2012 - %3, July

Explaining the Economy's Annual June Swoon

| Mon Jul. 9, 2012 11:05 AM EDT

Every year, it seems like the economy goes into spring training on a promising note, only to quickly dip into the kind of June swoon normally associated with the Dodgers. That is, it seems like this if, by "every year," you mean the past three years. What's up?

One possibility is that something about the nature of the recession has played havoc with the seasonal adjustments made to economic data. Normally, summer means lots of temporary summer jobs, so the various economic agencies take that into account. They don't report that the economy added a million jobs in June because they know that's merely an artifact of the time of year. Instead they subtract those jobs from the total in an effort to provide a better indication of how the underlying economy is really doing.

Usually this works fine. But Cardiff Garcia passes along this chart from Nomura suggesting that something about the Great Recession has thrown things out of kilter. The summer months are regularly looking gloomier than expected and the winter months slightly better. Garcia suggests that this might mean the economy isn't bouncing around quite as much as it seems:

Our guess — and please, we emphasise that it’s just a guess — is that that the underlying pace of jobs growth is somewhere between this month’s print of 80,000 and the six-month average of monthly job gains (150,000). We base this both on the seasonality issues and on the fact that certain other employment reports (initial jobless claims, the ADP private employment report, Challenger layoffs) indicate a slightly better situation.

To be sure, 80k-150k is a wide range, but our main point is that yet again, things probably aren’t quite as bad as the employment reports of second quarter would suggest, just as the economy wasn’t growing as quickly as the readings from the first quarter suggested.

This is all super wonky stuff, and probably doesn't really affect the big picture much. The economy is sputtering along in so-so shape, and corrections of this magnitude don't change that. However, if seasonal adjustments really have departed from their historical values, it gives new meaning to the usual advice not to read too much into a single month's numbers. Maybe the new advice should be not to read too much into even a single season's numbers.

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Chances You Are Being Watched Rise to About 1 in 50

| Mon Jul. 9, 2012 10:09 AM EDT

The New York Times reports today on the spectacular rise of police requests for cell phone surveillance:

In the first public accounting of its kind, cellphone carriers reported that they responded to a startling 1.3 million demands for subscriber information last year from law enforcement agencies seeking text messages, caller locations and other information in the course of investigations.

....Because of incomplete record-keeping, the total number of law enforcement requests last year was almost certainly much higher than the 1.3 million the carriers reported to Mr. Markey. Also, the total number of people whose customer information was turned over could be several times higher than the number of requests because a single request often involves multiple callers.

In other words, it's likely that police at all levels have made surveillance requests on upwards of three or four million people. That's 2% of the adult population of the country.

Do law enforcement authorities really need to be tracking 2% of the adult population of the country? Color me pretty skeptical.

The Nation's Crime-Fighting Consumer Watchdog Is Off And Running

| Mon Jul. 9, 2012 10:05 AM EDT
President Barack Obama and CFPB director Richard Cordray.

Almost a year ago, President Obama broke liberal hearts everywhere by passing over Harvard law professor (and now Senate candidate) Elizabeth Warren for the director's spot at the new Consumer Financial Protection Bureau. Warren, who first conceived of the bureau, stood awkwardly at Obama's side as he named former Ohio attorney general Richard Cordray to head the CFPB. It was an inauspicious start to arguably the most promising piece of the massive Dodd-Frank financial reform law.

So how has the consumer bureau shaped up? In the latest issue of the Washington Monthly, editor John Gravois takes a deep plunge into the CFPB's first year. He returns to the surface with good news: The bureau remains the best bet for cracking down on predatory lenders, fine-print-hiding credit card companies, and other financial chicanery in the traditional financial markets and beyond.

Gravois paints a picture of the CFPB, in its early days, looking an awful lot like a fledgling tech start-up. The bureau's makeshift office was "a scene of scuffed carpet, boxes lying about, fluorescent light, and décor the palette of seasickness: greenish pale gray and bruised purple." Manning the gears at the CFPB weren't your typical Washington bureaucrats:

Into this vessel, an unusually young, bright-eyed, and idealistic corps of civil servants crammed itself steadily over the course of 2011. The staff grew from a handful to hundreds in a matter of months. Bullpens sprang up in any room much larger than a closet; at one point, there were senior economists working at card tables in the bureau’s heavily cannibalized main conference room.

