Kevin Drum

Quote of the Day: On the Uses of Rudeness

| Wed Aug. 11, 2010 8:25 PM EDT

From Paul Krugman, supplying some unsolicited advice to White House press secretary Robert Gibbs:

Rudeness at the proper moment can serve a purpose — as I hope I’ve demonstrated over the years.

Roger that.

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Independents Rule

| Wed Aug. 11, 2010 5:05 PM EDT

Via Annie Lowrey, here's a Pew poll measuring knowledge of current events:

I guess you can try to draw some conclusions from the fact that Republicans are more likely to know that Greece got a bailout from the EU while Democrats are more likely to know who the prime minister of Great Britain is. But I'm not sure what. What's more interesting, I think is that independents do better than partisans of either stripe on virtually every question. The differences aren't huge, but they're quite clear.

What makes this odd is that independents are traditionally stereotyped as being less interested in politics and more apathetic than partisans. And maybe they are. But for a bunch of disengaged couch potatoes, they sure seem to know a fair amount about current affairs.

BP's Deep Secrets

| Wed Aug. 11, 2010 3:36 PM EDT

Julia Whitty reports on the ongoing cleanup of the Gulf oil spill:

"BP's two prime cleanup methods — setting out boom and using dispersant — completely undermine each other," [says Carl Safina, marine conservationist and cofounder of the Blue Ocean Institute]. The containment and absorbent boom that BP is deploying around beaches and marshes — largely ineffectively — is designed to do just that: contain and absorb oil. But the Corexit dispersant BP has flooded onto the leaking wellhead 5,000 feet down, and sprayed from the air onto the surface — some 2 million gallons in total — is designed to break up the oil. "Which one is it?" asks Safina. "Do you want to contain it or disperse it? It makes absolutely no sense to be doing both. Let's face it, with pollution, you count your lucky stars if you have what's called point-source pollution, that is, a single identifiable localized source of pollution, like the Deepwater Horizon. So what's BP doing with that? They're turning it into the worst pollution nightmare of them all: non-point-source pollution."

That's because untreated oil quickly rises to the surface, where it can be skimmed with relative ease. But treated with dispersant, it becomes a submerged plume, unlikely to ever float to the surface, and destined to migrate through underwater currents to the entire Gulf basin and eventually the North Atlantic. "Oil is toxic to most life," says Steiner. "And Corexit is toxic to most life. But the most toxic of all is oil that's been treated with Corexit. Plus, dispersants may well kill the ocean's first line of defense against oil: the natural microbes that break oil down for other microbes to eat." The EPA has never seriously examined Corexit's effects on marine life (see "Bad Breakup"). Now it'll get the biggest and baddest field experiment of all time, as the flora and fauna of the shallows and the deep scattering layer collide with the dispersed plumes.

Julia's piece, as a friend jokingly says, isn't written in the inverted pyramid style. It's a close look not at the surface of the Gulf — the part everyone sees — but at its deepest reaches, where dispersed oil is likely to remain for years or decades, interrupting food chains and delicate ecologies in ways we can only begin to guess at. This is the stuff BP would just as soon no one pay attention to, and it's not a story that can be easily summarized. But if you really want to understand what's happening in the Gulf, put aside a few minutes and read the whole thing.

And when you're done? Just click here for the rest of our coverage of the BP spill from this month's issue of the magazine.

Yes, Google Is a Little Bit Evil

| Wed Aug. 11, 2010 2:03 PM EDT

So what's the story on the Google/Verizon proposal that would allow carriers to offer high-speed networks to favored customers at a higher price than standard internet access? Would it spell the end of net neutrality?

There are two parts of the proposal. The first would essentially eliminate the principle of net neutrality over wireless networks. So within that piece of the internet, the answer is yes.

But what about the wireline network? There, the VG proposal is a little more subtle. Basically, they suggest that the current internet — which their document calls the "public internet" — should remain governed by strict net neutrality that treats everybody equally. However, carriers would be allowed to construct complementary networks that discriminate freely. The subtext here is that while well-heeled corporations could indeed buy better service, the public internet — i.e., the one we all know and love today — would be unaffected.

So: is this true? David Post is a strong supporter ("indeed, I'm a religious zealot") of the current end-to-end design of the internet, a design that essentially enforces net neutrality at the protocol level by placing all processing at the endpoints of the network and allowing the network itself to do very little aside from dumb transport of bits. Here's his take:

The problem is that there are many things an E2E inter-network (like the one we have) can’t do that people want their inter-network to do and would pay to have it do, and businesses serving those people want to provide those things. Things like guaranteed delivery of packets; the E2E network can’t promise that your packet will arrive at its destination, because that would require the network to keep track of your transmission as it moves along....[etc.]

