Paul or Ted Cruz.  The left dislikes him because he is the presumptive frontrunner for the GOP nod in 2016 and they want to take him down a peg for a potential national election - particularly since they fear his chances of success a lot more than the far right candidates that they feel confident they can beat.  So both MSNBC and Fox News have been pounding away relentlessly at these stories and the more mainstream press has followed suit.

What all of this means for Chris Christie's political future is uncertain.  It all depends on what facts come out about his involvement.  At the very least, it momentarily halts his momentum towards 2016 and opens the air for other credible candidates to emerge.  Somewhere, Jeb Bush is smiling.

Obamacare - How Do You Measure Success?
When President Obama set out to do health insurance reform, his goal was to cover uninsured Americans.  His original goal was to cover everyone through a combination of public plans, including Medicare, an expanded Medicaid, SCHIP and a "public option" on insurance place markets and private plans through a combination of employer provided and privately purchased plans.

It was clear from the outset with the compromises made to secure passage of Obamacare that the bill would not cover 100% of Americans.  First, the public option was taken off the table.  Second, the penalties for not holding insurance were made modest enough that everyone knew some would not participate in the market.  Third, the medicaid expansion was made optional for states, meaning that in Republican-controlled states that chose to reject the expansion, there would be an automatic gap in the market.

So how are we to measure the success of Obamacare?

The internal benchmark set by the Obama administration was the coverage of 7 million people in the marketplaces by the close of open enrollment at the end of this March.  Additionally, 9 million new people would be covered by Medicaid, adding 16 million in total to the rolls of the insured.

By that measure, Obamacare is gathering steam.  Marketplace enrollment through December reached 2.2 million people - short of the internal benchmark set by the Obama administration of 3.0 million by that point in time, but a huge boost from the early months, when major issues with the website plagued enrollment.  Medicaid enrollment is up 3.9 million for the year so far, although it is impossible the way the numbers are reported to tease out how much of that is due specifically to Obamacare and how much is due to other factors like economic changes.

By these benchmarks, Obamacare certainly doesn't look like a disaster - it looks like a piece of governance that is building steam and covering more people.

The initial reactions of sticker shock also seem to be fading.  I did a quick search for insurance policies in Las Vegas, using the Nevada exchange (I picked Nevada because they have an easily searchable exchange, are a mid-sized state and have a sizable number of uninsured, so they are an ideal target of Obamacare), reveal the following unsubsidized rates for a 40-year old non-smoker:
Cheapest "Bronze" Plan - $182.50/mo
Cheapest "Silver" Plan - $237.13/mo
Cheapest "Gold" Plan - $259.97/mo
Cheapest "Platnium" Plan - $320.27/mo

These rates, to me at least, are astoundingly cheap.  The Platnium plan that is $320.27/mo plan provides primary care doctor's visits for $5 apiece and specialist visits for $25 per visit, both with no coinsurance.  Generic prescriptions have a $0 copay, formulary brand name has a mere $15 copay.  The calendar year deductible on the plan is $400 and coinsurance on things like major surgery is only 10% after the deductible, with preventative and prenatal care carrying no deductible and no coinsurance.  Best of all, the out-of-pocket maximum is only $2,000, meaning that beyond the cost of the premium, you are never going to pay more than $2,000 for health care.  Those rates assume that you use the provider network, there are higher rates for going out-of-network, very typical of all insurance policies.

In short, for $320.27/mo, if I lived in Las Vegas, I could get a phenomenally better insurance policy than the very good policy that I current get from my employer.  And keep in mind that if my income is less than 400% of the poverty level, I would get a subsidy against this rate.

By this measure, Obamacare plans seem phenomenally good at cost and benefit.

I picked a middle-of-the-road scenario - a tobacco user would pay a higher premium (although such premiums are capped at a 50% premium to the non-user) and if I lived in a smaller state, there might be less competition and higher prices.  If I'm 60, that same policy shoots up to $680/mo, if I'm 25 it is only $251/mo.

The ultimate success will not be measured by my view of the value of the policies, however.  I think the best metric, which we won't know for some time, is the NET change in the number of uninsured people.  Critics have rightly pointed out that the raw enrollment numbers don't tell us how many people who would have bought insurance anyway from private companies are enrolled.  It also doesn't account for the impact of policy cancellations.