In part because of its wonky but swashbuckling mission, and in part because of its association with Elizabeth Warren, the bureau has attracted an unusual mix of talent for the civil service. "I'm not someone who ever thought I would work for the government," says Audrey Chen, a New York information designer whose previous employers included several tech start-ups and Comedy Central. The bureau’s part-time assistant director of research is Sendhil Mullainathan, a MacArthur "genius" grant recipient, Harvard professor, and star of the emerging field of behavioral economics. And numerous other recruits came from high-powered consulting firms or data-intensive advocacy groups like the Sunlight Foundation or Pew, giving the bureau a high-nerdy, service-minded feel: like a McKinsey and Company for the 99 percent.

The bureau has since relocated to nicer, more tastefully colored digs—ironically, in the former headquarters of the Office of Thrift Supervision, a now-defunct bank regulator known for its kneeling deference to subprime behemoths such as Countrywide and Washington Mutual. But what exactly will the CFPB do? Top of the list: arming consumers with clearer, more succinct information about the mortgages or credit cards they acquire:

Ever since the bureau opened a year ago, it has been running experiments on new forms of disclosure—one- or two-page documents rather than novellas of fine print—under a program called "Know Before You Owe." By posting model disclosure forms online, tweaking them over time, and eliciting feedback from tens of thousands of consumers, the bureau has begun gathering its own data on how people actually process different contract information. Similarly, it has also begun datamining the customer complaints about financial products that it collects.

But that's just the beginning. The bureau's research department—which will be made up not only of economists, but also psychologists and marketing experts—is only just getting off the ground, but could one day have the capacity to oversee large-scale randomized trials. At the same time, the bureau is also amassing huge amounts of industry data. Soon, it will have access to account-level information from nine of the largest credit card issuers—a far larger database, in other words, than what any individual issuer has on its own.

So what will the bureau do with all this information? In much the same way that companies use all their data to figure out exactly how best to profit from their customers, the bureau will use data to decide exactly how best to hold the market to the standards outlined in Dodd-Frank—how to keep it fair, transparent, and competitive; how to make sure that it is not abusive or deceptive; and how to make sure it supplies consumers with information that is timely and understandable.

Make no mistake, the CFPB is vulnerable to the same ills that plagued the OTS, the Securities and Exchange Commission, and the other financial watchdogs who dozed off or looked the other way in the lead-up to the 2008 financial meltdown. The bureau could get too cozy with the outfits it regulates, known as "regulatory capture." A President Mitt Romney or some other future GOP commander-in-chief could sign GOP-passed legislation defanging the bureau, or could install a do-nothing director, scaling back the zeal needed to chase down law-breaking payday lenders or credit card companies. But for now, as Gravois shows, the bureau is off and running.

We're Still at War: Photo of the Day for July 9, 2012

Mon Jul. 9, 2012 9:21 AM EDT

US Air Force pararescuemen and Army Soldiers prepare to cross-load simulated casualties from a Marine MH-53 to an Air Force HC-130J Combat King II during a training exercise at an improvised landing strip in the Grand Bara Desert, Djibouti. The joint service exercise took place in support of Combined Joint Task Force-Horn of Africa. US Air Force photo by Tech. Sgt. Donald R. Allen.

Esquire Takes on Obama's "Lethal Presidency"

| Mon Jul. 9, 2012 9:04 AM EDT

Tom Junod takes on President Barack Obama's "lethal presidency" in the latest issue of Esquire. If you're interested in the war on terror, drone strikes, and targeted killings, it's a must-read. Here's a teaser to get you started:

Sure, we as a nation have always killed people. A lot of people. But no president has ever waged war by killing enemies one by one, targeting them individually for execution, wherever they are. The Obama administration has taken pains to tell us, over and over again, that they are careful, scrupulous of our laws, and determined to avoid the loss of collateral, innocent lives. They're careful because when it comes to waging war on individuals, the distinction between war and murder becomes a fine one. Especially when, on occasion, the individuals we target are Americans and when, in one instance, the collateral damage was an American boy. 

Read on. Junod does a service in the piece by refocusing the discussion from Anwar al-Awlaki, the American-born Al Qaeda propagandist who was killed in a drone strike last September, to Awlaki's 16-year-old, American-born son Abdulrahman, who was also killed in a drone strike later that month. What happens when a drone strike kills an American teenager? We already know: nothing. Here's another choice bit:

In every single utterance of the Lethal Presidency on the subject of its own lethality, it has offered the same narrative: that although it claims the power to kill, its combination of legal restraint and personal scruple makes the exercise of this power extremely difficult. The Lethal Presidency — and the Lethal President — wants us to know that killing is hard. It has spent months telling us this story because there is another story, a counterstory voiced off the record by administration members and confirmed by everything human beings have learned about killing in their bloody history:

That killing individuals identified as our enemies isn't hard at all.

