Friday, November 22, 2013

The Fun House Mirror Rule that Changed the Filibuster in the Senate

Today the Senate voted to revise its rules, enabling the Senate to cut off debate on executive and judicial branch nominees with a simple majority.  I think the collegial consensus culture of the Senate has changed to the point where this was overdue.  I think Harry Reid should have done it at the beginning of  Obama's first term when it became clear that obstruction would be the name of the game.

Here's a brief post mortem.

In 1789, the first U.S. Senate adopted rules allowing the Senate to end debate and proceed to a vote. At the time Aaron Burr felt this was redundant, and a few years later the Senate agreed when it did not include a mechanism for ending debate when it rewrote the rules in 1806.  This lack of ability to cut off debate laid the foundation for the use of the filibuster, although it took 31 years before the first filibuster was exercised.

In 1917 the Democratic Senate added a rule allowing for the cloture of debate (ending a filibuster) after a group of 12 anti-war senators blocked a bill that would have allowed President Wilson to arm merchant vessels to combat German submarine warfare. From 1917 to 1975, the requirement for cloture was two-thirds of those voting.   In 1975 the Democratic-controlled Senate amended the rules so three-fifths of the senators sworn (usually 60 senators) could limit debate, except on votes to change Senate rules, which still required two-thirds to invoke cloture.

So with a two-thirds majority requirement for a rule change, how did the Senate manage to change the rule today?

Here's how filibuster expert Gregory Koger explained it to Ezra Klein today:
In a paper I'm writing with Sergio Campos, we lay out five illustrative options for how a majority could work its will. It's not exhaustive, because there are dozens of ways you could do this. What the Democrats did today was our option four. You bring up something, have a cloture vote, and after you lose say, "It takes a simple majority to win this one." We're not the only people who had this idea but we did anticipate this possibility. They had the floor debate on the nominee, and the cloture vote, and then the chair's decision is announced that cloture was not invoked, and Harry Reid raises his objection to the ruling of the chair and says he objects because it only takes a simple majority to invoke cloture on all executive nominations, and all judicial nominations except the Supreme Court. So the "rule" is articulated by the objection he's raising, and the only reason that it [SCOTUS nominations] was carved out is that Harry Reid said so.
Say what ……?

If I understand this right, Koger is saying you only need a majority vote to rule on an objection to a ruling of the chair (Point of Order under Rule XX), and so you can frame whatever you want the new rule to be in your objection.  If the  objection is then sustained by a majority …. voila, you've got your new rule!

Well, at least they are still operating by rules, even if it's fun house mirror rules.


Thursday, November 7, 2013

The Conversation About Economic Growth with Equity--Manifesto for A New Discussion Group

I mention Brad DeLong a lot around here.  Sometimes it seems like I read nothing else.  I do.  But I find DeLong the most engaging, challenging, and fruitful public intellectual on my radar screen in the area of political and historical macroeconomics.  He is now affiliated with a new venture, a discussion group to keep an eye on.  Washington Center for Equitable Growth.

Here is Brad DeLong's explanation for signing up:
Let me try to bring four things together.
  1.  The coming of the internet has created at least the potential for a much better public-sphere conversation on economic policy than we had a generation ago. .... 
  2. We, as of yet, do not have such a public-sphere conversation. At best, the conversation resembles a soccer game of seven-year-olds--twenty people in a huddle kicking the ball in random directions, with few people playing their positions and focusing on what is truly important.
  3. Over the past generation our politics and policy making has arguably degenerated. It is now clearly inadequate. We no longer (if we ever did) have a bipartisan technocratic center with serious votes committed to economic growth, equal opportunity, and an efficient well-functioning government that can tack left or right as necessary to assemble legislative coalitions to support good governance.           
  4. Where the conversation has been guided, it has been directed in directions that I, at least, think are unhelpful. ... Peter Peterson and company have driven the budgetary conversation to focus on entitlement cuts rather than entitlement right-sizing, right-funding, and right-managing. ....
  5. Taking these things together, it seems to me that it would be a good idea if I signed on to this Washington Center for Equitable Growth, and tried to drive the conversation to what is important.  
My promise to you: If you share our interest in public policy that leads to growth-with-equity—and would like to see a 21st century that is an American Century--in a these-are-people-to-emulate rather than we-fear-their-drones-and-their-blackmail sense—then:       
  1.   We are going to be disciplined: we will not publish so much under this heading that you either drown or fob us off to an aggregator.
  2.   Everything we publish will be important for you to read if you are interested in equitable growth (and you really should be).
  3. We won't try to get you to read what we write when somebody else has written it better—we will link instead.
  4.  We will try to make sure that we always do our homework.
  5.  We will try to bring to your attention people who think differently than we do and who have done their homework, are not engaged in intellectual three-card-monte, and are being smart.
Let us try to focus our conversation on what is truly important, for all of our sakes.
 It's a manifesto I can subscribe to.  


Tuesday, November 5, 2013

My Kingdom for a Rational Compensation System ...

Brad DeLong has a review of Alan Blinder's book on the financial crisis  After the Music Stopped: The Financial Crisis, the Response, and the Work Ahead (New York: Penguin, 2013).  He includes the following interesting argument:  (1) we need to strictly regulate finance to fix the economy, (2) but we can't regulate finance because with the current income inequality finance finds it easy to buy Capitol Hill, (3) shareholders of financial corporations finance could alter the highly unequal compensation system to a more rational system that would then permit Congress to regulate fianance, but (4) shareholders of financial corporations would rather not, so (5) we are lost .....