It is WAY too soon to judge the success of Obamacare one way or another.  But we are definitely way past the point where it is about a non-functioning website, which I always believed was a short-term question.

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Friday, December 27, 2013

The Year of 2013 In Reflection

2013 was about as substantive a political year as one can have in an odd-numbered year in the United States.  Here is a look back at what, in my opinion, are the 10 biggest news stories of the year from a political standpoint:

10.  The Crazy New York Mayor's Race
Anthony Weiner's weiner was back on display with sexting abounding.  Christine Quinn was handed a gimme and proved to be an absolutely abysmal candidate.  Bill de Blasio, the boring looking white guy with the hip interracial family (I mean, come on, who doesn't love Dante and his afro?) sneaks in to win a resounding victory.

9. Cory Booker Takes the Next Step
There are quite a few of us in the political realm that have been watching Cory Booker for some time and think that he is probably Presidential timber.  Some in the past have questioned his sexual orientation, but I frankly think that is MUCH less of an issue on the national stage than it was 20 years ago and it is one he has handled adeptly.  Booker has moved his political career at a deliberate pace, choosing to stay as Mayor of Newark for over 7 years, when he almost surely could have moved to a larger office sooner than that.  With his election to the Senate by a solid (although less overwhelming than some imagined) 11 point margin, Booker immediately becomes at the top of the 2016 VP candidate list and near the top of the 2020/2024 Presidential prospects.

8. Democrats Win in VA, Republicans in NJ
The results of an actual election would typically top the year's stories, but this year's results were largely affirmations of things that we already knew.  First, in Virginia, when you run a wing nut in a swing state, as the GOP did, you generally lose, even when you are running against a horrible candidate, which Governor-Elect Terry McAuliffe certainly was.  In New Jersey, Chris Christie proved again that center-right pragmatism CAN win in the northeast - maybe a model for a national election?

7. The Death of Nelson Mandela
First, a word of explanation.  Nelson Mandela deserves to be much higher than number 7 on virtually any list that you could conceive.  His story is amazing, from violent revolutionary to prisoner to quiet, forgiving, strong leader that ushered South Africa peacefully and successfully into the post-apartheid era, Mandela is one of the largest figures on the global stage in the past century.  Mandela's story largely happened in prior years, however, with his biggest moments coming after his release from Robbin's Island and his rise to lead the first post-apartheid government and share a Nobel peace prize with apartheid leader F.W. De Clerk.  Mandela was a great man, worth remembering.  His death is a loss to the world.

6. Pope Francis
The first Latin American (although ethnically Italian) pope has made his mark early, casting a strong contrast with his predecessor by urging the church to de-emphasize condemnation of abortion and homosexuality (although he has maintained the existing church doctrine) and focus instead on serving the poor and presenting a more modern, positive image of the church.  This is a huge and badly needed shift for the church and one that will have political impact both in Europe and the US.

5. The Boston Marathon Attacks
For a brief moment, we were all reminded in a most horrific fashion how free nations will always remain vulnerable to terrorists.  This story hit me personally as I was staying in Boston at the time of the attack.  Since September 11 through a combination of good intelligence, smart preventative measures, a weakened Al Qaeda and some good luck, we have had a precious few damaging attacks.  The Tsarnaev brothers unfortunately changed that for reasons which are still not entirely clear.

4. Syria - Airstrikes / No Airstrikes
In one of the most bungled pieces of foreign policy in recent memory, President Obama declared that the US would conduct limited air strikes in Syria and that he didn't need Congress' permission to do so.  He then sought that permission, didn't get it and didn't conduct the air strikes.  Syria then bailed him out by agreeing to dismantle it's nuclear program (we'll see.)  It's an odd world.

3. Gay Marriage Everywhere
My favorite story of the year.  First, Maine, Washington and Maryland brought in the new year by becoming the first three states to legalize gay marriage by public ballot.  Then, Rhode Island, Delaware, Minnesota, Hawaii and Illinois all legalized gay marriage via bills passed by state legislatures and signed by their respective governors.  Then, the SCOTUS struck down a key provision in the Defense of Marriage Act and essentially forced the federal government to recognize gay marriages performed by states where it is legal for federal benefits.  While the ruling stopped short of legalize gay marriage nationally, the reasoning of the fifth vote for the 5-4 decision from Anthony Kennedy made it pretty clear to most of us that SCOTUS inevitably will make such a ruling but was simply buying some time.  On the back of the SCOTUS decision, judges in New Jersey, New Mexico and Utah have forced those states to legalize same-sex marriage.

