• A Who's Who of financial blogs.

• The myth of the 100 days.

• A family-friendly White House?

• Have you read some Keynes today?

• An economist vs. economics.

Give it up to Slate: Their parody Facebook feed of Obama's first 100 days is very funny. Meanwhile, in other First 100 Days commentary, Mark Schmitt is skeptical of the whole construct, but I love his conclusion:

But we should take a moment to respect the miracle that these 100 days happened at all. Consider what we have come through in the last 12 years or so of conservative dominance: a politicized impeachment, an election in which the actual winner did not become president, a staggering usurpation of executive power, a long war premised on lies, a partly successful effort at one-party control, the most systematic violation of civil liberties since the Red Scare, a disgraceful and systematic embrace of barbaric behavior at the highest levels of government.

Step back any distance, and you'd say we've gone through an electoral crisis, several iterations of constitutional crisis, and a crisis of legitimacy. And yet here we are, with the constitution and our electoral democracy intact, a new leader and a new majority, diligently and democratically trying to undo the damage and build a new future.

I haven't written much about the Chrysler bankruptcy because I've not been sure I understand it well enough t have an opinion. But this is about the clearest explanation I've found:

What the federal government is hoping for — in it's happiest-of-happy-thoughts scenarios — is a quick "surgical" bankruptcy of only 30-60 days with Fiat swooping in to pick up the pieces of a tarnished and broken Chrysler, helping them to right the company with an injection of $3.5 billion in DIP (Debtor-In-Possession) financing — a special form of financing provided for companies in financial distress or under Chapter 11 bankruptcy process that allows the company to operate as it sheds contracts. Then the Feds will give $4 billion in "exit financing." First to go will be legions of dealer contracts that will be shed like so much dead skin off a snake. The UAW has already agreed to certain cuts in their 1997 contract that should take care of their needs.

That relatively rosy scenario can be broken up at any time if one of the key stakeholders — a few bondholders for instance or one of the major Tier One suppliers — decide to stall the process out of a desire to get a better deal than the one being pushed by President Obama's auto task force and Treasury Dept...[U]nder the federal bankruptcy code, companies need only a majority of a creditor class - defined as two-thirds of the dollar amount of that class of debt, and more than 50 percent of the holders of that class - to agree to a reorganization's terms to foist that plan upon holdouts. That standard is lower than the almost complete acceptance usually required for an out-of-court debt restructuring to succeed.

Jon Cohn has further thoughts, detailing the hope that "the partnership with Fiat--and importing of Fiat technology--should allow [Chrysler] to ramp up production of smaller, fuel efficient vehicles. At least some of those cars will, by agreement, be built here in the U.S." The problem is he doesn't seem to think it a very sound theory. "This strategy can work only if the government finds ways to make the purchase of fuel efficient vehicles more attractive," he says.

So we're left in a place where the government has to both subsidize the company and subsidize consumers who buy the company's product. Which makes sense: Would you buy a Chrysler right now? Or even next year? Yeah, me neither. But since the company can't survive without demand, demand will have to be induced. All of which makes you wonder why we're going to such lengths to "save" the American auto industry. For awhile, I thought it was a fairly cheap jobs program. Stimulus for Michigan. But as Robert Reich argues, the companies are not acting as if the point of this is to preserve jobs. GM just slashed 21,000 positions "as a means of assuring the Treasury Department that the company is worthy of more bailout money." The companies, in other words, are acting as if the government is here to bail out the industry as opposed to the industry's workers. And if that's the case, then I probably end up with Tyler Cowen:

[T]here are some very efficient Toyota plants in the United States. That too is part of our domestic automobile industry and those plants employ a large number of American workers.

You might think that Toyota is different because it is a Japanese company rather than an American one. But in fact Toyota is a publicly traded company, as are most of the other major automobile makers. That means any American can, any time he or she wants, buy some Toyota shares and make Toyota more of an “American company” and less of a “Japanese company.”

Have you gone out and bought those shares? Maybe not. Maybe that means you don’t really care about whether Toyota is a Japanese or an American company.

Conversely, imagine that 10 years from now GM is a flourishing corporation. But not in America. Its reputation never really recovered here. Instead, it has found great success producing low-cost cars for emerging markets. China and India are both large buyers. Do you think GM will remember that it is "an American company" with a special moral obligations to American workers. Do you think they will continue to locate their production facilities in high-cost states?

Steve Pearlstein spent some time last week with Mayo Shattuck, the grinning fellow pictured above. Shattuck was a high-flying financial whiz kid who looked like a genius amidst the boom but who's been tagged as a fool since the crash. Shattuck, of course, has all manner of perfectly reasonable explanations for his company's poor fortunes. But the conclusion, then, isn't just that Shattuck is being unfairly pilloried now. It's also that he was disproportionately lauded then. Quoth Pearlstein:

Like many executives and directors on Wall Street, Mayo Shattuck ultimately defends his performance by noting that in business, as in life, bad things sometimes happen to good people. By the same logic, of course, good things sometimes happen to good people -- which those good people ought to remember the next time they confuse luck with skill and begin to believe they are worth $14 million a year.

Tom Laskawy is attending Princeton's "Feeding a Hot and Hungry Planet" conference. Fun stuff. But he must not be that engaged because he had time to send a couple IMs that suggested a truly disturbing ability to anticipate my interests:

Tom: i'm at an ag conf. at princeton listening to an official from the UN FAO. he had a tidbit i need to share with you.

90% of "enteric fermentation" GHG emissions are from BURPING.

cow farting is basically off the hook. i knew you'd want to be advised of this development

That basically means that the potent methane emissions from cows -- emissions that contribute quite a lot to climate change -- are the product of burps, not farts. Which makes them slightly less funny, and hopefully makes the political system slightly more capable of taking them seriously. And he's right. I am glad to be advised of this development.

By the way: You don't know how hard it was to resist attaching a puerile picture to this post.

The Politico reports that "Senate Budget Committee Chairman Kent Conrad predicted that the budget pressures will force action on a major overhaul of the current tax system by 2010 or 2011." You don't often hear that, so it's worth unpacking for a second.

Len Burman, Director of the Tax Policy Center, recently released a report that laid this thinking out well. There are, he argued, a handful of "action-forcing" events that are going to focus the political mind on the inane way we fund our government. The most important of these is the Alternative Minimum Tax. The AMT is a sort of parallel tax track that ensures the rich pay at least some taxes. It wipes out deductions and closes shelters. If you qualify, and it's more than your tax burden under the normal system, you pay it instead.

The problem is that it's not indexed to inflation. Every year, more and more taxpayers are exposed to it. And every year, Congress passes a temporary fix to extinguish the potential outcry. But if they every stop passing those fixes, the sudden transition in the tax system would be violent. Absent another change in the law, 55 million Americans will be paying the AMT by 2018.

The fix to that seems easy enough: Congress should just reform the AMT. But this is Congress. Nothing is ever easy enough.

The problem is that Congress builds the expected revenues from the AMT into each budget. As Berman says, "the fiction of the AMT as a revenue machine masks the size of our budget problems." This year, Obama's budget eliminated that fiction and removed the illusory revenues from the document. Kent Conrad put most of them back in. But you can only keep doing that for so long. And when the AMT is eventually rationalized, that money is going to have to be made up somewhere else. Which means a big tax increase. It's hard to see that happening outside comprehensive reform.

The Baby Boomers are another problem. In the 80s, when Reagan ran massive deficits, they still had their peak earning years before them. Tax revenues were going to see some natural increase. The current situation is the opposite: The Baby Boomers are retiring, and when they retire, sucking up health care. Rather than bailing us out, as they did under Reagan, they're going to drag us down, as they transition to Medicare and Social Security. That, again, will require tax increases.

But you can't get more taxes out of this system. Fundamentally, people simply don't trust it. They think the rich are cheating. They think the deductions are nuts. And they are, in the aggregate, right (more specifically, everyone thinks the deduction they don't use are the unfair ones). Berman notes that the income tax used to be considered the fairest levy. Now polls show that the public thinks it the least fair source of public revenue. You're not going to get anywhere asking people to give more to this tax system. You'll need something different. And so the combination of this tax system growing simultaneously fiscally insufficient and politically toxic may well create sufficient pressure for tax reform.

All that said, I'm not a huge fan of Berman's proposal, as it largely amounts to a tax wonk's view on health reform, and in doing, elides a lot of the politics of the health care issue. It doesn't seem workable to me. But I do think people should spend more time listening to Robert Frank's ideas for the tax code. The other thing about fixing the tax system is that there are some potentially massive benefits. A more efficient and clean structure could accelerate growth, encourage savings, and reduce things like carbon or obesity. It's one of the few areas where you could do a lot of good without spending a lot of money.

Just ran across an interesting study. In it, Ruby Siddiqui argues that it's cost effective to treat all symptomatic patients with antiviral medications, even given the fact that you'll inevitably waste some courses on patients who aren't infected. What isn't cost-effective is to try and test each case and then administer antivirals. it's one of those cases where it's less expensive to permit some waste of the resource than it is to tightly identify the affected population. Abstract here:

Many countries are stockpiling antiviral (AV) drugs in preparation for a possible influenza pandemic. This study investigated the cost-effectiveness of such a strategy and the role of near-patient testing in conserving AV stocks, using a decision-analytical model. Under base-case assumptions (which included a fixed stockpile size that was smaller than the clinical attack rate) treating all symptomatic patients ('Treat Only') would be considered cost-effective (approximately £1,900-£13,800 per QALY gained, depending on the mortality scenario) compared with 'Do Nothing'. The 'Test-Treat' option (testing all symptomatic patients but treating only those that tested positive) resulted in moderate gains in QALYs at relatively large additional costs. The cost-effectiveness of 'Treat Only' was very sensitive to AV efficacy in preventing deaths. The model was also moderately sensitive to the time delay to the next pandemic and the discount rate. Other parameters (such as efficacy against complications, or the overall clinical attack rate) were not important determinants of the cost-effectiveness of this strategy...Stockpiling sufficient antivirals to treat all clinical cases appears to be a cost-effective strategy, provided antivirals are effective at preventing deaths from pandemic influenza. Stockpiling near-patient tests is not cost-effective.

From his interview with David Leonhardt:

I just recently went through this. I mean, I’ve told this story, maybe not publicly, but when my grandmother got very ill during the campaign, she got cancer; it was determined to be terminal. And about two or three weeks after her diagnosis she fell, broke her hip. It was determined that she might have had a mild stroke, which is what had precipitated the fall.

So now she’s in the hospital, and the doctor says, Look, you’ve got about — maybe you have three months, maybe you have six months, maybe you have nine months to live. Because of the weakness of your heart, if you have an operation on your hip there are certain risks that — you know, your heart can’t take it. On the other hand, if you just sit there with your hip like this, you’re just going to waste away and your quality of life will be terrible.

And she elected to get the hip replacement and was fine for about two weeks after the hip replacement, and then suddenly just — you know, things fell apart.

I don’t know how much that hip replacement cost. I would have paid out of pocket for that hip replacement just because she’s my grandmother. Whether, sort of in the aggregate, society making those decisions to give my grandmother, or everybody else’s aging grandparents or parents, a hip replacement when they’re terminally ill is a sustainable model, is a very difficult question. If somebody told me that my grandmother couldn’t have a hip replacement and she had to lie there in misery in the waning days of her life — that would be pretty upsetting.

Not really sure what to say about this.