The problem then boils down to: is there a way to preserve the E2E network — the open, nondiscriminatory inter-network — while simultaneously allowing people to get the services they want? Now in fact, that’s not exactly the question, because we know the answer to that one. There are already thousands, hundreds and hundreds of thousands, of non-E2E networks that do lots and lots of internal processing and provide lots and lots of services the E2E Internet does not provide. Your cell phone provider’s network, for instance. Most corporate wide area networks, for instance. Obviously, if Verizon wants to build a separate network and offer all sorts of glorious services on it, it can do so. The real net neutrality problem is this: if Verizon uses the Internet’s infrastucture to provide those services, will that somehow degrade the performance of the E2E Internet or somehow jeopardize its existence? Put another way: if Verizon can figure out a way to provide additional services to some of its subscribers using the Internet infrastructure in a way that does not compromise the traffic over the E2E inter-network, why should we want to stop them from doing that?

I think this is a good way of putting the question, though I'd expand it a bit. First, there's a technical question: can Verizon (and other carriers) segregate traffic over current backbones without degrading the performance of other traffic? I'm skeptical on fundamental grounds, but as Post says, there's always the chance that "technological innovation can do things that I usually cannot foresee." And it's certainly true that content delivery vendors like Akamai already provide high-speed access for a fee by pushing the boundaries of the current architecture of the internet as far as it will go. So maybe Post is right. But there's also an economic question: if carriers put all their capital development into high-speed dedicated networks, does this mean they'll simply let the current public internet deteriorate naturally as traffic increases but bandwidth doesn't keep up? That seems pretty likely to me.

If you're a pure libertarian, your answer is, "So what?" If there's a demand for high-performance public access, then the market will deliver it. If there's not, then there's no reason it should. But there's a collective action problem here: if the public backbone deteriorates, there's nothing I can do about it. As an individual, obviously I can't afford the kind of dedicated high-speed network that Disney or Fox News can. But the public backbone is a shared resource. Unless lots of my fellow users are willing to pay for high-speed service, I can't get it. And if access to most of the big sites is fast because they're paying for special networks, what are the odds that people will care all that much about all the small sites? Probably kind of slim.

Again: who cares? If most people don't care much about high-speed access to small sites as long as they have fast access to the highest-traffic sites, then that's the way the cookie crumbles. There's no law that says the market has to provide everything Kevin Drum wants.

Still, there are real benefits to providing routine, high-speed internet infrastructure to everyone. It means that small, innovative net-based companies can compete more easily with existing giants. It means schoolchildren can get fast access to a wide variety of content, not just stuff from Microsoft and Google. It means we have a more level playing field between content providers of all kinds. Sometimes universal access is a powerful economic multiplier — think postal service and electricity and interstate highways — and universal access to a robust internet is to the 21st century what those things were to the past. If, instead of an interstate highway system, we'd spent most of our money building special toll roads for Wal-Mart and UPS, would that have been a net benefit for the country? I'd be very careful before deciding that it would have been.

For now, then, count me on the side of a purer version of net neutrality, in which the backbone infrastructure stays robust because everyone — including the big boys — has an incentive to keep it that way. I'm willing to be persuaded otherwise, but Verizon and Google are going to have to do the persuading. And it better be pretty convincing.

A Nuclear Iran

| Wed Aug. 11, 2010 12:12 PM EDT

Here is Jeffrey Goldberg on the likely consequences of an Israeli strike on Iran's nuclear sites, which he estimates is 50% likely within the next year:

They stand a good chance of changing the Middle East forever; of sparking lethal reprisals, and even a full-blown regional war that could lead to the deaths of thousands of Israelis and Iranians, and possibly Arabs and Americans as well; of creating a crisis for Barack Obama that will dwarf Afghanistan in significance and complexity; of rupturing relations between Jerusalem and Washington, which is Israel’s only meaningful ally; of inadvertently solidifying the somewhat tenuous rule of the mullahs in Tehran; of causing the price of oil to spike to cataclysmic highs, launching the world economy into a period of turbulence not experienced since the autumn of 2008, or possibly since the oil shock of 1973; of placing communities across the Jewish diaspora in mortal danger, by making them targets of Iranian-sponsored terror attacks, as they have been in the past, in a limited though already lethal way; and of accelerating Israel’s conversion from a once-admired refuge for a persecuted people into a leper among nations.

