Ezra Klein

OBAMA UNDERMINES NELSON.

Ben Nelson has been carving out an interesting career niche for himself lately. What Joe Lieberman was to foreign policy, he's decided to become to domestic policy. And so you have odd spectacles like Nelson threatening to vote against Obama's pro-choice legal nominees and playing a key role in shrinking the stimulus and swearing to block efforts to use reconciliation for cap and trade legislation. But that's largely garden variety conservatism. Nelson's position on student loans is, however, more of a parochial offense. Obama wants to save tens of billions of dollars by eliminating the middlemen. Study after study shows that they increase cost and add no value. But some of those middlemen are in Nebraska. And for all Nelson's deficit heroics, he's not so concerned about the debt that he'd harm a local industry. He's standing squarely against the reform. He'll be a hero to the private student loan industry. Or, at least, he would've been : An agreement struck between the president and...

INTRODUCING YOUR UNITED STATES BUDGET CONFEREES!

By now, you've all heard of conference committee: that magical land were a couple powerbrokers from the House and a couple poobahs from the Senate meet to decide what the final budget will look like. Yesterday, the representatives from both chambers were named. They are: Senate: Kent Conrad, Judd Gregg, and Patty Murray. House : John Spratt, Allen Boyd, Paul Ryan, Rosa DeLauro, and Jeb Hensarling. In both cases, you have the chairman and ranking member of the relevant budget committee. That means Conrad and Gregg in the Senate and Spratt and Ryan in the House. The others are appointed to the process.

WAS SOCIAL SECURITY REFORM PART OF THE DEAL FOR RECONCILIATION?

We know a deal was struck on reconciliation. And we know what that looks like on the reconciliation side. But what did it take to get that? Cohn suggests Obama made a firmer commitment to paygo rules. Which is strange, as his commitment to them was pretty firm already. Congressional Quarterly has a more worrying suggestion : That Kent Conrad extracted promises that the administration would let him start tinkering with Social Security: One outstanding question is what Conrad may get in exchange for not standing in the way of reconciliation provisions. “Would I want things? Yeah,” Conrad said. Conrad and Judd Gregg of New Hampshire, the ranking Republican on the Senate Budget Committee, have long pushed for creating a task force that would write policy prescriptions for the government’s long-term budget problems that Congress would have to vote on. When asked if this proposal could in some way be part of a potential deal on the budget resolution, Conrad only would say that many things...

PASS HEALTH REFORM BY OCTOBER 15TH, OR ELSE.

First, a bit of background: Awhile ago, we talked about the three types of reconciliation possible on health care. The first type was a simple reconciliation process. The second type was a timed process where reconciliation would begin if the Congress didn't pass a bill by "X" date. And the third type was a threat to pass another budget at a later date that would include reconciliation. The timed process always seemed the most likely. And Jon Cohn reports today that a deal has been struck: The budget will include reconciliation instructions pegged to October 15th. That's the date by which Congress has to pass bipartisan health care reform. If they fail, then the relevant committees have to write reconciliation legislation that faces a simple up-or-down vote in the Senate. No filibuster allowed. And with 59 Democrats, no Republicans needed. It's hard to overstate the importance of this decision. This could be the day that health care reform went from being unlikely to inevitable...

THE GREAT AMENDMENT HUNT: END OF THE WELFARE WARS.

Most of the amendments I've put up here today have been a bit galling. This one, however, is a pleasant surprise. David Vitter offered an amendment "to require States to implement drug testing programs for applicants for and recipients of assistance under the Temporary Assistance for Needy Families (TANF) program, which would encourage healthy, drug-free families instead of encouraging dependent behavior or on-going drug abuse." In other words, welfare would require a drug test. If you're a poor child, and your mother can't pass the test, or is afraid to try, no welfare. Back in the day, this sort of feel-good assault on welfare mothers would have passed with 112 votes. The Senate would have had to seat new senators to sufficiently demonstrate support for further toughening welfare requirements. This time, it was easily voted down, 18-79. The welfare wars have really lost their potency.