It did make me realize that one of my favorite things in life is hearing people painfully enunciate slang. Saying the word "swagga" is not the same as saying the corrupted version of the word "swagger."

It's true that the flu is, as of now, not especially deadly. Survival rates are quite high. That's a very good thing. And there's some evidence that this flu will prove mild. Possibly even more mild than a bad flu season. But it's not the end of the story. Influenzas mutate. The question is whether it mutates out of existence or towards lethality. "Towards lethality" becomes more likely if more people catch the flu and thus more mutations emerge. So being aggressive in stopping the spread of the largely non-lethal variant is important if we want to avert the development of a more lethal strain. It's not about stopping this flu. It's about stopping what this flu can become.

But if the flu isn't currently very lethal, it does appear to be extremely infectious. The reason is simple enough: It's a new strain of flu that human beings don't have resistance against. Not only can it spread very quickly, it is spreading very quickly. We've hit five on the World Health Organization's flu threat level. It only goes up to six. Six denotes a pandemic: The flu has spread to two or more WHO regions. And most experts expect we'll be there in days.

It's true that people shouldn't panic in the sense of stockpiling ammunition and duct taping windows. But this is a situation in which a short-term overreaction might be the best strategy. That would mean that people really curtail the sort of activities that abet the spread of infection: They cancel non-essential travel, bike rather than take the subway, wash their hands obsessively, etc. It's not crazy stuff. And unlike in financial crises or recessions, where cutting spending worsens the downturn, the sensible actions for fearful individuals will actually improve the probable outcomes.

But the fact of it is, if the response works, we'll never know if we overreacted. If the one person who would have been host to the wrong mutation doesn't get the flu, it will have been a successful effort. But there's no way to track that. And there will be costs: The global economy will further suffer. But not as much as it will if we get this wrong.

From his interview with David Leonhardt:

I have always said, though, that we should not overstate the degree to which consumers rather than doctors are going to be driving treatment, because, I just speak from my own experience, I’m a pretty-well-educated layperson when it comes to medical care; I know how to ask good questions of my doctor. But ultimately, he’s the guy with the medical degree. So, if he tells me, You know what, you’ve got such-and-such and you need to take such-and-such, I don’t go around arguing with him or go online to see if I can find a better opinion than his.

And so, in that sense, there’s always going to be an asymmetry of information between patient and provider. And part of what I think government can do effectively is to be an honest broker in assessing and evaluating treatment options. And certainly that’s true when it comes to Medicare and Medicaid, where the taxpayers are footing the bill and we have an obligation to get those costs under control.

Till now, I've been of the opinion that arguing in favor of raising revenue by taxing unwanted behaviors is little more than a quixotic argument. Good for a blog post, maybe, but nothing beyond that. Then I heard that the prospect of sin taxes was actually emerging in the administration's internal discussions. No decisions have been made, but I was surprised to learn that a soda tax had even been considered. If this NPR/Kaiser poll is correct, however, then the public is significantly more open to these approaches than I'd assumed:

Problematically, the poll question lumps a lot of different policies together. Paying for health care by taxing cigarettes is actually a common strategy. It's how we funded S-CHIP, for one. Taxing soda is rather further from the center of the consensus. But there's no evidence, in this poll at least, that the public instinctually recoils from the idea. Which is not to say that it'll happen soon. But given that it's already been proposed in New York and mentioned in Washington and polled by NPR, I'd say the odds are pretty good that it'll happen sooner or later.

From his interview with David Leonhardt:

THE PRESIDENT: What I think will change, what I think was an aberration, was a situation where corporate profits in the financial sector were such a heavy part of our overall profitability over the last decade. That I think will change. And so part of that has to do with the effects of regulation that will inhibit some of the massive leveraging and the massive risk-taking that had become so common.

Now, in some ways, I think it’s important to understand that some of that wealth was illusory in the first place.

So we won’t miss it?

THE PRESIDENT: We will miss it in the sense that as a consequence of 25-year-olds getting million-dollar bonuses, they were willing to pay $100 for a steak dinner and that waiter was getting the kinds of tips that would make a college professor envious. And so some of the dynamic of the financial sector will have some trickle-down effects, particularly in a place like Manhattan.

But I actually think that there was always an unsustainable feel about what had happened on Wall Street over the last 10, 15 years, and it’s not that different from the unsustainable nature of what was happening during the dot-com boom, where people in Silicon Valley could make enormous sums of money, even though what they were peddling never really had any signs it would ever make a profit.

That doesn’t mean, though, that Silicon Valley is still not a huge, critical, important part of our economy, and Wall Street will remain a big, important part of our economy, just as it was in the ’70s and the ’80s. It just won’t be half of our economy. And that means that more talent, more resources will be going to other sectors of the economy. And I actually think that’s healthy. We don’t want every single college grad with mathematical aptitude to become a derivatives trader. We want some of them to go into engineering, and we want some of them to be going into computer design.

Unsurprisingly, the United States Travel Association has issued a statement asking unnamed officials to "resist inflammatory comments on Swine Flu." Comments like this one, from the Vice President, mayhaps?

I would tell members of my family -- and I have -- I wouldn't go anywhere in confined places now. It's not that you're going to Mexico, it's that when one person sneezes it goes all the way through the aircraft. I would not be, at this point, if they had another way of transportation, suggesting they ride the subway. If you're out in the middle of a field and someone sneezes, that's one thing. If you're in a closed aircraft or a closed container, a closed car, a closed classroom, it's a different thing.

But here's the thing: Biden may be right to induce a bit of panic. The United States Travel Association won't think so. It's their profit stream on the line, after all. But epidemiologists are probably quietly relieved by the Vice President's comments.

Last night, I spent some time with Arin Dutta's "The Effectiveness of Policies to Control a Human Influenza Pandemic: A Literature Review." The overview was prepared for the World Bank. In it, Dutta argues that the key variable in determining the spread of an infection is the "base reproduction rate," defined as the number of secondary infections produced by a primary infection. In other words, if one person has the flu, then on average, the base reproduction rate measures how many people will catch the flu from him. Lowering that rate is the key to pandemic response. And lowering that rate requires things like "forcing or urging people to limit contacts, encouraging hand washing or other personal hygiene, or promoting the use of facemasks." Some of it sounds trivial. But it matters. If the reproduction rate falls beneath 1, "the epidemic usually dies out." But even small variations in the rate can have large impacts, as you see in this chart:

"R" is the reproduction rate. And a small increase in R -- from 1.1 to 2.4 -- triggers a 600 percent jump in the attack rate. That's the problem with flu pandemics. They're dependent on collective action. An individual who takes non-essential plane flights -- even to Mexico, cause tickets are now cheap, and really, what are the chances? -- is making a rational decision based on individual probabilities. But if everyone does that, then we're hurtling towards a full-blown pandemic.

Which is why the absolute best case is that Joe Biden did something that's so effective that he looks really stupid. If people actually reduce social contact and cut down on air travel and stay home in response to a single cough, then it's much likelier that swine flu will quickly die out. If it does, we'll all feel a bit foolish over having taken those precautions and late night comics will make fun of Joe Biden and everyone will move on. If we don't, and R jumps up, then we could be dealing with a full blown pandemic and Biden's warning will come to be seen as, if anything, insufficiently alarmist.

I don't think press conferences are terribly useful mediums. The assembled reporters haven't settled on a theory of what they're trying to accomplish. Some, like Ed Henry with his question on abortion, are looking to elicit a moment of spontaneous embarrassment or a flash of unexpected controversy. Some, like Andre Showell and his question on unemployment in black communities, try to air issues that don't normally command presidential attention. Some, like Jeff Zeleny and his request for Obama to recall a moment of "enchantment," want the flash of humanity that leavens the processions of policy details. Some, to paraphrase Armageddon Now, don't exhibit any method at all.

But it's all happening at once. Reporters choose from a dozen theories of questioning and a nearly infinite number of topics. You get the occasional moment of insight, but it's generally an accidental thing, akin to pulling a book from a wall and finding you've opened the Bat Cave. So though the transcript to the press conference is now floating around the interwebs, I'd urge you to read David Leonhardt's long interview with Obama instead. It does one thing, and choose a couple topics, and so you get an actual sense of Obama's thinking on a series of important issues. I'll be quoting a couple pieces from it as the day goes on, but its really worth reading in full.

Obama's digression into the meaning of bipartisanship last night was important for two reasons. The first was obvious: It's important to understand how the president defines the concept. And he was pretty clear. "I can't sort of define bipartisanship as simply being willing to accept certain theories of theirs that we tried for eight years and didn't work and the American people voted to change," he said. Rather, bipartisanship is "if I'm taking some of your ideas and giving you credit for good ideas." In other words, it's a process, not an outcome.

The second is that Obama had a specific example in mind. "I've said this to people like Mitch McConnell," he recalled. "I said, look, on health care reform, you may not agree with me that we should have a public plan. That may be philosophically just too much for you to swallow. On the other hand, there are some areas like reducing the costs of medical malpractice insurance where you do agree with me. If I'm taking some of your ideas and giving you credit for good ideas, the fact that you didn't get 100 percent can't be a reason every single time to oppose my position."

There's not much ambiguity there. Obama is implying that he thinks it illegitimate for Republicans to oppose health reform based solely on the existence of a public plan. Or, put the other way, he's suggesting that he genuinely believes the final bill should include a public plan and Republicans should learn to live with that. In Obama's preferred world, a bipartisan bill will have elements that some Republicans and some Democrats have trouble accepting. In the Republicans' preferred world, a bipartisan bill will be restricted to elements that neither Republicans nor Democrats have trouble accepting. It's a vision where cooperation drags legislation down to the lowest partisan denominator.

Since then, Barack Obama and Arlen Specter have both dropped hints that their conversations are considerably advanced on one issue in particular: Health care. At last night's press conference, Obama was asked about Specter's defection. He spent a couple minutes echoing Arlen on Arlen: He's not a rubber stamp, long and distinguished record, streak of independence, etc. But then Obama said something telling:

I do think that having Arlen Specter in the Dem Caucus will liberate him to cooperate on critical issues like health care, like infrastructure and job creation, areas where his inclination was to work with us but he was feeling pressure not to.

Arlen Specter has had a tough few years. In 2005, he was diagnosed with an advanced form of Hodgkin's lymphoma. Chemotherapy took months. His hair fell out. His friend John Sununu shaved his own head in solidarity. But treatment was successful, or seemed so. In 2008, however, the cancer returned. His second round of treatment ended last July. It's been, in other words, a few years of the sort that leave you rather impressed with the importance of health care coverage. And that seems to have been Specter's takeaway. In his press conference yesterday, he ticked off his interests in this order: "I’ve been deeply involved in health care reform, and global warming, climate control, and immigration, and will continue to be so." A paragraph later, he said that "one matter that especially concerns me is medical research."

And it's not just rhetoric. When Specter helped broker the stimulus deal, he took a special interest in funding medical research. His centrality to the compromise was singularly responsible for $10 billion going to the National Institute of Health.

If you had told me three months ago that you could guarantee Specter's vote on health care reform, I'd have probably thought that enough to pass the bill. It's true, of course, that his vote probably had more cache when it came from a Republican. But a vote is a vote.

• Questions and answers on EFCA.

• A gross tomato that doesn't leak.

• Should we force health providers to work amidst a pandemic flu?

• Cost-effectiveness of anti-retroviral stockpiles and near-patient testing for pandemic influenza.

• David Leonhardt interviews Barack Obama.