Well I'm sold. Who wouldn't be? But this is basically all boilerplate: everyone acknowledges that an Israeli attack on Iran would carry massive blowback. What's more, Israel is only barely capable of carrying out such an attack since Iran's facilities are at the far edge of the combat radius of its F-15 and F-16 jets. So why consider it? Here's Goldberg's summary:

Israeli policy makers do not necessarily believe that Iran, should it acquire a nuclear device, would immediately launch it by missile at Tel Aviv....The challenges posed by a nuclear Iran are more subtle than a direct attack, Netanyahu told me. “Several bad results would emanate from this single development. First, Iran’s militant proxies would be able to fire rockets and engage in other terror activities while enjoying a nuclear umbrella.....Second, this development would embolden Islamic militants far and wide, on many continents, who would believe that this is a providential sign, that this fanaticism is on the ultimate road to triumph.

“You’d create a great sea change in the balance of power in our area,” he went on. An Iran with nuclear weapons would also attempt to persuade Arab countries to avoid making peace with Israel, and it would spark a regional nuclear-arms race. “The Middle East is incendiary enough, but with a nuclear-arms race, it will become a tinderbox,” he said.

Other Israeli leaders believe that the mere threat of a nuclear attack by Iran—combined with the chronic menacing of Israel’s cities by the rocket forces of Hamas and Hezbollah—will progressively undermine the country’s ability to retain its most creative and productive citizens. Ehud Barak, the defense minister, told me that this is his great fear for Israel’s future....“Our young people can consciously decide to go other places,” if they dislike living under the threat of nuclear attack. “Our best youngsters could stay out of here by choice.”

I assume this is the best case they can make, and it's pretty unconvincing. In fact, the only compelling part of it is the part that's always been most compelling: that it might spark a nuclear proliferation nightmare. "If Iran gets a nuclear weapon," Hillary Clinton declared a few months ago, "then other countries which feel threatened by Iran will say to themselves, ‘If Iran has a nuclear weapon, I better get one, too, in order to protect my people.’ Then you have a nuclear arms race in the region." Saudi Arabia is usually touted as the most likely country to follow up, followed by Turkey.

This is what I was talking about when I said that I'd believe American attitudes toward foreign adventurism had changed only "when something actually happens overseas, a president tries to build support for intervention, and Congress and the public—including Joe Klein and me—balk." But I'm not sure. Will Joe Klein and I — and most of the rest of the country — balk at this if and when the time comes? Probably. But I'd be less than honest if I said I knew for sure.

Goldman Sachs Still in the Money

| Wed Aug. 11, 2010 10:40 AM EDT

Back when the financial reform bill was passed, I said that if bloated finance industry profits declined over the next few years that meant reform had probably worked. If not, not. It's still too early to know if that's going to happen, but today the LA Times reports on a bellwether:

As Wall Street scrambles to find the best and most profitable way to operate under the new financial reform law, Goldman Sachs Group Inc. — the firm that was expected to suffer the most under the legislation — could emerge practically unscathed.....Top Goldman executives [have] privately advised analysts that the bank did not expect the reform measure to cost it any revenue.

....Richard Bove, a bank analyst at Rochdale Securities, said he had changed his view of the law's effect on Goldman. "I thought this company was going to be really harmed by this bill; now I've figured out that it's not going to happen," he said. "They should win big here."

....Some on Wall Street had predicted the reform would trigger an exodus of traders and executives to hedge funds and other private firms that will not fall under the jurisdiction of the new regulatory regime. But with the adaptations the banks have been making, they have so far persuaded most of those employees to stay, industry insiders say.

Among those staff members, "some of the anxiety that was tied to this bill really dissipated after it was signed," said Ron Geffner, head of the financial services group at New York law firm Sadis & Goldberg.

Who knows? Maybe Goldman really is just smarter than all the other guys, and they're going to prosper even as the entire industry shrinks. Anything is possible. But this is really not a healthy sign.

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Good Morning!

| Wed Aug. 11, 2010 10:00 AM EDT

The Washington Post surveys the global economic scene following yesterday's anemic Fed action:

Overnight in Asia, China released data showing that its economy was beginning to cool rapidly....The government also announced a looming economic problem: the inflation rate spiked 3.3 percent in July, amid flooding that disrupted food supplies.

....In Europe, the Bank of England lowered its GDP growth forecast for 2011 to 3 percent annually, down from 3.4 percent, saying the country faces a "choppy recovery."