That it's the easiest thing humans — particularly humans in power — can do.

The rest is here.

Food and Extreme Weather: It's the Soil, Stupid

| Mon Jul. 9, 2012 5:00 AM EDT

As the climate warms up and "extreme" events like heat waves and droughts become more common, what will become of food production? I started to examine that question in my last post, published Wednesday. A front-page article in Thursday's New York Times brought a stark reminder of why the topic is crucial. Reports the Times' Monica Davey:

Already, some farmers in Illinois and Missouri have given up on parched and stunted fields, mowing them over. National experts say parts of five corn-growing states, including Indiana, Kentucky and Ohio, are experiencing severe or extreme drought conditions. And in at least nine states, conditions in one-fifth to one-half of cornfields have been deemed poor or very poor, federal authorities reported this week, a notable shift from the high expectations of just a month ago.

The message from the Midwest is clear: Chemical-intensive, industrial-scale farming is vulnerable to spells of hot, dry weather—some of the very conditions we can expect to become common as the climate warms. In my last post, I argued that the solution to this problem favored by US policymakers—to keep industrial agriculture humming along with novel seeds engineered for "drought tolerance"—probably won't work.

What might? I think the answer lies outside of some Monsanto-funded university lab and right beneath our feet: in the dirt. Or, more, accurately, in how farmers manage their dirt.

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America's Dirtiest Beaches

| Mon Jul. 9, 2012 5:00 AM EDT

With temperatures in the triple digits in many parts of the United States and not far from it in the rest of the country, lots of people are seeking relief on the sandy shores. But before you head to the beach, you might want to make sure that cool ocean air isn't carrying a whiff of sewage first.

Each year, the Natural Resources Defense Council puts out a handy guide on water quality at ocean and Great Lake beaches around the US. The latest report finds that 8 percent of beach water samples collected by local officials in 2011 violated public health standards, leading public health agencies to issue advisories or shut beaches down entirely. That might not seem like a lot, but it adds up. Last year had the third-highest number of closures or advisories in the 22 years NRDC has published the report. Water quality was just as bad as it was in 2010, NRDC found.

"We're not seeing improvements the way that one would hope we would see," said Jon Devine, a senior attorney in NRDC's water program and the author of the report. "That indicates a need for national policies that target the biggest sources of beach pollution."

NRDC pulled reports on 200 of the most popular beaches in the country; we mapped them below.

Each point on this map represents a beach; click one to see the percentage of water samples tested that exceeded national pollution standards.


Often when we talk about beach closures, we use nice euphemisms like "pollution" or "bacteria." But what that really means is poop. Yes, when your beach is closed it's most often because waste—human and animal—has caused the levels of bacteria and other unhealthy pathogens to spike in that body of water. Much of that comes from storm-water runoff, when the rain carries sewage from overflowing septic systems, yards laced with Fido's droppings, and a variety of other sources to nearby waterways. Contamination can also come from wildlife or accidents at sewage treatment plants, but in the vast majority of cases the folks doing the water monitoring don't really know exactly where all the, well, shit came from.

Beach bacteria can cause gastrointestinal distress, skin rashes, and eye infections, or much worse diseases like meningitis and hepatitis.

The bacteria can cause gastrointestinal distress like nausea and diarrhea, skin rashes, and eye infections, or much worse diseases like meningitis and hepatitis. Dirty beaches are much more hazardous for the people with compromised immune systems or children, who are more likely to swallow the water while swimming. But even having a "clean" beach might not be enough. In fact, as NRDC points out, even beaches that meet the federal standards would still sicken as many as 1 in 28 swimmers.

The EPA is currently considering new standards for recreational water quality, but NRDC says the new rules aren't expected to be much better than the current 20-year-old rules. The group would also like to see new guidelines to help reduce the amount of storm-water runoff, through promotion of green roofs and other smart urban-planning techniques that will help stop urban and suburban pollution from making its way into our waterways.