I'm with Ben Miller and Frank Bruni: Restaurants should charge for bread. As Bruni argues, there's no such thing as "free bread." Rather, there's such a thing as "slightly more expensive entrees." And that's the thing people are getting when they think they're getting free bread.

That might all be fine if the amount of bread people were receiving corresponded to the amount of people who would actually pay the marginal cost of a baguette and some butter. But that's almost certainly not the case. Things that are considered "free" are not treated rationally. A nice experimental demonstration of this was relayed in Dan Ariely's book Predictably Irrational: The Hidden Forces That Shape Our Decisions. A few years ago, Amazon introduced "Free!" Super Saver Shipping. The deal was simple: By $25 worth of merchandise, save $3.99 in shipping. Sales shot up worldwide as consumers bought a bit more merchandise to qualify for free shipping.

Except in France.

When Amazon investigated the anomaly, they found that their French division had not offered actually "free" shipping. They were charging a single franc. The equivalent of twenty cents. Amazon removed the minor charge and sales in France shot up to match the rest of the world. Twenty cents had almost destroyed the program.

Ariely conducted a similar experiment himself. He set up shop in a mall and offered shoppers one of two deals. Either they could have a free $10 certificate (which is to say, a free $10), or they could pay $7 for a $20 certificate (which is to say, a free $13). Literally everyone chose the first. But when Ariely made the $10 certificate cost a single dollar, two-thirds of the folks he stopped preferred to pay for the $20 certificate.

What does this have to do with bread? In short, people consume a lot more of something when they think it's free. Even attaching a marginal cost to the bread bowl -- a quarter, say, or a dollar -- would probably lead consumption to plummet. That would make everything else on the menu cheaper and, incidentally, make dining out a bit healthier as people wouldn't overconsume bread. It's not just that the bread eaters are being subsidized by the bread refuseniks right now. It's that everyone is wired to eat more of the bread because they think they're getting something free.

The Finance Committee is going to be releasing a series of three documents on health policy options. One will deal with delivery system reform, another will cover financing, and the third will detail mechanisms for coverage expansion. Yesterday, the Committee released the delivery reform options, and put them up for download here. This is the piece of the puzzle that attracts the least attention, but in some ways, might be the most important. Delivery system reform is where you can really save money through things like comparative effectiveness data or changing the payment structure. It's where you can really improve the quality of the care that the insured get, as opposed to just increasing subsidies for the uninsured. Which is all to say, it's worth a read.

The traditional response to this is that it's more important for the administration to cultivate David Brooks than EJ Dionne. EJ will praise them regardless of any outreach. He, after all, fundamentally supports with their agenda. Not so Brooks. But the counterargument to this is nicely articulated by Matt:

The appeal of a pundit outreach strategy focused primarily on the “reasonable right” is not lost on me—absent the outreach, it’s overwhelmingly likely that Brooks’ columns would be much harsher, whereas progressives who like most of Obama’s administration on the merits are likely to be nice anyway. But I do think it’s a bit shortsighted. I first thought about this when during the campaign Obama tried to assuage Jewish voters’ fears by courting Jeffrey Goldberg rather than by using one of the many, many, many progressive Jews in the punditry game. On the one hand, it’s arguably more effective to have the kind of guy who writes bogus stories about Iraq/al-Qaeda links in your corner than it would be to have a progressive Jew.

But the danger here is that while this sort of thing may work in the short-run, in the long-run one impact of this sort of courtship is to entrench Goldberg as the arbiter of what kinds of political opinions are kosher. And at the end of the day, a progressive politician is going to be better-off having progressive Jews in the position to define that.

Similarly with Brooks. The coverage Brooks has given Obama thus far has, I think, been on net helpful to the administration. But at the moment Obama’s riding high. His approval rating is in the sixties, his opponents are acting like idiots, and he’s no wracked by any kind of scandals. That sort of situation isn’t going to hold up forever. Any administration features some dark days sooner or later. And when those days come, the people in the media who’ll still stick with you are the people who really care about the substantive agenda. So for the long run, it’s useful to raise the stature of the kind of media figures who are going to be helpful for the long run. Brooks is a good conservative columnist, well-worth reading. But he really is a conservative columnist. And so elevating him as the columnist is ultimately going to be self-defeating.

Which is all to say there's a tradeoff. When the president's chief political adviser spends a night extolling the virtues of a conservative columnist, that makes the conservative columnist both friendlier to the administration but also more important as a media figure. David Brooks is made more influential by the fact that everyone has to go read David Brooks when the administration releases a new policy initiative because he's the the columnist who can best convey the administration's thinking. Eventually, that friendliness may lapse. But the expanded influence won't. And Brooks will be a more credible critic for having been a cherished ally.

I think this result, from the Pew Research Center, should actually concern supporters of cap and trade:

One of the quirks of the elite political debate is that it tends to occur in dense cities with extremely impressive transportation infrastructures. DC. New York. Places where cars are more of a luxury item. But that, as the graph shows, is not how most Americans think of them. Car stereos are a luxury. Cars are a necessity. They're ranked as more important than a phone, a computer, or an air conditioning system.

That's not to say that the attachment between suburbanites and their Camrys is forgotten in the political conversation, but it doesn't, in my experience, inform the conversation as viscerally as some might expect. I fear that an Orange County commuter is car-dependent in a way a New Yorker has trouble fathoming, and thus correcting for, when they're thinking about how to sell a bill. The theory right now is that some sort of rebate system could actually make cap and trade an economic boon to the working class, if not the commuter. But loss aversion being what it is, I find it hard to imagine that the promise of a tax rebate they've never gotten before will overwhelm fears that they'll pay more money at the gas station they visit every week. One just seems more tangible than the other.

The GDP numbers today verged on the obscene: January, February, and March saw a 6.1 percent contraction in gross domestic product. That's the worst reading in since the 1950s, and significantly more dire than than the 4.7 percent predicted by economists. The chart above comes from the fine folks at the Economic Policy Institute and compares the numbers from this recession with the averages from past recessions since World War II. The takeaway is predictable: We're worse off.

Justin Fox, however, sees a silver lining:

In fact, the sharp decline in private inventories that accounted for 2.79 percentage points (almost half) of the GDP decline is actually extremely good news, because it means businesses may have already made most the inventory adjustment that's a part of every recession—clearing the way for an upturn.

Kathleen Sebelius mustered 65 votes in the Senate yesterday. That's something of a victory for Anti-abortion zealots managed to muster fairly -- though not totally -- united opposition among Republicans. Matt Yglesias looks at this and says, "if you can only get 65 votes for what should be an uncontroversial HHS appointment, then the odds of a broad bipartisan coalition for big picture health care reform are not so good."

I think that's right. On the other hand, you don't need a broad bipartisan coalition. You only need a small bipartisan coalition. Or, if you could achieve full Democratic unity, no bipartisan coalition at all. The point of the bill is passing it, not passing it pretty. That, at the end of the day, is why the administration insisted on including the reconciliation process. Ramming the bill through with 50 votes isn't the most elegant way to pass health care reform. But it's better, they seem to have decided, than not passing health care reform. The voters aren't big on awarding style points.

I'd also suggest that the Sebelius vote is more akin to a farm subsidy vote than a piece of major social policy legislation. So long as Sebelius is confirmed, the actual vote total is only of interest to the anti-abortion groups who are trying to show symbolic opposition to her record. As such, voting against Sebelius had no consequences for Republicans. Voting for Sebelius did. That might have changed had they held the votes to actually doom her nomination. But insofar as they didn't have that power, casting irresponsible votes is one of the few delights afforded to powerless minorities. You wouldn't want to take that away from them, would you?

More analogous, I'd suggest, is the budget vote. And the budget just passed with the House with exactly zero Republican votes. More important than whether Republicans will vote for health care is whether Democrats wrongly imagine that they'll vote for health care. The real danger was that promises of Republican cooperation would lead to a Democratic strategy predicated on substantial Republican votes. That didn't happen. Instead, Democrats are assuming the absence of significant Republican support and moving ahead on a strategy that leaves space for them at the table but can succeed even if they never enter the room.

The outbreak of swine flu should be renamed "Mexican" influenza in deference to Muslim and Jewish sensitivities over pork, said an Israeli health official Monday.

Deputy Health Minister Yakov Litzman said the reference to pigs is offensive to both religions and "we should call this Mexican flu and not swine flu," he told a news conference at a hospital in central Israel.

Both Judaism and Islam consider pigs unclean and forbid the eating of pork products.

Yakov Litzman is a member of the United Torah Judaism party -- which is in turn the unlikely alliance of two ultra-orthodox parties. Litzman's original affiliation is with Agudat Israel, a party that takes policy instruction from the Hasidic rebbes of Ger, Vizhnitz, Boston and Sadigura, and from the Belz rebbe. But because of the vagaries of coalition politics, he's been made the deputy health minister. That probably seemed a safe place where he could be ignored for a few years. And then a possible pandemic emerged. Now Israel's health ministry is stuck with an extremist who doesn't like saying the name of the flu.

Via Dave Noon.

This is a novel response to the concern that the GOP has become an exclusively southern party:

DeMint says he isn’t worried. He denied that the GOP has become a southern party, attributing Republican losses in the northeast to some northern voters who have left the region and moved south hoping to avoid labor unions and “forced unionization.” He said Americans will eventually come back into the Republican fold because of growing alarm about the size of government and President Obama’s fiscal policies.

Update: Turns out Jim DeMint isn't quite that crazy. CNN's Political Ticker blog unfairly paraphrased the quote. Kevin Drum has the actual transcript, and DeMint is saying something more along the lines of heavy union density is pushing Pennsylvania in a more liberal direction, which is a fairly banal argument.

But due to the rules of the Senate GOP, Grassley is termed out as the ranking member of Finance in 2010. So there's some question as to what he'll do next. And Arlen Specter's defection potentially answers it. With Specter gone, Grassley could become the ranking member the Senate Judiciary Committee, a spot he's admitted that he covets but hasn't pursued "out of respect for Specter." With Specter gone, he could take it immediately, and hold it for years to come. But it would mean giving up Finance before his 2010 deadline.

Another option is for him to wait until become ranking member on the Budget Committee when Judd Gregg retires. That would be a seamless transition from Finance: He'd make the move in 2010. “From my heart," Grassley has said, "I’d rather have Judiciary than Budget.” But getting Judiciary would mean giving up Finance to Orrin Hatch. Grassley wouldn't lose his seat but he would lose a lot of his power and relevance, and FInance has just about never been as relevant as it is right now.

Speaking of SSRN, I just stumbled across "Fuck," a paper by Ohio State Law Professor Chris Fairman, which "explores the legal implications of the word fuck." The abstract:

This Article is as simple and provocative as its title suggests: it explores the legal implications of the word fuck. The intersection of the word fuck and the law is examined in four major areas: First Amendment, broadcast regulation, sexual harassment, and education. The legal implications from the use of fuck vary greatly with the context. To fully understand the legal power of fuck, the nonlegal sources of its power are tapped. Drawing upon the research of etymologists, linguists, lexicographers, psychoanalysts, and other social scientists, the visceral reaction to fuck can be explained by cultural taboo. Fuck is a taboo word. The taboo is so strong that it compels many to engage in self-censorship. This process of silence then enables small segments of the population to manipulate our rights under the guise of reflecting a greater community. Taboo is then institutionalized through law, yet at the same time is in tension with other identifiable legal rights. Understanding this relationship between law and taboo ultimately yields fuck jurisprudence.