All told, in December of 2012, there were only 7 states that had legal gay marriage.  There are now 18.  Anyone want to bet whether we make it to 50 in the next 2-3 years?

2. The Shutdown
In the most visible show of disfunction in at least 20 years, the federal government partially shut down as a budget deal seemed elusive.  We learned a few things in the debacle - the Tea Party was willing to push for its agenda even in the face of certain defeat, John Boehner was unable to control his caucus against the Tea Party (he has since lashed out at far right interest groups - I think he has had enough), shutdowns actually cost more than the government running and Democrats ruled the day....that is until our #1 story took place.

1. The Obamacare Mess
Oh what a disaster in the execution.  Democrats and the President have given up untold capital and the Affordable Care Act has given up massive credibility as the federal government failed to be able to design a website with over 3 years warning.  While I don't think that the initial execution is indicative one way or another as to the prudence or long-term success of the law, it will surely cost the President any hope of driving the congressional agenda next year and will undoubtedly cost the Democrats seats next fall.  Any dreams of regaining the House that Democrats may have had after the shutdown are gone and whether they retain the Senate or not is a open question at this point.

Happy New Year, everyone!

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Saturday, December 14, 2013

Why Everyone Punted on the Sequester

In a rare moment of bipartisanship, Rep. Paul Ryan (R-WI) and Sen. Patty Murray (D-WA) this past week reached a budget compromise that is actually quite moderate in nature.

Conservatives got the two things that were most critical to them - no tax increases (although there were some fee increases, which I feel are defacto tax increases - more on that later) and restoration of some of the sequester budget cuts.

Liberals got two more years without entitlement cuts as the agreement leaves Social Security, Medicare and Medicaid untouched.  They also got higher overall spending caps (by $63 billion) over the next two years than the sequester allowed, although part of that increase will go to defense.

In theory, the package is deficit reducing, but probably not in reality.  The package allowed $63 billion in additional spending over the next two years, offset by $85 billion in cuts (primarily from federal workers and military pension contribution changes) and fee increases (most notably an increase in the fee on airline tickets) over the next 10 years.  So if the world stays utterly static over the next ten years, the deficit will go down, but the reality is that the package increases the deficit by $45 billion over the next two years versus the sequester agreement and it is a near 100% certainty that budgeting over the following 8 years will change.

This is a small-ball bargain that largely preserves the status quo.  It does not touch in any meaningful way the three biggest drivers of the deficit, which are entitlement spending, defense spending and revenues.  But that might actually be okay - the federal budget last year was $680 billion, way down from the recession heights of $1.4 trillion+ and clocks in at only 4.0% of GDP, close to a reasonable level.  In order to keep the debt to GDP ratio constant, the deficit can be as high as the inflation rate plus the rate of economic growth.  If one assumes modest 2% inflation and 2% GDP growth, then a 4% deficit will essentially keep debt flat in real terms.

Unfortunately, the math above only works if you never have a recession.  Recessions cause huge spikes in spending and decreases in revenues that shock the system.  In order to pay for these approximately once per decade shocks, in the good years, governments need to be running deficits of a lot less than 4%, ideally budgets would be balanced or even slightly in surplus.

The brief modern history here is that the US exited World War 2 with major debt from war obligations, with debt to GDP running as high as 120%.  We steadily "paid down" this debt, no so much through absolute reduction but though inflation and economic growth and by the end of the Carter administration, debt had fallen to 35% of GDP.  The next 12 years of Reagan and Bush (although H.W. did eventually agree to tax increases) saw major increases in defense spending, no cuts to social spending and large tax decreases, all of which, combined with the 90-91 recession, spiked debt to almost 70% of GDP.  The Clinton administration saw tax increases (his idea) and large cuts in defense (his idea) and social spending (Newt Gingrich's idea) which combined for budget surpluses and took debt down to 55% of GDP.

Then W. Bush took over as President and immediately slashed taxes, instituted prescription drug benefits for Medicare and ramped up defense spending in the build-up to wars in Afgahnistan and Iraq.  Debt was already up to over 70% of GDP before the recession hit and spiked to over 80% of GDP by the time Bush left office as massive outlays for bank bailouts and social benefits hit the federal coffers as the recession hit.