But back to the report, since you probably want to know what beaches to avoid. Here are the worst offenders, the beaches where a quarter of the samples taken last year found levels of contamination above national standards:

  • Avalon Beach and Doheny State Beach in California
  • Winnetka Elder Park Beach and North Point Marina North Beach in Illinois
  • Constance Beach, Gulf Breeze, Little Florida, Long Beach, and Rutherford Beach in Louisiana
  • Beachwood Beach West in New Jersey
  • Woodlawn Beach and Ontario Beach in New York

And here are the best beaches—the ones that earned five stars:

  • Newport Beach, Bolsa Chica Beach, and Huntington State Beach in California
  • Gulf Shores Public Beach and Gulf State Park Pavilion in Alabama
  • Dewey Beach and Rehoboth Beach in Delaware
  • Ocean City, Maryland
  • Park Point Franklin Park, 13th Street South Beach Park Point, and Lafayette Community Club Beach in Minnesota
  • Hampton Beach State Park and Wallis Sands Beach in New Hampshire
  • South Padre Island in Texas

The House That Ate the Hamptons

| Mon Jul. 9, 2012 5:00 AM EDT

Ira Rennert's Fair Field

This weekend, Mitt Romney made a very profitable swing through the Hamptons. On the agenda: A trio of fundraisers, including a $50,000-a-head party at David Koch's $18 million estate and a shindig at financier Ronald Perelman's 57-acre estate, home to "the most outstanding private conifer collection in the United States." But those spreads have nothing on billionaire Ira Rennert's estate in Sagaponack (which, sadly for Romney, did not host a fundraiser). 

Thought to be America's largest inhabited residence, Fair Field cost $100 million to build and is worth at least $200 million. The 110,000-square-foot complex has 29 bedrooms, 39 bathrooms, three pools, two libraries, a bowling alley, a playground, a full theater, its own power plant, and a garage for 100 cars. The main building is 66,000 square feet, 28 times bigger than the average new house. It's the third-largest private home in America. (No. 1 is the 174,000- square-foot Biltmore Estate.) The mansion even inspired a novel, The House That Ate the Hamptons. Kurt Vonnegut called it "the greatest book ever written." In a rare public appearance, Rennert described his mega-mansion as "old age and loneliness insurance."

A local architect who approved the project praised its "restrained classic design." Or, as one local put it to MoJo's Josh Harkinson, "It's a fucking monster!" Fair Field is now at the heart of a new controversy between Rennert and his slightly less affluent neighbors, who have accused him of "practicing class warfare" with his noisy private helicopters. Seriously. Check it out.

The Dirty Projectors' New Harmony

| Mon Jul. 9, 2012 5:00 AM EDT
The Dirty Projectors.

The Dirty Projectors
Swing Lo Magellan
Domino Records

I think it's important to note that while digging up some background for my review of the Dirty Projectors' latest, out this week, I ended up transfixed by Nicki Minaj's very pastel and vaguely schizophrenic video for "Stupid Hoe." I didn't travel down this rabbit hole via run-of-the mill internet procrastination. David Longstreth—singer, songwriter, multi-instrumentalist, and notorious "musical overachiever" from the Dirty Projectors—has described it as the best music video he's ever seen, and I decided I had to re-watch it. You know, for research. 

Minaj, who turns the mirror on pop music by caricaturing all of its multiple personalities at once, thrives in complexity. Whatever Longstreth is channeling in the Dirty Projectors is too idiosyncratic for anyone to successfully pin down, and the "sounds like" descriptor thus summons up artists as bafflingly disparate as Steve Reich, Beyoncé, Phish, and Talking Heads. But this makes sense; ever since 2002, when Longstreth recorded his first album, The Graceful Fallen Mango, as a freshman at Yale, his meticulously orchestrated music has (like Minaj's)  always paid special reverence to the complexity of art.

Quote of the Day: Swiss Bank Account Edition

| Sun Jul. 8, 2012 8:19 PM EDT

From Maryland Governor Martin O'Malley, expressing his opinion of Mitt Romney's love of Alpine banks:

I’ve never known of a Swiss bank account to build an American bridge, a Swiss bank account to create American jobs, or Swiss bank accounts to rebuild the levees to protect the people of New Orleans. That's not an economic strategy for moving our country forward.

I believe that O'Malley has won the competition for most references to "Swiss bank account" in a single sentence. That was the contest everyone was playing this morning on the Sunday talk shows, wasn't it? I'd know for sure, but I spent the morning watching tennis instead.

By the way, I have it on good authority that Roger Federer has placed his Wimbledon winnings in a Swiss bank account. What's his excuse?