John Sides notes that the Social Science Research Network -- one of the web's leading repositories of academic papers -- has started a blog. But it's not a very good blog. It's seen three posts in two weeks. And my hunch is that's partially due to a poor mission statement. "The SSRN Blog will not be a broadcast vehicle," they promise. "We want to engage you in an ongoing conversation."

No! Lots of people are willing to engage me in an ongoing conversation. The world has, if anything, an abundance of ongoing conversation. Conversely, it has a decided scarcity of useful research papers, or at least people willing to point me, and others, to useful research papers. According to the statistics on SSRN's sidebar, the site has received 23,315 papers in the past six months. That's around 130 papers a day. That's a lot of graphs I could be using for this site. And you don't know how the knowledge of missed graphs pains me.

What all us folks having ongoing conversations need, more than anything, is a broadcast vehicle to help us find the best of those papers. We don't need "posts [that] will explore and share our perspective on issues such as Open Access, new publishing models and directions for scholarly research, and the technologies that affect us all." Specialize! We'll do the ongoing conversation. You help us find papers so that conversation is less uninformed and we'll download them so your site is more popular and more academics funnel their papers in your direction. Win-win!

I don't want to agree with Tyler Cowen on the politics of torture prosecutions, but I think I actually do:

I believe that a full investigation would lead the U.S. public to, ultimately, side with torture, side with the torturers, and side against the prosecutors. That's why we can't proceed and Obama probably understands that. If another attack happened this would be all the more true.

There are two counterarguments to this. One is the legal point eloquently offered by Glenn Greenwald, who simply says, "the notion that the law can and should be ignored whenever we think doing so would produce good results or would constitute good policy was the engine that drove Bush lawlessness."

Then there's the more instrumental counterargument. Prosecutions impact individual incentives rather than simply political incentives. Obama has won the argument only so long as he remains in office. A win at the polls is not a durable victory. It can be obviated by someone else winning at the polls. But there might be more rank-and-file resistance to torture, however, if future CIA agents looked back and realized that they could be vulnerable to prosecution once the politics changed. Safety in the moment would not imply safety across time periods. And you'd really only need one high-profile, successful prosecution to show that.

Specter was similarly nostalgic. "We have talked over every problem under the sun and under the moon," he agreed. "We’ve ridden that train together again and again, and we’ve supported that train."

It all sounds pretty sexy. Barack Obama, as is his tendency, was more measured. His remarks were mainly a warning to Joe Sestak and the other Democrats who are considering challenging Specter in the primary. "Let me start off by just saying I’m thrilled to have Arlen in the Democratic caucus," said Obama. "I have told him that he will have my full support in the Democratic primary. Joe Biden has said the same thing. We are confident that Arlen Specter is going to get a 6th term in the Senate and the American people are going to be better off for it."

Maybe. There's one argument that the optimal outcome for Democrats is for Arlen Specter to fear, and then to lose, a primary challenge from a Pennsylvania Democrat with more grassroots support. In that world, Specter has an incentive to vote as a liberal until the primary and, after the election, he can be replaced with an actual liberal who will vote that way out of conviction. The counterargument is that if Specter is defeated in the coming primary, it will deter other vulnerable Republicans from following in his footsteps.

Either way, Obama ended the presser by fondly recalling those long hours Joe Biden spent with Arlen Specter on the Amtrak. "I’m grateful that [Arlen] is here," said Obama. "And I’m also grateful that Joe Biden paid him a little attention on the train."

Full press conference transcript after the jump.

THE PRESIDENT: Good morning, everybody.

THE VICE PRESIDENT: Mr. President, as we used to say in the Senate, I hope you’ll excuse a point of personal privilege here. I -- Arlen Specter has been my friend and my confidant and my partner, and I his partner, in scores and scores of major, major pieces of legislation and issues for a long time. And beyond that, Mr. President, he’s been there for me every time things have been tough for me, and I hope I have been there for him.

And it gives me great pleasure, great pleasure, Mr. President, to now officially be in the same caucus with Arlen Specter. We’ve ridden the train for so many years, we’ve visited each other’s homes, our families, that it is -- it’s just, as, again, a point of personal privilege, it’s just a delight to have no separation.

Mr. President, I’m even more pleased that Arlen’s independence, integrity and piercing intellect will now be sitting in a Democratic caucus. I think it will be a real added value. Anyone who thinks that Arlen is going to cash in his independence politically has another thing coming, but I think our caucus and our party will be better for it, and as a consequence, I think we’ll be able to serve the country even better than we have.

And the people of Pennsylvania are going to continue to benefit from his fierce -- and I emphasize and I need not tell you, Mr. President -- his fierce commitment to the people of Pennsylvania and to this country.

So, Mr. President, I am pleased to introduce a man of immense personal courage and unmatched integrity, my friend, Arlen Specter.

SENATOR SPECTER: Thank you.

Thank you, Mr. Vice President, and thank you, Mr. President, for your support and encouragement.

I was unwilling to subject my 29-year record in the United States Senate to the Pennsylvania Republican primary electorate, but I am pleased to run in the primary on the Democratic ticket and am ready, willing and anxious to take on all comers in a general election.

I have not represented the Republican Party; I have represented the people of Pennsylvania. And I will continue to do just that. As I said yesterday, I will not be an automatic 60th vote. There have been positions, which I talked about yesterday and will not re-enumerate, where I stand in a different position from the traditional position of the Democrats, and I will continue that independence.

I do think, Mr. President, that I can be of assistance. You have projected an administration that I feel very comfortable with. I felt comfortable, frankly, in talking to my Republican colleagues yesterday, which I did, to have them hear from me personally what my thinking was and my reasons for what I was undertaking to do. And that wasn’t an easy conversation, but I felt comfortable with it.

And I think I can be of assistance to you, Mr. President, in my views on centrist government. There are a lot of big issues which we’re tackling now that I’ve been deeply involved in -- issues which go beyond my own personal interests. And I do want to serve in a sixth term; I make no bones about that. But I’ve been deeply involved in health care reform, and global warming, climate control, and immigration, and will continue to be so. And I am mindful of the deficit and the national debt as we balance a lot of competing interests.

One matter that especially concerns me is medical research. I think it is scandalous that we have not done more to harness the scientific know-how in America, with the gross national product we have, to do more to cure the maladies of the world. And I’ve taken the lead with Senator Tom Harkin on a bipartisan basis in increasing NIH funding, and I think that has saved or prolonged lives, including mine. And that’s a big reason why I’m so anxious to stay in the Senate and carry that work forward.

But most of all, I’m appreciative of what Senator Biden has said. We have talked over every problem under the sun and under the moon. We’ve ridden that train together again and again, and we’ve supported that train. We’ve helped finance it. And I appreciate what you have in the stimulus package, Mr. President.

When I talked to the President yesterday, I said, I haven’t seen you in the elevator lately. His office used to be right down the hall from mine on the 7th floor of the Hart Building, and he hadn’t come back lately, so I said I was calling him up just to -- just to chit-chat. And I got to know the President to some extent in the Senate -- I talked to him already, but that’s -- Joe taught me how to do that.

Just one personal comment. The President approached me when he was Senator Obama, before the Democratic primary. And he said, “Tell me, Arlen, if a Jewish kid from Kansas can carry Pennsylvania, how can a black kid from Kansas carry Pennsylvania?” And I gave him some advice, and he became -- (laughter) -- he became President of the United States of America.

THE PRESIDENT: That’s how it worked. Thank you so much, Arlen. Thank you.

Well, let me start off by just saying I’m thrilled to have Arlen in the Democratic caucus. I have told him that he will have my full support in the Democratic primary. Joe Biden has said the same thing. We are confident that Arlen Specter is going to get a 6th term in the Senate and the American people are going to be better off for it.

I’d like to say a few more things about Arlen, but before I do, I’d like to briefly address the ongoing challenge posed by the H1N1 flu virus.

We are closely and continuously monitoring the emerging cases of this virus throughout the United States. Overnight we also received confirmation that an infant in Texas has died as a result of this virus. And my thoughts and prayers and deepest condolences go out to the family, as well as those who are ill and recovering from this flu.

This is obviously a serious situation -- serious enough to take the utmost precautions. Secretary Napolitano, Secretary Sebelius and our entire team are in close contact with state and local authorities around the nation. But I would also urge health agencies in local communities to be vigilant about identifying suspected cases of this virus in your areas and reporting them to the appropriate state and federal authorities in a timely way. We need your assistance.

It’s also the recommendation of our public health officials that schools with confirmed or suspected cases of H1N1 should strongly consider temporarily closing so that we can be as safe as possible. If the situation becomes more serious and we have to take more extensive steps, then parents should also think about contingencies if schools in their areas do temporarily shut down, figuring out and planning what their child care situation would be.

If we ended up having a school closure, a child was sick, just sending a child from the school to a day care center is not a good solution. So we would have to think through, and each parent, I think, would have to think through what options would be available to them in the event that this became more serious.

Yesterday, I also requested from Congress an immediate $1.5 billion in emergency funding. This funding will ensure that we have adequate supplies of vaccines and the equipment to handle a potential outbreak. It will ensure that these vaccines and equipment get to where they need to go around the country. And it will provide for sufficient planning and preparation at the state and local levels.

Every American should know that the federal government is prepared to do whatever is necessary to control the impact of this virus. But there are also steps that Americans can take individually. They’re the same steps that you would take to prevent any other flu: Keep your hands washed, cover your mouth when you cough, stay home from work if you are sick, keep your children home from school if they are sick.

I’ll continue to get constant updates on the situation from the responsible agencies, and we will continue to offer regular updates to the American people about the steps they need to take and the steps that we are taking. And I can assure you that we will be vigilant in monitoring the progress of this flu, and I will make every judgment based on the best science available.

Now, part of the reason we have such an outstanding array of scientists and researchers is because of the tireless efforts of the gentleman standing to my right. Having courageously battled multiple life-threatening diseases of his own -- and let me tell you, Arlen Specter is one tough hombre -- he has become a champion for public health in this country.

He’s most recently responsible for the increase in funding for the National Institutes of Health so that it can continue to discover the cures and treatments that will save countless lives.

And that brings me to why we’re here today. Today I have the honor of standing next to the newest Democrat from the state of Pennsylvania. I know the decision Senator Specter made yesterday wasn’t easy. It required long and careful consideration, and it required courage. But I know that it also reflects an independence that has been the hallmark of Arlen Specter’s career since the days he arrived in Washington. He has never been in the Senate to fight for any particular party, but rather for the men and women of Pennsylvania who sent him here.

This is also why I don’t expect that Senator Specter will agree with every decision I make and support every single one of those policies. I don’t accept -- I don’t expect Arlen to be a rubber stamp. I don’t expect any member of Congress to be a rubber stamp. In fact, I’d like to think that Arlen’s decision reflects a recognition that this administration is open to many different ideas and many different points of view; that we seek cooperation and common ground; and that in these 100 days we’ve begun to move this nation in the right direction.

As I told Senator Specter yesterday, he has my full support, my full commitment to work with him on those areas where we do agree -- areas like health care, education, expanding America’s manufacturing base, and medical research. I look forward to working with the Senator on these and other issues in the coming weeks and months. I’m eager to receive his counsel and advice, especially when he disagrees. And I have great respect and admiration for the decision that he has made.

Senator Specter often tells the story about his father, Harry Specter, who came to this country from Russia nearly a century ago. He fought in World War I and was seriously wounded in action. Later, he became one of the thousands of veterans who never received the bonus that our government promised in return for the brave service that they had rendered to our nation. Many of these veterans would later march on Washington because of that broken promise, and some were shot at by their own government because they were voicing dissent.