THE GREAT AMENDMENT HUNT: NO RECONCILIATION FOR CLIMATE CHANGE.

Everything I'm hearing suggests that amendment 735 , Mike Johanns effort "to prohibit the use of reconciliation in the Senate for climate change legislation involving a cap and trade system," will remain in the final legislation. It passed with 67 votes. More on reconciliation soon.

THE GREAT AMENDMENT HUNT: LEAVE COW FARTS ALOOOOOONE!

Reader Myrtle finds a gem from Wyoming's John Barasso. Amendment 765 demands that "climate change legislation decrease greenhouse gas emissions without regulating carbon dioxide, nitrogen oxide, water vapor, or methane emissions from biological processes associated with livestock production. In other words, stay away from cow farts. This isn't just quixotic. Livestock production is a major contributor to greenhouse gases. And the Cattle Network has identified the danger. Back in November, they were tripping out over the EPA's announcement that it was edging towards declaring carbon a pollutant. If that happens, they said: Title V of the Clean Air Act requires that any entity with the potential to emit more than 100 tons per year of a regulated pollutant must obtain a permit in order to continue to operate...[and] the vast majority of livestock operations would easily meet the 100 ton threshold and fall under regulation. In fact, USDA has stated that any operation with more than 25...

GREAT AMENDMENT HUNT CLARIFICATION.

I elided this earlier, but what the Senate passed last night were not binding amendments. They were, in general, instructions to conferees. Put simply, the Senate is building its budget. The House is building its budget. Eventually, representatives from both bodies will have to go to conference and make the two budgets the same. When that happens, a lot of extraneous elements from both budgets will be thrown out. For that reason, amendments passed during this phase act as suggestions to those conferees. Which doesn't mean they're not worth ferreting out: Every passed amendment is saying that this is what the budget should look like. It may be the case that Henry Waxman refuses to play along. Or it may be the case that their instructions are heeded by the conferees. So people should keep digging into the midnights amendments and posting their findings in comments.

SHOULD EMPLOYER-BASED HEALTH CARE BE TAX DEDUCTIBLE?

They say that an important fact needs a striking number. So here's a striking number: $1.7 trillion. That's what people on the Hill are telling me they think health care reform will cost over 10 years. It's a tremendous sum. Larger by far than anything the candidates admitted during the campaign. Larger by far than anything anyone has explained how to pay for. The public plan gets all the attention, and it's important. But if we can't pay for the underlying reform, there's nowhere to even put a public plan. Worryingly, even without sufficient financing on the table, there's a growing effort to take a major source of financing off the table. The big pot of money in health care reform is the employer tax exclusion. Right now, health care benefits that come through your employer are not taxable. That's a huge amount of lost revenue. Around $1.5 trillion over 10 years. It's also a particularly galling tax quirk. It distorts the health insurance market by routing it through your employer...

THE GREAT AMENDMENT HUNT OF 09.

Over Twitter, Ewstephe unearths a very weird amendment from last night. Roger Wicker submitted a change to the section of the budget that funds Amtrak. "None of amounts made available in the reserve fund authorized under this section may be used to provide financial assistance for the National Railroad Passenger Corporation (Amtrak) unless Amtrak passengers are allowed to securely transport firearms in their checked baggage." In other words, if I can't pack a rifle, Amtrak doesn't get funding. This was passed by the Senate in a voice vote. And that's just one of the hundreds of weird amendments passed last night. So join in the Great Amendment Hunt! Instructions here .

QUOTE OF THE DAY.