Here's Brad:  
[T]he United States ... ought to obey Blinder's three commandments to the government and strictly regulate finance, in the interest of avoiding excessive leverage and hold financiers strictly... liable for misrepresentations and omissions....However, accomplishing it is a political task.
 One point of view is that this political task will be easy for at least the next generation: even people who are twenty today remember the orgies of near-fraud and outright fraud committed in the housing, mortgage, mortgage-backed securities, and derivatives markets; not until they retire in 2060 will it be possible to pull the same type of tricks again on the same scale.  
The second point of view is that this political task will be impossible. According to this point of view, times like these in which income inequality are high are times in which finance finds it easy to buy Capitol Hill, and that although finance has a collective long-run interest in being regulated so that it does not overspeculate [fiananciers do not] recognize this collective interest--or [they] expect to make their financial pile, and take an [attitude of] apres moi le deluge. 
Certainly the root-and-branch Republican opposition in the Congress to the very existence and functioning of the relatively innocuous Consumer Financial Protection Board is a strong piece of evidence for the second point of view. And if that point of view is indeed correct, we are in awful trouble: only ... sharply reduc[ing] the education salary premium coupled with a severe strengthening of the progressiv[ity] of the tax system could then create a politics and a Capitol Hill that would support the kind of financial regulation that 1929 taught us that we needed, and that 2008 taught us that we needed again.  
...Perverse compensation systems--systems that provide financiers with enormous incentives to run very large risks in the belief that you can make your pile and, before the time the crash comes, have moved on to philanthropy or politics or art collecting-- exist for a reason. And it is these perverse compensation systems that provide financiers with the incentives to forget that shareholders are their real bosses, to deliberately un-manage risks, to assume excessive leverage, and to treat the balance sheet as a toy.   
Moreover, there are three ways to make money in finance. The first is to have better information, and so buy low and sell high: this is nearly impossible. The second is to match risks  that need to be born with people for whom it makes sense to bear extra risk: this is difficult. The third is to match risks that need to be born with people with money who do not understand what the risks really are: this turns out to be easy. And this is especially easy when there is less information in the financial market--when securities are complex, when trading is proprietary and secret, when bespoke rather than standardized is the order of the day, and when balance sheets are toys rather than accurate representations of firm positions.  
Fixing perverse compensation systems would fix all these problems. But with perverse compensation systems, all these problems are intractable. The right organization of finance is one in which financial professionals lead middle-class lives but get to be rich at 60 if, when they reach 60, people look back and see that their judgment has been very good and their clients have received good value for their fees. Shareholders of financial corporations could impose such a compensation system if they organized themselves and so wished. They aren't organized. They do not so wish.
 


Friday, November 1, 2013

Old Man The Word: Robert Redford's "All is Lost"

Single handed sailors are a breed apart:  alone for weeks or months on a very large ocean, they are reliant on their craft, their skill, some electronics to keep them tethered to the world.  But it's a slim line.   Storms, a loss of balance, lacerations, bangs on the head, or hitting an obstacle while sleeping can make it all come undone.  

Such is the isolated life of the nameless Septuagenarian, mid-Ocean 1,700 miles from the Sumatra Straight,  coming to terms with end of life in Robert Redford's All is Lost.  There is a great soundtrack, but no conversation.  Just stoic silence as the old man goes about trying to salvage his craft, a 1980's 40 foot fiberglass sloop with beautiful wood joinery.  It slowly comes apart.  The ship hits a drifting container, a bit of flotsam astray from the commercial shipping lanes in the middle of the Indian Ocean.  The ocean is smooth and calm, so there is no emergency even as water laps over the floorboards.  The sharp corner of the container has ripped a 4 foot hole in the side of his boat like a heart attack.  Water laps in, but the gash is just above the water line, not fatal.  Redford looks down in wonderment at hundreds of baby shoes floating out from the container. 

Over the next eight days we follow the old sailor as he roughly patches the hull with fiberglass, encounters two severe storms, and persevers.  He goes about his business calmly.  What else can he do.  Even as he is tossed around his craft, even as he is violently sea sick, the boat is rolled twice in the storm and he loses the mast, and ultimately the boat sinks.  Pathetically, ever so slowly, but inevitably.

He winds up in the life raft as life becomes ever more precarious.  He improvises a water still, but it produces just less than necessary to sustain him.  He writes a note to his family, his regrets.  I have fought to the end, he tells them.  He wonders if it matters.  It's the human condition;  we struggle, we struggle, 'til we're gone.  He hooks a nice fish, but before he can pull it in the raft, a shark takes it away.  Sharks circle the raft.  The camera is deep under water.  The sharks are not menacing, but it's their territory.  They are young and vibrant.  The old man does not belong.  He has become invisible.  Two freighters pass right next to him.  He is like a cripple next to the freeway, trucks passing by.  The freighters pass by.  They do not stop.  They are oblivious to him.  

And then there is the hand of God from the Sistine Chapel, reaching out to Adam; and there is Alex Ebert's song …



Old man hypnotized
Spider with ancient eyes
Black dogs who come in herds
Old man the word

Raised on golden days
God loves the U.S.A.
Fed on purple haze
Young men today
He heard them say
Amen, Amen, Amen

I’ll never say good-bye
I’ll never tell you lies
I’m never gonna die
Amen, Amen, Amen

Young man’s memories
Stay away from the summer leaves
Old man we cannot see
Old man decay
Slip slow away

Old man we’ll hold your face
Sons danced for your song
Old man looked around
Heard but the sound
Amen, Amen