Arlen Specter has said that his career in public service has been one long journey to get his father’s bonus. And until he does, he plans to keep on running. It’s a metaphor that’s particularly apt today as he begins the next chapter in his proud effort to fight for all those men and women who need and deserve a voice in Washington.

And so I’m grateful that he is here. And I’m also grateful that Joe Biden paid him a little attention on the train. (Laughter.) Thank you much, everybody.

Gail Collins:

Everybody knows, of course, that even when Al Franken finally makes it to Washington, getting all 60 Democrats-and-fellow-travelers to vote together on something will be like herding … something really impossible. Not cats. Cats I could envision all going in one direction if there was a little herring-flavored incentive at the end of the line. Herding rabid guinea pigs in a thunderstorm, maybe.

• When should people get married?

• A 419 e-mail scam.

• Think Tank Round-Up.

• What Pierre Bordieu explains about Tim Geithner.

• The odd union of Gay and Nan Talese.

HARWOOD: One of your jobs as chief of staff is to help the president figure out when you can declare victory on an issue, even if you don't get everything you want. Two particulars: Can you have a successful outcome on health care if you have not dramatically expanded coverage, if you have a piece of legislation that focuses on cost reduction? And can you have a successful and transformative energy policy without putting a price or limit on carbon emissions?

Mr. EMANUEL: Well, the way I'm going to answer that, John, is to go back with what the president said when we were passing the Recovery Act: Don't make perfect the enemy of the essential. And he said that in the Recovery Act, and key moments in the negotiation he made that clear in the--when we were negotiating this budget I think we're on the doorstep of passing, which will be, I note for you, as a blue--economic blueprint, will have happened in record time with record vote.

That said, he has--his principles are very clear. On health care, controlling costs, so you don't have health care costs accelerating at three times, on average, inflation. On energy, weaning ourselves not only from independence on foreign oil, but most of all, if we do the energy policy right it will be the greatest job growth we'll see in our country in a long time. His goals are clear. He's willing to explore different roads to get to those ends.

It's worth noting that Emanuel answers in a way that doesn't commit the administration to coverage expansion or carbon pricing. You don't, of course, want to read too much into a single answer in a single interview. Coverage expansion has certainly been named as a goal in Obama's health reform and carbon pricing is the explicit point of one of his major policy initiatives. But nor is Emanuel a traditionally careless speaker. Quite the opposite, actually.

But it's not just that: One of the themes in Robert Pear's article is the tension between primary care doctors and specialists. It's widely understood that primary care docs are undercompensated. It's also pretty well understood that our system is too heavily oriented towards specialty care, with all its attendant costs and incentives. And it's also pretty well understood that the deficit is looking increasingly impressive. So the idea in some circles is to boost Medicare payments for primary care doctors by cutting money from specialist reimbursement. It's a good idea! It does three things that need to be done: Increases primary care payments, specialty medicine less attractive as compared to primary care, and does it all in a deficit-neutral fashion. But it's not, as you might imagine, a particular popular idea in the specialty community.

Igor Volsky:

So what does all of this mean for health care reform and the recent debate over reconciliation? Democrats now have 60 votes (assuming that Al Franken is seated) to pass health care reform and some pundits may argue that reconciliation is no longer necessary. But this view overestimates the unity of the Democratic party. Blue-dog moderates like Sens. Evan Bayh (D-IN) and Ben Nelson (D-NE) are unlikely to support the price tag of comprehensive health care reform ($1.3 trillion over 10 years) or legislation that undermines the monopoly of private insurers. For this reason, reconciliation forces Republicans and Blue Dog Democrats to compromise with the liberal majority, not the other way around.

Right now, you hear more about votes than public opinion because there's no plan for the public to have an opinion on. Soon, that'll change, and a lot of the energy that's now going into changing the minds of legislators will go into changing the public's mind on the legislation. People forget this, but in 1994, Clinton's plan never came to a vote. It was too unpopular. My sense in this fight is that if the plan is popular enough to be a safe vote for 50 Democrats, then the numbers are such that it's likely to be a safe vote for 60 Democrats and a handful of Republicans, too. But if it's unpopular enough that you can't get any Republicans or full Democratic unity, you're not likely to survive the reconciliation process.

An informed reader writes in.

Ezra,

A few quick notes on your housing market post. I’m in the affordable housing realm—mostly rental, occasionally ownership-- so I’d like to think I know something.

1.) This isn’t as crazy as it sounds. A lot of developers of large projects will offer their own financing or partner with a specific lender for the first units in the building. A solid developer should’ve included this in their budget. If they’re creditworthy enough to have access to construction financing, they should be creditworthy enough to afford origination costs and servicing of the mortgages in the short term. Once the building fills up, they’ll probably sell the mortgages off to a secondary market buyer.

2.) This is a way of keeping the developer honest. If I were on the banking side of the equation, and my odds of being paid back are affected by the ability of 70 other unit owners to pay their mortgage and condo fees, I would want the developer to have some concern about the creditworthiness of their buyers.

3.) I think this says more about where banks think the condo market is going than anything else. If they won’t finance loans for buildings under 70% occupied, it means they have serious questions about the absorption rate for units. Further, to qualify for prime rates, a new buyer needs 25% down these days. This suggests that bank’s estimates for future housing prices aren’t so rosy, and might be worse than the Fed’s own worst case scenario.

I agree with all of that, and the final point is particularly important. The banks are not behaving as if they think we've turned a corner.

In general, when a politician leaves a party, you ask "why?" With Specter, the more rewarding question is "who?" In this case, there's an answer: Pat Toomey and the Club for Growth. Toomey is the conservative ex-congressmen mounting a primary challenge against Specter. The Club for Growth is the monomaniacally anti-tax organization that's funding it. And Specter's defection is the direct result of that effort. He said as much at his press conference. That is to say that Specter's defection is the direct result of the Republican tendency to challenge unreliable politicians. It's a strategy that Democrats have, at times, envied: As the argument goes, Republicans have more party unity because they have less tolerance for betrayal. And that's probably true. There were a lot more Democrats who voted for Bush's tax cuts than there were Republicans who voted for Obama's stimulus bill.

But in recent years, no Senate Democrats have switched parties, while at least two Republicans have done so, and many more (including John McCain) have reportedly thought about it. Democrats, conversely, didn't even lose Joe Lieberman. It's an approach that makes for less unity and more votes. That frustrates Democrats when they see Evan Bayh and Ben Nelson freelancing their way across the stage. But it tends to look better when a Jim Jeffords gives Democrats the majority or Arlen Specter gives them their 60th vote.

Over at Swampland, Karen Tumulty distinguishes a "filibuster-proof majority," which is what FDR had, from a Senate where one party or another controlled a theoretically filibuster-proof number of seats, which is what Carter had. Specter's defection, she suggests, is akin to FDR's situation rather than Carter's.

But I'm not sure that's right. FDR, after all, couldn't pass health care reform, and so didn't even try. The presence of the Dixiecrats led him to almost totally exempt African Americans from Social Security. His court-packing scheme was a flop. There is, in other words, no such thing as a majority that renders the president's agenda safe from congressional opposition. The simple fact that a majority could be filibuster-proof in general doesn't mean it is filibuster-proof on discrete pieces of legislation. The question, rather, is simply how much gets passed. FDR got a lot more passed than Carter. But it's a continuum. Arlen Specter's sudden admiration for progressive principles has not rendered single payer a likely outcome or given Obama a free hand to pursue a harsh carbon tax. Rather, it has turned a potential vote for Obama's priorities into a likely vote for Obama's priorities. That's an improvement, but it's not clear that it's a gamechanger.

The Financial Times has a good story today on a new twist in the mortgage market. Namely, banks have stopped offering mortgages in buildings that haven't already sold a sufficient quantity of units. In one case, a buyer with "stellar credit" and a 25 percent downpayment couldn't get a mortgage because the luxury development she wanted had only sold three of 46 units.

This is not, on the bank's part, a crazy argument: Developments that don't sell sufficient units have massive problems. The water stops working because the pipes freeze. The heating bill is unpayably high. The units fall into disrepair. The developer defaults and can no longer pay maintenance costs. Eventually, the residents who have bought homes walk away from their mortgages. For a pretty good look at this dark cycle, check out this "This American Life" episode.

But it becomes a chicken-and-egg problem. If you can't get mortgage financing to sell the first homes in a development, you can't sell the rest of the homes in a development, either. Some banks are insisting that they won't offer mortgages for developments where less than 70 percent of the units are sold. Worse, analysts say that 12,000 new units will be completed in New York before year's end, so it's not as if there's any shortage of unoccupied developments coming on market. But if the units can't be sold, then the developers will go bankrupt. And if the developers go bankrupt, the units will fall into disrepair and become less sellable. And if they're less sellable, then...

Kathleen Sebelius is expected to win a fairly easy confirmation today. Some Senators have spoken of delay, but few suggest there's any hope of marshaling a consequential number of "no" votes. And so we will have our Secretary of Health and Human Services. Max Baucus's glowing statement follows the jump:

Floor Statement of Senator Max Baucus (D-Mont.)

Regarding the Confirmation of Kathleen Sebelius To Be Secretary of HHS

Mr. President, the Senate confirmed the first member of President Obama’s cabinet more than three months ago. Today, we are here to finish the job.

It has taken some time to get here. But now we have a great nominee to be Secretary of Health and Human Services.

Today, we will vote to confirm the nomination of Governor Kathleen Sebelius to be Secretary of HHS. She is the right person for the job.

Governor Sebelius comes to us with a long list of qualifications. She is a true public servant. For more than six years, she has served as Governor of Kansas. For eight years, she served as the Kansas Insurance Commissioner. And for eight years before that, she served in the Kansas State Legislature.

Governor Sebelius has devoted a career to serving the public. She understands the legislative process. She understands the administrative process. And she has experience working with the private sector, too. Governor Sebelius has earned the respect of Republicans and Democrats alike.

Governor Sebelius knows a lot about health care. She is committed to protecting people and getting them the health care that they need. As Governor, she worked hard to make sure that Kansans — especially kids — had access to quality health insurance that they could afford. And as Insurance Commissioner, Governor Sebelius blocked a merger that would have made insurance unaffordable.

In addition to protecting consumers, Governor Sebelius also recognizes the need to bring businesses together to make our health care system work.

As Governor, she worked hard to make health care costs more manageable for businesses. And she worked to get more small businesses to offer health insurance coverage. Governor Sebelius doubled the small business tax credit.

Governor Sebelius’ record shows that she approaches problems from all sides. She is prepared to try creative solutions. She is forward-thinking. She’s willing to work with everyone. And she’s not afraid to lead — even when faced with difficult choices and resistance to change. That’s just the kind of leadership that we need in the Secretary of Health and Human Services.

Governor Sebelius has proven that she is willing to work hard. And it’s a good thing — because we have a lot of work to do.

Our health care system is broken. We spend more than any other country on health care — more than $2.4 trillion dollars annually — and we don’t even cover all Americans.

Forty-six million Americans lack health insurance, and another 25 million Americans are underinsured — they have some coverage but not enough to keep their medical bills manageable. That’s why medical debt contributes to half of all bankruptcies — affecting about two million people a year.

American families are struggling to keep up with the high costs of health care. And American businesses are straining to absorb these rising costs while trying to stay competitive at home and abroad.