The first year of the Obama administration saw continued large outlays for the bailouts coupled with a large stimulus bill that spiked the debt by almost 10% in a single year.  Now the debt has stabilized right around 100% of GDP.

We really need to get back to about 50% of GDP to be able to absorb comfortably the next recession, since debt levels over 100% of GDP are reaching towards the saturation point where credit downgrades and loss of investor interest cause a spike in interest rates.  And a 1% interest rate increase on a 100% of GDP debt increases the deficit by 1% of GDP, meaning that we are very susceptible to interest rate risk if rates rise off of their current historic lows.

This deal won't accomplish any of that - it doesn't deal with tax reform, entitlement reform or defense spending reform.  But it does give the markets certainty, prevents another government shutdown in the near term and at least maintains debts and deficit at a stable level.

It is also significant in that conservatives agreed to new sources of revenue.  An increase in the airline ticketing fee is effectively a tax, since it is a direct charge to you as a consumer when you purchase an airline ticket.  Calling it a fee and not a tax is politically expedient, but the effect is the same - airline consumers pay more to the government.

The deal passed overwhelmingly in the conservative-dominated House, by a roll call vote of 332-94 with 73% of Republicans and 84% of Democrats backing passage.  It seems likely to pass the Senate, although, oddly, Republican opposition in the Senate seems a lot stronger than in the House and the vote next week may be much closer than the House vote.

For Republicans, this deal provides political cover to focus the debate on Obamacare, where they perceive themselves to have a big advantage given the struggles with the website and anger over policy cancellations.  For Democrats, they get a higher spending level and clear the legislative agenda to discuss other items that are non-budgetary, such as immigration reform, where they perceive they have a public opinion advantage.

This deal was expedient bipartisanship, but welcome bipartisanship nonetheless.

Obamacare Enrollment Improves Some
Obamacare enrollment increased dramatically in November, with the total now enrolled nationally reaching 365,000 by the end of the month, up from under 30,000 in October.

The basic benchmark of success is 7 million enrollments by the time open enrollment ends on April 1st.  Clearly, enrollment will not happen evenly across the months and will ramp up as the deadline gets closer.  Even so, October was clearly a dramatic failure.  The November numbers are less clear.  On a straightline basis, if every other month (December, January, February, March) only saw the same level of enrollment as November, enrollment would reach less than 2 million.  But, as I said, that is not the likely scenario.  It is still TBD to me if the administration comes close to its goal.

An additional 803,000 people have qualified for expansions in Medicaid and SCHIP, another key element of the law's expanded access.

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Thursday, November 21, 2013

Finally, A Republican Idea That Democrats Can Agree On: The Nuclear Option

This is going to sound like a Washington insider story, but today marked perhaps the most significant change in how the United States Senate operates since Senate Rule XXII was implemented in 1975.  Most people I'm sure are not familiar with Senate Rule XXII, so perhaps a brief history of the Senate filibuster is in order.

The Senate has often been referred to the "world's greatest deliberative body" and the joke that usually follows is "with a heavy emphasis on the deliberative and not so much on the great."  Unlike the House of Representatives, which has, except for its very early history, always operated with great majority power - simple majorities set the rules governing debate on a bill and provide for passage (meaning that the party in power can pass any bill in less than an hour if it chooses to), the Senate has always had a huge respect for the rights of the minority.  The House is the fickle younger child, with its entire membership up for re-election every 2 years, the Senate is the older brother designed to check the pace of change, with only one third of its members changing out every 2 years and much slower rules for moving bills forward.

The early Senate debated for as long as people wanted to debate before voting.  There was an unwritten rule that Senators did not try to cut off debate but that Senators also did not hold up debate simply to delay a bill.

In 1919, the Senate passed the first version of Rule XXII, a rule that allowed two thirds of the Senators present to vote to cut off debate.  The first test of the new rule was in 1919 when the Senate debated the Treaty of Versailles and Woodrow Wilson's plan for the country to join the League of Nations, when an angry group of Senators, mostly of Irish and German descent, opposed the treaty.  Ironically, both passage of the treaty and the rules governing cloture at the time required a two-thirds vote, meaning that ending a filibuster required precisely the number of votes that ultimate passage would require.  While Senate Majority Leader Henry Cabot Lodge attempted several times to broker a compromise to the treaty that added conditions limiting the power of the League to declare war.  Ultimately, Lodge was unable to broker a deal, successfully invoking cloture but failing in the vote on the treaty.