Stock Market guru Benjamin Graham : Mathematics is ordinarily considered as producing precise and dependable results; but in the stock market the more elaborate and abstruse the mathematics the more uncertain and speculative are the conclusions we draw there from. In forty-four years of Wall Street experience and study I have never seen dependable calculations made about common stock values, or related investment policies that went beyond simple arithmetic or the most elementary algebra. Whenever calculus is brought in, or higher algebra, you could take it as a warning that the operator was trying to substitute theory for experience, and usually also to give to speculation the deceptive guise of investment. He wrote that in 1959. Maybe if he'd had the good sense to write it in 2003, someone would have listened. Instead, he selfishly said a relevant thing long enough ago that modern, informed types were able to disregard his advice as dated. Jerk. As example: The formula that ate Wall...

AMATEUR CONGRESSIONAL OVERSIGHT!

A lot of weird stuff happens when the Senate opens for amendments to the budget. Take health care. This , for instance, is an amendment by Jim DeMint declaring it against Senate rules "to consider any bill, joint resolution, amendment, motion, or conference report that eliminates the ability of Americans to keep their health plan or their choice of doctor (as determined by the Congressional Budget Office)." This was an amendment by John Ensign to "prohibit the use of data obtained from comparative effectiveness research to deny coverage of items or services under Federal health care programs." If Medicare discovered a drug was ineffective, in other words, it couldn't stop covering it. The amendment failed, but just barely. Ben Nelson voted for it. As, bizarrely, did Russ Feingold. More worrying were the poison pills inserted to derail cap and trade. This is an amendment by John Thune to "require that [climate change] legislation does not increase electricity or gasoline prices." It...

YOUR WORLD IN CHARTS: EDUCATION INEQUALITY IS ECONOMIC INEQUALITY EDITION.

From a talk Peter Orszag recently gave to the Association of American Universities: The data comes from a paper by Claudia Goldin and Lawrence Katz. In the study, they examine what they call "the race between education and technology." From 1915 to 1980, they say, educational attainment outpaced technological change. As such, lower income groups made quick economic gains and the gap between the rich and the poor narrowed. "But a big reversal occurred around 1980." Educational attainment dropped. The pace of technological change quickened. The demand for more skilled workers, in other words, increased just as the supply of skilled workers was shrinking . As such, the relatively few skilled workers on the market commanded hefty wage premiums, and inequality widened. There's some significance, then, to Orszag's use of the data from this paper (in fact, a couple of his graphs use data from Goldin and Katz's series). Goldin and Katz conclude "that when it comes to changes in the wage...

GOT TO LEARN TO SHARE (LEGISLATIVE EDITION.)

The Lewin Group " Staff Working Paper " examining the feasibility of combining the Baucus health care proposal with Ron Wyden Healthy Americans Act is, on first glance, a bit puzzling. For those interested, the paper concludes that harmonization is, indeed, feasible. But that's not a particularly interesting result. It's like finding that you can change the plot of a book that hasn't been written yet. What's interesting about the paper, rather, is the political jockeying that birthed it. If you talk to supporters of the Wyden plan about the continued role for the Healthy Americans Act, they tend to emphasize a pretty simple point: They've actually got legislation . Their bill has been written and rewritten. They have spent years working with the Congressional Budget Office to get the budget hawk's seal of approval. They have brought the legislation before academics and interest groups, before politicians and business leaders. They have heard concerns and incorporated new features...

THE BASICS OF SECURITIZATION.

I try, when possible, to link to useful explanatory documents in the financial crisis. And this IMF two-pager on the basics of securitization is pretty clear. It doesn't do a very good job getting into the problems with the practice, but it's a very clear explanation of the mechanisms beneath it. In particular, watch how each step in the securitization process takes the holder of the security farther and farther from any actual knowledge about the underlying assets. They have formulas, and flawed information from the ratings agencies, but all they've actually got is a piece of a part of a tranche derived from an abstraction of the original holding. They have no concept of the reality underlying their investment. It's all trust that the analysis and repackaging conducted before their purchase was accurate. This graphic tells the basic story well, except that in real life, the process repeats many times, and there's often little to no direct contact left with the originator.

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