The path that we are on is not sustainable. We must reform our health care system. And we must do it now. Failure to address problems in the health care system will undermine our efforts to restore the economy.

We need a health care system that meets all of our needs. A high-performing health care system would guarantee all Americans affordable, quality coverage no matter their age, health status, or medical history.

Health care reform will help to stabilize our economy. And it will make sure that we are prepared to handle our long-term fiscal challenges.

Congress has made a good start toward reform. But there’s still a long way to go.

Last year, we started the process by holding 10 different health reform hearings. We learned about the problems in our current system and started to develop solutions.

In June, along with my Colleague Chuck Grassley, I hosted a day-long health care summit for the Finance Committee. We engaged our Colleagues in the process early on. And in November, I released a white paper — A Call to Action — that outlined my vision for health care reform.

Since then, I’ve been working closely with Senator Grassley and the Senators on the Finance Committee. And I’ve been working with Senator Kennedy and the HELP Committee to come up with meaningful, comprehensive health reform legislation that we can pass this year.

Last week, the Finance Committee held the first of three roundtables. We discussed delivery system reform. And tomorrow, we’re walking through some policy options. In coming weeks, we’ll have two more roundtables and walk-throughs.

Senators will weigh the options. They will contribute to the process.

By June, we’ll be ready for a Finance Committee markup. We’re working together. We’re making good progress. But Congress cannot do this alone.

Congress needs a strong partner at HHS to pass comprehensive health reform. We’re developing a framework that will change how health care is delivered. But we need a first-class Secretary and team at HHS to help get reform off the ground.

I look forward to working with Governor Sebelius to make sure that our bill can be implemented. I want to make sure that we send the Secretary a product that sets the rules of the game. And I want to make sure that we also give the Department and agencies the flexibility that they will need to play their part effectively.

It will be a long and iterative process. And I’m pleased that we’ll be able to get started soon.

Governor Sebelius is the right person for the job. She has the political experience, determination, and bipartisan work ethic to get the job done. She’s been an Insurance Commissioner. And she knows the nuts and bolts of the health care system. She’s been a Governor, so she knows how to work with Democrats and Republicans.

I have no doubt that Governor Sebelius will continue to show her commitment to public service as Secretary of Health and Human Services. And the American people will benefit from her service.

Let us finish the job of confirming President Obama’s cabinet. Let us place a fine public servant in office. And let us confirm Governor Kathleen Sebelius to be Secretary of HHS

Pennsylvania Sen. Arlen Specter will switch his party affiliation from Republican to Democrat, according to sources informed on the decision.

Specter's decision would give Democrats a 60-seat, filibuster-proof majority in the Senate assuming Democrat Al Franken is eventually sworn in as the next Senator from Minnesota. (Former Sen. Norm Coleman is appealing Franken's victory in the state Supreme Court.)

Specter as a Democrat would also fundamentally alter the 2010 calculus in Pennsylvania as he was expected to face a difficult primary challenge next year from former Rep. Pat Toomey. The only announced Democrat in the race is former National Constitution Center head Joe Torsella although several other candidates are looking at the race.

The number 60 doesn't assure 60 votes on any particular priority, but it's a tremendous psychological advantage. It means that there are 60 votes with a baseline incentive to see a successful Democratic Party rather than an unsuccessful Democratic Party. There are 60 senators, in other words, who are free from the incentive structure of the minority. That doesn't guarantee legislative success, of course. The last time the majority party controlled both the executive branch and 60 seats in the Senate was 1975 to 1979, which is to say, under Carter, and that didn't work so well. But the Dixiecrats are gone, the committee chairmen are less powerful, and the relationship between the executive and the Congress is substantially less adversarial. This has the potential to really reshape the playing field.

One more thought: Like with Southern Democrats switching to become conservative Republicans, Northern Republicans often prove to be fairly liberal Democrats. Jim Jeffords is a good example of this. So once Specter actually comes on-board, he may be a much more reliable vote than someone like, say, Ben Nelson. And as a new Democrat in a blue state, Specter will be very safer if the Democratic base appreciates him than if they mistrust him.

Update: Specter's statement is here. Key quote:

Since my election in 1980, as part of the Reagan Big Tent, the Republican Party has moved far to the right. Last year, more than 200,000 Republicans in Pennsylvania changed their registration to become Democrats. I now find my political philosophy more in line with Democrats than Republicans.

Baseless speculation: Did Specter's decision to oppose the Employee Free Choice Act force his switch? He was sort of caught between a rock and a hard place. Pat Toomey was going to primary him on the right. In past years, that was fine, as he had tacit support from elements of the left, namely the unions. But since betraying them on EFCA, the unions were promising to make Specter their main target. So if he stayed in the Republican Party he would lose the base at the exact moment that Republicans had lost their capacity to talk to independents and that the most powerful of lefty interest groups was gearing up for a massive campaign against him. He was a many with no home. By joining the Democratic Party, he could effectively neuter the unions while gaining the whole of Pennsylvania's Democratic Party machine. But he only really needed to do that because of EFCA.

Thought the first: They blew through $100 million? Buh-buh-buh-buh-how? The magazine wasn't printed on gold leaf. It wasn't staffed by robots from the future. It didn't have a Mars bureau. My working assumption has been that the budget meetings went something like this:

But presumably that's not right. Or is it?

Thought the second: Someone should hire the extremely talented economics writer Ryan Avent. Quickly. before someone else hires the extremely talented economics writer Ryan Avent. That guy is an obvious growth stock.

According to The Financial Times, Mexico is thinking of "shutting down" the country's capital. The immediate next step, according to the mayor, will be to close the transportation network. Restaurants that can hold more than 50 people have been barred from opening for business. Factory shifts are going to stagger and slow so fewer people are crowded into one place at one time. You can imagine what's happened to tourism. The recession had already slowed Mexico's economy. Now swine flu is going to bring it to a stop. And if Mexico goes down, that of course has major ripple effects on other countries and markets. It's a bad scene.

Can we really prevent global warming? Or should we be thinking more about adaptation? Building coastal fortifications may be cheaper than halting the release of CO2.

Right now, the climate scientists feel that if all humans shut off carbon emissions today, it will still glide up by about 1 degree centigrade. In the business-as-usual scenarios, Nicholas Stern says there's a 50 percent chance we may go to 5 degrees centigrade. We know what the Earth was like 5 or 6 degrees centigrade colder. That was called the Ice Ages. Imagine a world 5 degrees warmer. The desert lines would be dramatically changed. The West is projected to be in drought conditions. And certain tipping points might be triggered. We can adapt to 1 or 2 degrees. More than that, there is no adaptation strategy.

This is all getting a little silly. From Dave Weigel's article on the efforts of pro-life Kansans to derail Kathleen Sebelius's nomination:

According to [David Gittrich, the long-serving state development director of Kansans for Life.], when Brownback turns his sights on the governor’s race he’ll gave to “reestablish his credentials as a pro-lifer” and explain his vote. “All the pro-life votes in the world don’t make up for supporting Kathleen Sebelius,” said Gittrich. “This is like saying, ‘I’m against the Holocaust and Nazi Germany but I’d like Hitler to be in charge of the health care center.’”

Charming. And this Washington Times editorial arguing against appointing Rosa Brooks as an adviser to the Undersecretary of Defense takes much the same tack:

President Obama is surrendering national security with a radical appointment at the Defense Department. Rosa Brooks, this month made adviser to Undersecretary of Defense for Policy Michelle Flournoy, will be in a position to do significant damage to U.S. security...Putting her in the policy shop "is like Lyndon Johnson making Jane Fonda a senior adviser on Vietnam," the former Pentagon adviser says.

It's true, of course, that various Obama-associated economists are interested in behavioral economics. Peter Orszag is famous for showing that graph on the power of changing the 401(k) default to opt-out rather than opt-in. Cass Sunstein wrote Nudge. But this is a young discipline. It's being popularized a whole lot faster than it's being filled out. Cutting edge behavioral economics couldn't do much more than change policy-making on the margins. There's no coherent "behavorial economics" vision for health reform or bank recapitalization. The example of a behaviorally informed policy that Foer and Scheiber offer, for instance, is a form of auto-enrollment in Medicare Part D called "intelligent assessment." It's a useful tweak that's responsive to the widely-reported complexity of choosing a drug plan. But it's a marginal one, and not the sort of thing that would require a behavioralist mindset.

Foer and Scheiber go on to attribute the Obama administration's unwillingness to nationalize the banks as evidence that "what the Obama administration has done these last few months is simply scale up the logic of nudging, albeit massively." But is that true? The Obama administration itself has said they doubt they have the capacity to nationalize the banks or the congressional support to authorize such a policy. Ben Bernanke has said he doesn't have the legal authority to do it. And plenty of administration sources have explained the Geithner plan as an effort to avoid returning to Congress for more funding.

The sad reality of the American political system is that it's fairly immune to anything so elegant as a particular economic theory. Even if Obama did have a coherent vision for the mechanics of his policies, it's not clear that Ben Nelson and Evan Bayh and Susan Collins would share that vision, and that would pretty much be that. And his administration knows it. The Obama administration, probably rightfully, has a very grim view of Congress's capacity to support inventive policymaking. But their theory of policymaking has been, also rightfully, that little happens without congressional support. And so they've oriented their policy proposals around ideas that have preexisting support in Congress rather than banking on the hope that the elegance of their new ideas will create support where it didn't initially exist.

But that's not behavioralism. That's Rahm Emanuelism.

• The First 100 Days...Of the McCain Administration?

• Was Tim Geithner a radical nationalizer?

• Shortage of doctors proves obstacle to Obama's goal.

• Republican spending cuts: An eerily prescient indicator of natural disaster?

• Reid to McConnell: "This is a seat for you at the table; we hope you take it."

Ben Smith has a nice catch today. Conservatives for Patient Rights -- the folks founded and funded by this guy -- released an ad quoting Canadian physician Brian Day on the horrors of socialized medicine. But an alert tipster sends the rest of the interview with Day. At about the four-minute mark, Days protests that he's not, under any circumstances, suggesting some "two-tiered, American-style medical care." He goes on to note that Germany, France, Switzerland, Austria and England "don't have queues in health care."

“I think this is what people tend to forget," he continues. "They equate alternatives to the Canadian health care system with ‘Americanization,’ which is not what we’re talking about. We’re talking about countries like Belgium, and Switzerland, and France, and Austria.”

It's telling that the American health care system plays much the same role in the Canadian discussion that the Canadian health care system plays in the American discussion.

I'm loathe to describe Larry Summers' in terms that suggest a shy and retiring personality, but it is the case that we've heard a lot less from him than from folks like, say, Tim Geithner. Last Friday, however, he gave a talk to the InterAmerican Development Bank outlining his take on the financial crisis (and he did it, as he said, in "the language of economics"). Simon Johnson summarizes.

One other point worth making on the marriage debate. In general, this conversation is conducted at a fairly elite level. When we talk about young couples choosing between furthering their education and careers and getting married and having children, we're generally talking about the minority of Americans who go to college or even travel beyond. But the tension between career and children is similarly sharp for lower-income folks. And it's often not a choice.

According to data collected by the National Survey on Family Growth, 30 percent of women have had an unplanned or mistimed birth. That number jumps to 51 percent for women beneath the poverty line. And among women with no high school diploma or GED, it's 61 percent. Once these women have a child, it's no longer a choice between the path that focuses on career and educational advancement and the path that focuses on family. Insofar as those roads branch off from each other, the choice is made. And long-term earning prospects suffer.