....In the morning, there was more bad news from a third continent: the United States. The Commerce Department said the trade deficit ballooned more than analysts expected in June, after the stronger dollar made it easier for people in the U.S. to snap up cheaper exports from countries such as China. The gap widened to $49.9 billion in June, up from a revised $42.0 billion in May.

No worries, though. The Fed and congressional Republicans will do something eventually. Maybe. Best to wait until the elections are over, though.

Overdraft Justice

| Wed Aug. 11, 2010 12:17 AM EDT

Here's a tidbit of good news:

Wells Fargo & Co. should pay about $203 million to customers who say the bank manipulated debit-card transactions without their knowledge to increase revenue from overdraft fees, a federal judge ruled....Wells Fargo changed the way it treated customers' daily debit transactions and cash withdrawals in December 2001, according to the lawsuit filed in 2007. Transactions with the highest dollar amount posted first, rather than in the order they occurred.

I'm pretty sure this is the result of a suit brought against Wachovia, which was purchased by Wells Fargo a couple of years ago. In any case, the practice of reordering debit card transactions has been fraudulent from the beginning, and I'm glad to see a judge doing the right thing here. (More about overdraft reordering here and here.) Hopefully the award won't get knocked down by an appellate court.

The Long-Term Unemployed

| Tue Aug. 10, 2010 7:58 PM EDT

Matt Yglesias put up a chart today showing that unemployment is high among the less educated but pretty low among the well educated. Then this comment:

Virtually every single member of congress, every senator, every Capitol Hill staffer, every White House advisor, every Fed governor, and every major political reporter is a college graduate. What’s more, we have a large amount of social segregation in the United States — college graduates tend to socialize with each other. And among college graduates, there simply isn’t an economic crisis in the United States.

Here's another chart that, if anything, makes this point even more strongly: it shows the rate of long-term unemployment by educational level. I had to cobble it together with an interpolation or two,1 but I think it's pretty close to the mark, and what it shows is that for those with a high school diploma or less, the long-term unemployment rate is about 5-6%. If this is the social class you hang out with, then out of a circle of a few dozen friends and acquaintances you probably personally know four or five who are currently out of work, and of those perhaps two or three who have been out of work for six months or more and are getting truly desperate.

But if you're a college grad? Obviously this varies from person to person, but chances are that you know only a couple of people who have been out of work for even a couple of months and nobody who's been out of work for six months. Or, at most, maybe one. And chances are that even that one has a way better safety net — savings, parents, credit cards, etc. — than the blue collar folks who have been out of work that long.

Being out of work for a few weeks — or even a couple of months — is bad but not debilitating. It's long-term unemployment that makes people profoundly fearful and discouraged. But among the college-educated crowd, it barely exists. The fear just isn't there, and that makes it awfully easy to ignore.

1I'm not sure why BLS doesn't make this stuff more easily available. If anyone has the raw data for this and can provide exact numbers, let me know.

Credit Reports and Employers: A Story From the Trenches

| Tue Aug. 10, 2010 4:22 PM EDT

Normally I omit names when I publish email from readers. But this one comes from Michael David Smith, and as you'll see, knowing his name is an important part of the story. So, with his permission, here's his email:

I hope you'll keep hammering away at the credit reporting agencies. Several years ago my then-boss mentioned to me off-handed, "We hired you even though you have terrible credit." I was rather stunned and said, "What are you talking about? I have perfect credit, and even if I didn't, how would you know?" He then informed me that they did a background check on me before hiring me, got a report saying I had terrible credit, but decided I was their best candidate anyway. I asked to see the report they had for me, and my boss dug it out of the HR files. It listed my name (which is a very common name shared by thousands of Americans), four different social security numbers, and about two dozen different credit cards I had allegedly fallen behind on.

So I called the credit reporting agency (I think it was Experian). It took forever to actually get a person on the phone who knew who knew what he was talking about, but when I finally did, the guy said, "Oh, yeah, that happens all the time with people who have common names. Your credit got mixed up with other people who have the same name as you. There's really nothing we can do about it."

Eventually, I filled out all sorts of forms contesting all the bad credit they had attributed for me and got them to send me a clean credit report that didn't mix me up with other Michael Smiths. But it was a long, painful process.

I think this is about par for the course for credit reporting agencies. Basically, they don't really give a shit if their information is correct. It's always seemed to me that you should be able to sue them for libel if they distribute false information about you, but outside my own personal fantasyland I assume that's impossible.