On Bill Moyers' (Jan. 8, 2010), Kevin Drum and David Corn made a point about financial reform that actually applies to many of the other problems currently roiling American society:
KEVIN DRUM: You know, complexity is the friend of the financial industry. If you really want to control them, you need simple rules....but that was never on the table. That sort of simple regulation was never on the table....
[T]he banking industry has convinced us that only the banking industry has the expertise to deal with these very, very complex issues. And we bought it. We all believe that. These guys are the experts. And it is very complicated. This stuff is very, very complex. And that is exactly the reason why you need simple rules o rein it in. Because the more complexity you have, the more loopholes there are. The more you can take advantage....
DAVID CORN: Well, you know, one of the small debates in Washington has been what type of consumer financial protection agency there should be that would look at things like this.
Elizabeth Warren [wants the power to regulate] banks and credit card companies and others that provide financial services and financial products. And she wants there to be some very simple rules.
For instance, like you have to-- every credit card company would have to provide what they call vanilla products. Whereby, "Here's your credit card. You have, I don't know, 12 percent interest. It doesn't change. No other fees. Until we let you know in a letter with bold print that it's going to change. And we give you the right to keep the card or not keep the card." Something very simple....
KEVIN DRUM: People are more afraid of big government than they are of big banks, despite what happened over the last couple of years. And they shouldn't be. They should be-- what they should be is demanding a better government. A government that regulates without being captured by all the special interests. A government that puts in place regulations that are simple and clear. So, David, what you're saying. The vanilla products option, for example, in the CFPA was a nice-- the reason the banks hated it was because it was so simple.
A nice simple regulation. There's no way to get around it. If the rule says you have to offer as an option, this is not the only thing. You have to offer if you're going to do a home loan one option has to be a standard, 30-year, fixed rate mortgage. And you can have all your other options, but you've got to at least tell people they can have that. That's a very simple regulation. There's no way to get around it. And that's why banks hate it.
David Corn pointed out the same thing also applies to campaign finance issues:
DAVID CORN: It's like money in politics, which we're talking about a little bit, too. You try to set up these convoluted rules to deal with campaign cash and deal with constitutional issues and it's almost, you know, it's- I won't say it's impossible — but it's tremendously difficult to do it in a way so that you don't leave openings for others to take advantage of, particularly when they have access to the people writing the laws. I mean- Mark Mellman, a Democratic pollster told me, listen, if 99 percent of Americans can't understand derivatives, you can't regulate derivatives in our Democratic process. And I think there's a lot of truth to that. I mean, people have to understand it. If only the people who benefit from them understand what's going on, they have the leg up. And there's no way for average citizens to even enter the process.
As Global Guerrillas points out about the piece in the NYT about bankers finger-wagging at homeowners who are learning from the example of the bankers themselves and walking away from their responsibilities, the end point of the resulting arms race in complexity will be the utter breakdown of the system:
The aggressive behavior of corporations and high net worth individuals relative to debt and contracts will be copied by the rest of society. Get over it, game theory dictates this. The result a legalism so intense (since basic norms of behavior can't be assumed, they must be spelled out with excruciating detail and enforced through lengthy and exhaustive monitoring) that the overhead expenses of running our economic system become unsustainable. Why? This behavioral roll-out converts the economic returns on societal complexity already in place (systems we built to solve past problems) from marginally positive returns (I'm being generous) into deeply negative drags on all economic and social activity.
This isn't to say that all simple regulation is good regulation. Far from it. The flat tax idea, for example, is simplicity itself but bad policy because it's regressive, hitting low-income people far more heavily than high-income people (the tax credits meant to mitigate this aren't adequate and are more subject to political manipulation than raising taxes directly). But simple rules do help to ensure transparency and reduce the ability of monied interests to capture the mechanisms of government for their own benefit and leave the public befuddled about why things rarely work out to their benefit any more.
Single-payer health insurance is an example of good simplicity. It's the most inclusive and inexpensive approach to health care because of its administrative simplicity. A single-payer Medicare-For-All approach to reform would have been unbeatable because its simplicity is understood and valued by the public and feared by the complexity-loving insurance interests. The approach that health care reform ended up taking instead became fraught with corruption by special interests because complexity allowed them to write in all the loopholes and allowances that the insurance companies use to confuse and defeat their customers. And no one is really sure what the terms of the reform mean even now - even defenders of the reform plan disagree on the what the implications of this hugely unwieldy and complicated plan will be.
With all the talk about left and right, insiders and outsiders, teabaggers and socialists, here's the one meme that cuts through all of it: To control the special interests, you need simple rules. Simple rules mean no wiggling out of the plain meaning of a regulation, no hiding behind exemptions meant for others fulfilling some supposedly worthy social goal, no one law for those who can hire high-priced legal gunslingers and another for everyone else. There may be cases where special exemptions and loopholes are justifiable and socially worthy; let them then stand out for being the exception rather than the rule, and be debated on their merits.
The Republicans are stupid and wrong about almost all their policies, but they're often more politically astute than the Democrats. Will they hit on this approach before the Democrats do? I hope they won't but I fear they will. They're already stumbling on the edge of it with their complaints about the 2000-page health care bill, though they haven't made the connection explicit. They're even closer with their criticisms of the Democrats for wanting to do the final negotiations on the health care bill behind closed doors instead of on C-Span as promised.
Republican solutions often have a dubious simplicity, like the flat tax, health savings accounts, or "Drill baby drill." But it's a simplicity that usually hides built-in advantages for the corporatocracy and the well-to-do.
But the very simplicity of what they offer is key to what Kevin Drum refers to in the Moyers interview as "intellectual capture":
Intellectual Capture means that essentially the financial industry has convinced us, you know, in the '50s what was good for General Motors was good for America. Now it's what's good for Wall Street is good for America. And they've somehow convinced us that we shouldn't ask about what's right or what works or what's good for America.
While the Democratic leadership stumbles along, building outrageous Rube Goldberg monuments to the failed status quo like they've done with health care reform and are doing with financial reform, progressives should be attacking the intellectual capture that encourages this head-in-the-sand approach instead of going along with it in the name of party unity.
Imagine if, instead of always nodding to conservative views and trying to split the difference President Obama used his bully pulpit and his "Let me be clear" to unabashedly embrace policies that might upend the powerful and the status quo but benefit the rest of America. Sadly, he seems to be an intellectual captive of right-wing frames himself. To argue for simplicity you have to have ideological convictions of some kind, guided by clear values, not just a belief in your own pragmatism and your ability to find ways to "do what works" without upsetting the apple cart of the status quo.
So that leaves the task up to progressives. It means, for example, continuing to argue for single-payer health care as the real reform that still needs to happen, as the fairest, simplest, most inexpensive solution to ensuring public health. It means arguing for the institutions that are too big to fail to be broken up, because they should exist to serve the people and not the other way around. It means arguing for the rich to start paying their fair share of the costs in society because secretaries, clerks, and laborers shouldn't be paying higher tax rates than the CEOs of the companies where they work. It means arguing that terrorism is a cost of empire, and the way to end terrorism is to dismantle the Empire. 'Free trade' sounds like a good thing, but in a world where capital is free to move between countries and labor is not, the benefits are mostly captured by wealthy owners and investors while everyone else is forced into a race to the bottom.
And so on.
Imagine what the impact would be on conventional wisdom if the Democratic leadership, and President Obama, were arguing that intellectual framing of the issues too instead of always undercutting it.
It's a long-term battle, but also a short-term one. The growing populist rage in the country is looking for simple answers and clear targets to blame. Right now I wouldn't bet the Dems are the ones who are going to be most successful at offering them.