That, of course, is the more pressing reason to make parenthood less antagonistic towards career advancement. Those women don't have the luxury of "choosing" career any longer. Insofar as children crowd out career, career simply gets crowded out, and these mothers then have lower long-term earning prospects and the children, not incidentally, have lower standards of living. Reducing that crowd-out effect is, in other words, not just a policy for people choosing between parenthood and law school. It's also -- even mainly -- a policy for those who didn't realize they were making a choice, or didn't mean to make a choice, but are at risk of suffering the consequences of it anyway.

Regnerus gets at, but doesn't correctly articulate, a genuine problem: A person's 20s are a crowded decade with long-term implications. They're simultaneously the best period to start a career and to start a family. Regnerus isn't entirely wrong to bemoan the fact that marriage has been decisively shifted to the late-20s and early-30s, but he doesn't do a good job integrating his own evidence. It's accurate to say that there's a substitution effect as people prioritize education and career. Plenty of promising college relationships crash on the shoals of law school acceptance letters. But he doesn't get into why they do that, and he doesn't consider the counterfactual of what would happen if they stopped. One obvious example: There's a correlation in the data between young marriage and eventual divorce (see the graph below. Source.). A woman who sacrificed a career for an early marriage would be much worse off after an unexpected split.

Additionally, you actually can have children in your 30s. After 35, it gets harder, but it's doable. It's extremely hard, however, to begin building a career in your 30s. And it's even harder to begin building a career in your 30s with a six-year-old. Again, you're dealing with a tradeoff. Regnerus laments that early marriage is being traded away but he doesn't actually argue that the trade is irrational.

The interesting thinking on this subject, conversely, comes not in judging the trade, but rendering it less necessary. There are times, as Michelle Goldberg has argued, that liberal social policy is the only life raft available to traditionalists. Asserting that women shouldn't choose career over commitment is, to put it lightly, not working. But there are a variety of policy interventions that would make it less necessary for couples to choose career over commitment. For instance: Child care, paid maternity leave, early childhood education, career training, educational help, flextime policies. The question is not how to change the choice couples make. it's how to reduce the need for that choice.

This is one of those issues where you could imagine a pretty fertile compromise between traditionalists and liberals. Both would presumably want similar policies, albeit with different expected outcomes. But so far as I know, there's fairly little intersection between the two camps. The traditionalists seem more interested in scolding women than in changing outcomes. Liberals are correctly allergic to the judgmental take of traditionalists. But liberals, at the end of the day, are the ones with the toolkit for addressing the problem, not to mention the political power to do so. Which gets to a question for the traditionalists: Is this about changing outcomes or changing values? If you believe this is about getting people to make an appropriate moral choice, then exempting them from that choice obviously doesn't solve anything. But if you believe it's about easing the path for families, then that calls for a rather different approach.

Related: Karen Kornbluh on juggler families.

Ryan Lizza's profile of Peter Orszag begins with a long Jon Stewart anecdote and ends by making some health care news. Thus, it is, in the eyes of this blog, virtually a perfect work. Here's the news:

Orszag’s job is to defend Obama’s budget on all fronts, but he will be most deeply engaged in health care. I asked him how he could be so sure that his ideas about how to reduce health-care costs would work, mentioning that I had been surprised to learn that Paul Ryan and other Republicans had seized on health-care cost controls as the issue they believed would bring down Obama’s health-care plan and, with it, they surely hoped, his Presidency. Specifically, they believed that Orszag’s obsession with “comparative effectiveness,” research about which treatment options work best for a given ailment, will lead to vast government intrusion into the doctor-patient relationship. The research, which received major funding in the stimulus legislation and which was also included in Obama’s budget, had assumed a sinister meaning on the right.

Orszag dismissed the criticism as a caricature. “I don’t see how it interferes with the doctor-patient relationship to suggest that it would be better if your doctor had more information about what would work for you,” he said. “The best way of putting it is that your doctor shouldn’t have disincentives to give you the higher-quality care, which often happens now.” Far from a huge government bureaucracy, he proposes a simple adjustment of incentives: “You get paid more if the treatment has been shown to be effective and a little less if not.”

This is an idea that's not associated with Orszag so much as with Jason Furman, one of Larry Summers' deputies at the National Economics Council. For a detailed summary of his proposal, see this article. But the short version is that you use evidence to change, rather than decide, reimbursement rates. Statins, for instance, are very effective and we want them to be widely used. So cover that at 100 percent. No out of pocket payment at all. Lumbar surgeries, conversely, are very ineffective, and the evidence suggests that fewer should be used. So cover them at 30 percent. You're not barring anyone from accessing the care they want. It's hard to say you're rationing. But you're setting the system's incentives to prioritize the care that works, and is cost effective.

The video above pits Henry Waxman against Newt Gingrich is straight-up, no-holds-barred, citation warfare. (There are moments when I wish this blog had music, or at least exciting sound effects). The primary point of contention is a number you're hearing a lot these days: $3,128. That's the supposed yearly cost that cap and trade will impose on every American. The number's pedigree is pretty good, too. It's from MIT.

The problem is that it isn't true. The author of that study, MIT scientist John Reilly, has now sent multiple letters to John Boehner begging him to ask his troops to stop distorting Reilly's science. The $3,128 estimate, he says, is "nearly 10 times the correct estimate, which is approximately $340."

But as Brian Beutler neatly documents, Reilly isn't the only one seeing his estimates butchered. Studies from the Wharton School of Economics and the Center on Budget and Policy Priorities are also getting ground up and twisted out. As the old line goes, good arguments don't need a lot of lies told about them to succeed. The Republican argument on cap and trade is assumed to be pretty good -- it'll raise your energy prices! -- but doesn't seem to have left the Republican leadership particularly confident. After all, every dollar cap and trade raises is a dollar that can be rebated to consumers, making the system either neutral for individuals or genuinely progressive. And that's probably what will happen. But that's harder to oppose. So we're getting a lot of lies.

Sadly, the truth just isn't that exciting. An EPA study examining the House cap and trade proposal concluded that the legislation would cost U.S. households around $98 to $140 per year between now and 2050. It's sensible stuff. That may be why, a couple years ago, one observer commented, "I think if you have mandatory carbon caps combined with a trading system, much like we did with sulfur, and if you have a tax-incentive program for investing in the solutions, that there's a package there that's very, very good. And frankly, it's something I would strongly support."

That observer? Newt Gingrich.

The New York Times has a front-pager on Tim Geithner's schedule back when he was heading the New York Federal Reserve. What we learn is that Geithner spent a lot of time hanging out with bank presidents. He was even a candidate to helm Citibank (Geithner apparently had no interest in the job). As always, it's a bit hard to know what to think of all this. It raises the specter of capture, but on the other hand, Nouriel Roubini is a fan of Geithner's more recent announcements, and so it's not obvious that less compromised candidates would actually be doing anything different. I have trouble imagining that Rahm Emmanuel is ready to nationalize the banks.

In some ways, this seems more like a commentary on what's wrong with the Federal Reserve than on what's wrong with the Treasury Department. At Treasury, Geithner is subject to all manner of forces outside his control and all manner of actors with differing incentive structures and constituent demands. But the Fed is politically insulated. It's apart from all that. So it's a bit worrying that it's New York director chooses to be very close to the individuals he's meant to be regulating. The end result is an institution unconcerned with voters and mechanisms of democratic accountability, but pretty concerned with how bank chiefs feel about things, and pretty sympathetic to the explanations they give for their practices. Sometimes independence from one constituency just enables capture from another.

If you look at the health care policies favored by liberals and the health care policies favored by conservatives, here's the general difference: Conservatives believe the decision-maker in health care is the consumer. Liberals believe it's the doctor. And so conservative policies try to change consumer behavior. Liberal policies try to change doctor behavior.

That's why conservative policies tend to focus on how individuals pay for care: High deductible health care plans, for instance, make consumers spend more out of pocket, and so they're more price sensitive, and in theory, more careful. Single payer health care and other versions of the "global budget" theory change the way providers are compensated (overprescription means underpayments), and so, in theory, change the behavior of doctors. And a new Kaiser/NPR poll shows why this might be important:

You could argue that that question is flawed: Most people haven't been prescribed anything of any seriousness in the last two years. It's a bit like asking the population at large whether Microsoft Vista has crashed on them. The majority will say no, but then, the majority don't use Microsoft Vista. My sense, however, is that the poll is getting at another issue: Do you think your doctor would ever do such a thing? And most people don't. That matters. If my doctor prescribes a useless MRI, I have no way of knowing the MRI was useless. Patients can't easily check their doctor's work. Background skepticism is most all that matters. And very few patients want to be skeptical about their doctor. That's a worry they just don't need.

But that makes it hard to see how you control costs on the patient side. You can make it harder for them to afford care. But they're not going to know which care to skip. Which gets to the common liberal argument that we should change the payment structure that pays doctors more when they prescribe more care and also give doctors more evidence so they have a better idea of what care they should prescribe. But liberals shouldn't foll themselves. Neither solution is popular. For instance:

Honestly, I'm surprised patients even have an opinion on that. And it might be a very weak opinion. But for now, the public prefers that doctors get paid for each thing they do than on a salary basis. They prefer, in other words, that doctors have an incentive to do more rather than do less. Nor does it seem like the American people are particularly interested in implementing the findings that emerge from cost effectiveness studies:

This, I think, gets back to the need to change the behavior of doctors rather than consumers. Patients mainly know to ask for what their doctors tells them to ask for. That's a bit less true in the age of WebMD. But their underlying tendency is to want everything done, no matter the cost, no matter the evidence. A conservative would say that that's because they don't feel the cost. If they did, they'd be quicker to demand the evidence. A liberal would say that people don't worry about cost when they're dealing with their daughter's life. They largely offload decision-making to the doctor, and so the key is that the doctor has appropriate incentives and evidence to help them make wise decisions rather than to enable desperation.

Either way, one thing worth noting is the degree to which no one in the system currently has an incentive to control costs. Doctors and hospitals pass unlimited costs onto insurers. Insurers pass those costs onto employers. Employers take those costs out of wages. And individuals don't know their missing wage increases are a product of their health care costs. You're never going to control costs if you can't break some portion of this chain.

Matt is right to say that a lot of what passed for "financial innovation" was in fact innovative efforts at regulatory arbitrage. One of the pieces of the crisis that I hadn't understood until recently, for instance, was the role that Basel II banking regulations played in the growth of the structured securities market. In essence, Basel II, which went into effect a couple years ago, held that a bank only had to keep half as much capital on hand for AAA-rated securities as for other types of assets. That created a huge incentive for banks to get more things rated AAA, as it meant that they didn't need to have as much money sitting around. They could spend it buying more products that offered higher returns. They could, in other words, further leverage themselves.

Cue "financial innovation." Structured finance -- where you separate assets into different parts (tranches), and make the "senior" tranche pretty safe by making the other tranches pay out losses first -- was essentially a way to build a lot of AAA-rated securities. Churning out these AAA-rated securities became the primary job of the ratings agencies. From CKE:

According to Fitch Ratings (2007), roughly 60 percent of all global structured products were AAA-rated, in contrast to less than 1 percent of the corporate issues. By offering AAA-ratings along with attractive yields during a period of relatively low interest rates, these products were eagerly bought up by investors around the world. In turn, structured finance activities grew to represent a large fraction of Wall Street and rating agency revenues in a relatively short period of time. By 2006, structured finance issuance led Wall Street to record revenue and compensation levels. The same year, Moody’s Corporation reported that 44 percent of its revenues came from rating structured finance products, surpassing the 32 percent of revenues from their traditional business of rating corporate bonds.