Over the next 56 years, the filibuster was used sparingly.  While the bar was high to cut off debate, with two thirds of the Senators present required to end debate, the rules also required that the opposition continue to debate the bill while the filibuster was going on - in other words, someone had to be on the Senate floor the whole time talking about the bill at hand.  The number of cloture votes during that time period was less than 20 (the exact number, I am not sure of, as several different sources have different numbers, but all are less than 20.)  Its most famous use was in 1964, when a block of Southern Democrats, led by Senator Strom Thurmond of South Carolina (Strom was a Democrat before he switched parties in 1966, although he had supported Barry Goldwater over Lyndon Johnson in 1964, largely because of his opposition to civil rights), filibustered the Civil Rights Act of 1964 for over 2 months before cloture was finally invoked in a 71-29 vote, only the second time cloture had been invoked since Rule XXII went into effect.

In 1975, Senate Democrats, who had won a large majority of 62, but still short of the two-thirds (67) votes required to break filibusters, feared that they would face constant filibusters from the Republican minority and sought to lower the bar for breaking a filibuster.  They brokered a deal with Republicans whereby the threshold for ending a filibuster would be reduced to three fifths, but in return, filibustering Senators would not need to actually speak to filibuster, but could simply force a procedural vote.  Also, the threshold of three fifths was three fifths of ALL Senators, not just three fifths of those present, meaning that 60 votes were always required to break a filibuster, regardless of the number in the chamber at the time.

Even with these rule changes, the filibuster was rarely employed.  From 1975 through 1992, there were only a few dozen filibusters and almost never for a Presidential appointee.  Democrats did not filibuster Clarence Thomas' controversial nomination in 1991, approving Thomas with a simple majority vote of 52-48.  While many people think Reagan Supreme Court Nominee Robert Bork was filibustered, he was not - he withdrew from the nominating process when it became clear he was not likely to win approval in the Senate outright.

In the 90s, Republicans began to pick up the pace of filibusters in opposition to proposed Clinton programs such as the pro-Union striker replacement ban.  Filibusters jumped up to 40 or 50 a year, but still, President nominees were almost never filibustered, even controversial picks like Surgeon General Joycelene Elders and Commerce Secretary Ron Brown were allowed through.

In the 2000s, Democrats started making more liberal use of the filibuster and started filibustering judicial nominees and controversial appointees such as UN Ambassador John Bolton.  Filibusters picked up to 60+ per year by the end of the Bush administration.  Republicans then had a bold idea dubbed the nuclear option, to end the allowed use of the filibuster for Presidential appointees.  The plan was that when Democrats filibustered a proposed Bush nominee, Republicans would raise a point of order as to how many votes were required to break a filibuster.  The Senate parlimentarian would correctly rule that 60 votes were required and Republicans would appeal his decision.  The loophole that they would use is that overcoming that ruling would only require a simple majority vote.  51 Republican Senators would then vote that only 51 votes are required to overcome a filibuster and voila!, the filibuster is over for nominees.  The plan can close to happening but was averted when Senator John McCain brokered a deal to end filibusters on some nominees while retaining filibusters on some other, more controversial picks.

Which brings us to the present day.  Republicans have upped the ante exponentially during the Obama administration.  Filibusters routinely number in the hundreds per year now - essentially the GOP filibusters everything that isn't going to already get 60 votes, making the super-majority an everyday requirement rather than a rare requirement for especially controversial bills.

And today, the Democrats stole the Republican idea and invoked the nuclear option on the nomination of Patricia Millett for the US District Court.  In one fell swoop, with a mere 52-48 vote, the filibuster has been ended forever for Presidential appointees.  The decision excludes Supreme Court nominees, which would be subject to a filibuster, although a similar trick could be employed, if desired, for a future controversial nominee.

Expect a land rush of cloture motions on nominations that the GOP has held up.  Also expect even more amped up acrimony in the Senate.  And definitely expect the GOP to up the ante if and when they win the majority back in the Senate.

So is this a good thing or a bad thing?