This, incidentally, strikes me as a tough story for liberals. The regulation in question was pretty straightforward: If you have more safe assets then you have less risk and can use more of your capital. The breakdown was first in the ratings agencies, who began mispricing assets, and second among the regulators, who didn't particularly notice.

Last week, I headed out to Missoula to give a talk on behest of Matt Singer's Forward Montana. Perks to giving talks in Missoula: 1) They happen in bars. 2) Wearing jeans makes you seem dressed up. There's literally a pitcher of scotch ale on the chair next to me in case I get thirsty during the talk. Take note, DC: This makes panel discussions more interesting.

As you might expect, the talk is on health care, and the basic argument is, first, that health care is a political problem more than it is a policy problem, and second, that the big question is not the public plan but how you pay for the damn thing. Also, I use a lot of car analogies.

Nate Silver on blogging:

For the most part we’re just trying to be interesting to people. I think we differ from a lot of blogs. We very rarely just say, okay, here is this that’s going on and here’s what Ezra Klein said and Ezra’s great, so you should read…. Instead, we actually - everything we do we try to actually have some original kind of substance there. We don’t just do a lot of linking around. In some ways, it’s not a very bloggy kind of blog.

This post lacks a nifty news peg, but I've been thinking a lot about Joshua Coval, Jakub Kurek, and Erik Stafford's paper "The Economics of Structure Finance." In particular, people talk about the "systemic risk" of big firms and massive banks. The banks, in other words, that are too big to fail, and whose very existence thus poses a threat to the system. That's where you get the talk about capping bank size. But the argument of the paper is that the turn from bonds and loans to structured finance was itself a contributor to systemic risk. And I've not heard as much discussion about that.

Coval, Kurek, and Stafford is clunky to write, so henceforth, I'll just call them CKS. Either way, they argue that risk needs to be understood not only in terms of how often an asset fails but when it fails. Namely, is it likely to fail amidst a chain of other defaults and a broad economic collapse? Or is failure basically uncorrelated to other aspects of the economy? That matters for an individual portfolio, of course, because you don't want your investments to drop all at once. But it matters even more, as we're finding out, for the system as a whole, which can't handle everyone's portfolios dropping all at once.

According to CKS, the key here is in the shift from traditional bonds to structured finance. Traditional corporate bonds, they argue, are "largely driven by firm-specific considerations." Microsoft may be somewhat likelier to go out of business if GM is collapsing, but if I told you GM was collapsing, your first move wouldn't be to check on Microsoft. Structured finance, however, plays differently: Banks were mainly interested in holding AAA tranches because that lowered their capital requirements. Structured finance was a way of building a lot of AAA tranches. And so, by 2007, the plurality of Moody's business was rating structure finance. The problem is, unlike a traditional bond, damage to safest tranche of a CDO probably happens at the same time as damage to the safest tranche of just about every CDO. An ill tide sinks all boats.

"Credit ratings," write CKS, "are silent regarding the state of the world in which default is likely to happen." An asset that has a one percent chance of default gets the same rating whether the default is likely to happen in a recession or simply randomly. That's because the bond rater is pricing risk to individual firms, not risk to the system. And since portfolios biased towards structured financial products decreased the risk of individual firms but increased the risk of the system as a whole, risk was underpriced in structured finance. Which meant there could be more structured finance products sold with a AAA rating. And even in the downturn, that worked out: The suffering has been systemic more than it's been firm-specific.

I've not seen so much on how to fix this. Maybe ratings agencies will develop a standard formula for assessing how likely a firm's portfolio is to go bad all at once. Maybe the government will regulated how much correlated risk a bank can hold at one time. But it does seem to be part of the puzzle.

Not to cop to a Sunday night spent catching up on DVR'd sitcoms, but Scrubs featured a pretty brilliant acoustic cover of Outkasts "Hey Ya," which is, in turn, ripped from this even more brilliant "Hey Ya" cover by Mat Wettle of Obadiah Parker.

All of which is to say, Happy Monday.

Mark Regnerus's op-ed on the virtues of marrying young makes some interesting arguments that I'm loathe to offer half-baked commentary on. I prefer easy topics, like the financial crisis. I would, however, like to offer my congratulations to the environmental movement: We have literally reached a place where even articles on the optimal age for matrimony include an analysis of carbon emissions:

Marriage may be bourgeois, but it's also the greenest of all social structures. Michigan State ecologists estimate that the extra households created by divorce cost the nation 73 billion kilowatt hours of electricity and more than 600 billion gallons of water in a year. That's a mighty big carbon footprint created in the name of solitude.

You know the economic downturn has gotten bad when it's slowing the expansion of the new organic supermarket that was supposed to move into my neighborhood. Can't Congress do something!?

• Samantha Power and Cass Sunstein have a child. Intelligence-based superpowers not yet divulged.

• What is Obama's grand economic theory?

• Banks on the block.

• Health care polling data!

In response to the Great Amendment Hunt of Ought-Nine, commenter Badger asked, "These are pretty silly, but isn't the House going to make mincemeat out of these things once it goes to conference/reconciliation/de-crazifying committee?"

Probably. Most of these amendments were meant to "instruct" the budget conferees. They will be duly ignored. They exist more to put the Senate on record than to actually change federal law. Indeed, many of them were effectively meaningless: In one case, the Senate voted to instruct conferees to bring a point of order against any legislation that would let tax rates rise to their pre-2001 levels. That, of course, is the very point of the budget.

But that amendment will be ignored. Tax rates will rise. The budget will pass. So why get exercised? In short, the Senate is now on record against a lot of policies it means to pass. It is on record against all the particulars, for instance, of cap and trade legislation. You can imagine the ads now. "In April, Senator so-and-so promised not to raise energy taxes on hardworking Americans. In June, under pressure from liberal interest groups, she flip-flopped. Can we really trust Senator so-and-so?" Those ads, you can argue, will emerge anyway. But why not defeat the amendments now? At the least, it's good precedent. Republicans, after all, will try this again. And their success this week will likely embolden them. The Republican sense is that Democrats are afraid to defend the implications of their policy priorities, particularly on cap and trade. That looked true this week.

There's also, among budget wonks, a sense that Democrats aren't taking this seriously. Some said they just wanted to speed through the amendments so they could rush a budget vote next week. That way, the package will still qualify for the 100 Days label. Others suggested that they didn't see the point of fighting hollow amendments. Either way, a lot of time was wasted, and a lot of inanity was passed, and all of it to score meaningless political points. As one budget wonk confided to me, "I said to some colleagues last night that either you ought to scrap the budget process or you ought to scrap the U.S. Senate. But the two together just don't make sense."

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 House and Senate negotiators won't give Nelson that chance. A process known as "reconciliation" allows budgetary measures to be moved through the Senate with a simple majority, rather than 60. Multiple congressional sources say that congressional Democrats have decided to use reconciliation to go after student-lending subsidies, specifically to get around Nelson.

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.

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 have been discussed.

It says something about the state of American politics that the Democratic chairman of the Budget Committee has to be bribed so he doesn't stand in the way of efforts to ensure that 50 million people receive health insurance coverage. Obviously, his incentives are to maximize his own influence, but it's still weird.

Update: To further emphasize this point, Allen Boyd is on the conference committee from the House side. As Matt Yglesias notes, Boyd was the only Democrat to endorse Bush's Social Security privatization scheme. That gives means five of eight conferees -- Conrad, Boyd, Gregg, Ryan, and Hensarling -- would be inclined to muck about with Social Security. It's not solid evidence that Social Security is vulnerable. But when combined with Conrad's odd quote above, it's suggestive.

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. Without reconciliation, the incentives for the minority are very simple: Kill the bill. Do as Gingrich did in 1994 and hand the majority a failure. With reconciliation, killing the bill just means you're locked out of the final legislation. It's a death sentence for your involvement in the process. It is not, however, the end of the process itself.

Primary credit for this goes to Obama. Everything I've heard suggested that this was an executive branch priority. Without steady pressure from the president, reconciliation would likely have been traded away long ago. In that, it might be considered surprising. This was not an obvious outcome. Obama was the bipartisan idealist. He was "a new way for Washington." He was the guy you couldn't trust to fight. He just didn't understand partisanship.

Washington has a way of changing that real fast, however. Back during the stimulus debate, I argued that Republicans showed their hand too early. By totally withholding support for the president's first, and least partisan, priority, they showed their involvement couldn't be assumed on any future piece of legislation. And so it wasn't. Ryan Grim reports that in a meeting with House Republicans this week, "President Obama reminded the minority that the last time he reached out to them, they reacted with zero votes -- twice -- for his stimulus package. And then he reminded them again. And again. And again." They had shown their hand. And Obama had reconciled himself to it.

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.

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.

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 dairy cows, or 50 beef cattle would have to obtain permits. According to USDA statistics, this would cover about 99 percent of dairy production and over 90 percent of beef production in the United States.

As the proposal stands today, the permit fees would equate to a "tax" of $175 per dairy cow and $87.50 per beef cow.

John Barasso is trying to make sure that doesn't happen. And the United States Senate passed his amendment with a unanimous voice vote. As for the carbon emitted amidst livestock production? That's trickier. On the one hand, interest groups will battle viciously to keep it off the books. And on the other, it's too funny -- cow farts! -- for politicians to advocate and the public to take seriously.

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.

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. It wildly disadvantages the self-employed and the uninsured. In general, the workers who receive it are richer than other workers. Capping it is a progressive way to pay for health reform.

But in recent weeks, there's been increased agitation among unions to convince Congress that it shouldn't cap the employer tax exclusion. The Health Care for America Now coalition has come out against touching the exclusion. One problem: That's the most obvious pot of money. Eliminating it would nearly pay for health reform. Capping it would probably bring in about $500 billion. But it would mean that workers with health benefits above the cap pay more in taxes.

The argument has been that some of those workers are not richer. Some of them are union workers with good benefits. Others are older workers, or workers for small companies. Elise Gould, a health care wonk over at EPI, produced a paper showing who these workers are. It's true, she finds, that capping the deduction would prove progressive. But she also finds that it would disproportionately impact firms with older workers and firms with fewer than 10 people.

Both results are depressing Neither is surprising. Older workers -- defined here as over 50 -- require pricier health benefits. Smaller firms can't effectively bargain with insurance companies and so they grimly accept worse rates.

I'm not sure, though, that either objection is as problematic as Gould implies.

The plans under consideration would ease the root causes of the problem for both groups. Baucus's plan, for one, allows workers age 55 or over to buy into Medicare, at least as an interim measure. If that provision were made permanent, it would largely solve the problem these workers face on the private market. Similarly, all plans under consideration allow small firms to buy into large, government-run buying pools that can bargain for much better health insurance rates. So though it's true that their prices are currently quite high, we can expect that the same plan that would cap their deductibles would also lower their premiums.

Given the dire financing question, more than a few health reformers have said to me, pretty simply, that if the tax exclusion can't be touched than health reform can't be achieved. And I've not seen many folks propose workable alternative sources of funding. So we're left in a situation where we may have to choose between a plan and a deduction cap or no plan and no deduction cap. And though the evidence that the cap would hurt some vulnerable workers is strong, I think the evidence that it would do yet more to benefit those workers is stronger.

Related: Tax My Benefits. Please!