Unfortunately, I think it is a Sophie's choice.  The filibuster as a tool to protect minority rights and check the power of majority to make sweeping controversial changes strikes me as a prudent tool.  The filibuster as it is presently used has become untenable.  Perhaps noble traditions that require discretion in the exercise of power are too much to trust today's politicians with.  And perhaps the filibuster has done more harm than good - after all, blocking civil rights bills is hardly a great record to run on.

Regardless, the nomination filibuster is gone.  The rest of it may soon follow as I fully expect the GOP to basically refuse not to filibuster anything they can going forward.

Washington just gets more and more dysfunctional.  Is there any doubt that another budget and debt ceiling crisis is just around the corner?

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Friday, November 8, 2013

Assessing the 2013 Actual vs. Expected Results and Exploring Why

Governor's races are so tricky.  Odd year races are even trickier.  Figuring out turnout in elections where there is no national decisions on the ballot is a bit of a guessing game.  Polls from reliable firms are harder to come by.  Hence, historically my margins of error have been greater in these races.  This year is no different.

Here is the rundown of actual versus projected results:
New Jersey Governor
Predicted Outcome: Christie +24.1%
Actual Result (preliminary): Christie +22.3%
Error in Projection: 1.8% bias for Christie

Virginia Governor
Predicted Outcome: McAullife +6.4%
Actual Result (preliminary): McAullife +2.4%
Error in Projection: 4.0% bias for McAullife

New York Mayor
Predicted Outcome: DeBlasio +41.2%
Actual Result (preliminary): DeBlasio +48.8%
Error in Projection: 7.6% bias for Lhota

First, the good news in the projection accuracy:
* All 3 races were called correctly
* The New Jersey race was actually very well called, considering the margin
* I was correct about Libertarian Robert Sarvis - his support did fade substantially versus the late polling, although he clocked in at 6.5%, above my projected 5-6% (but well below 9% or so that he was polling)

Now, the bad news:
* Like most, I dramatically overcalled the margin of Terry McAullife's victory in Virginia.  He simply underperformed virtually all of the polling.  A special call out to the Emerson College poll, which nailed the margin of the race, although it had Sarvis at a whacky 13%.  All of the other polls had McAullife ahead by far more.

So why did McAullife underperform?

Was it the scourge of Obamacare?  Republicans certainly think so and have been amping up the closing of the race as a precursor to a scorched earth campaign on Obamacare in 2014.  And they have some reason to believe.  Cuccinelli campaigned hard late on Obamacare and the news of the early failures of the website and of cancelled policies were happening right during the time when Cuccinelli was closing the gap.

A counterpoint to this would be depressed turnout.  Turnout for the 2013 Virginia Governor's race is estimated at 37%, down from 42% in the 2009 race, which may have formed the basis for a lot of poling models, and as in most elections, lower turnout tends to favor the Republican.  Still, 2009 was a historically high turn out race and 37% is not out of line for a more typical race.

My conclusion?  Voter turnout model error may be responsible for part of the result, but the Obamacare issue does loom large at the moment.  Whether it will work as an effective 2014 strategy for the GOP will depend largely on what happens in the next 12 months.  The story probably won't be about a broken website by then.  But whether it is about people paying more for policies that they don't want or having greater access, choice and value will decide whether Obamacare is an albatross to the Democrats or a boon.  We'll have to wait and see.

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Tuesday, November 5, 2013

McAullife Takes the Lead - I'm Calling It

I wanted to see McAullife cross the zero line before I called it, but I'm very comfortable going out ahead of the networks and declaring McAullife the next Governor of Virginia.

The margin will likely ultimately be in the 1-2% range as his margin has slipped somewhat from the initial returns that showed his numbers more in line with President Obama's performance.

But, I can't see any way back for Cuccinelli with 91% of the vote in, McAullife sitting on the right side of the lead (albeit narrowly) and 29% of the vote still left to count in Fairfax County.

Full analysis later in the week on all the races, but in the end:
(1) Christie cruised to victory easily, as expected.  Looks to be at least a 20 point win.
(2) Bill DeBlasio won in an essential non-race.  He leads by 38 points in the early going, but that could go up or down some as the early results are likely not representative.  Results are in line with expectations.
(3) Terry McAullife wins more narrowly than anticipated.  The big question coming out of this week is - why?

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