2011 - %3, April

Eat the Rich

| Wed Apr. 6, 2011 1:20 PM PDT

Megan McArdle:

As the angry debate over Ryan's budget plan wears on, one suggestion I'm seeing over and over is that we should just raise personal and corporate income tax rates back to where they were in the 1950s, when marginal tax rates were 50% on corporate income and up to 90% on personal income.

Really? Who's saying that? Anybody of any significance?

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Bold Thinking on Climate Change

| Wed Apr. 6, 2011 11:56 AM PDT

Medicare and the federal deficit are long-term problems. Global warming is also a long-term problem. Paul Ryan has been widely hailed as courageous for proposing a 100% conservative solution to the former, so Matt Yglesias wants some props for proposing a 100% liberal solution to the latter:

Yes this is a “politically unrealistic” agenda, but why is that different from the widely praised “boldness” and “bravery” and “adult” nature of various deficit hawk concepts? Can’t we get a commission? A grant from Pete Peterson? Something? It seems to me that a politician who wrote down a Ryan-style “Climate Roadmap” would find him or herself dismissed as a leftwing crackpot pushing wishful thinking rather than a bold thinker. It’s infuriating.

Yes. Yes it is.

The Algebra II Blues

| Wed Apr. 6, 2011 10:56 AM PDT

This story has been tickling the back of my mind ever since I first saw it, but I haven't blogged it yet. So here it is. I knew that many school districts have started requiring kids to pass algebra in order to get a diploma, and I've always had mixed feelings about this. But a few days ago the Washington Post informed me that things have gone far beyond that:

Of all of the classes offered in high school, Algebra II is the leading predictor of college and work success, according to research that has launched a growing national movement to require it of graduates.

In recent years, 20 states and the District have moved to raise graduation requirements to include Algebra II, and its complexities are being demanded of more and more students.

....One of the key studies supporting the Algebra II focus was conducted by Anthony Carnevale and Alice Desrochers, then both at the Educational Testing Service. They used a data set that followed a group of students from 1988 to 2000, from eighth grade to a time when most were working. The study showed that of those who held top-tier jobs, 84 percent had taken Algebra II or a higher class as their last high school math course. Only 50 percent of employees in the bottom tier had taken Algebra II.

....But not everyone is convinced that Algebra II is the answer. Among the skeptics is Carnevale, one of the researchers who reported the link between Algebra II and good jobs. He warns against thinking of Algebra II as a cause of students getting good jobs merely because it is correlated with success. “The causal relationship is very, very weak,” he said. “Most people don’t use Algebra II in college, let alone in real life. The state governments need to be careful with this.”

This is one of the things that makes me so dubious of the ed reform community. Algebra II! As a minimum requirement to hold a high school diploma! We're literally saying that if you can't factor polynomials, manipulate complex numbers, do matrix arithmetic, and understand basic trig, then you can't get a high school diploma? Really?

This effort is apparently being spearheaded by Achieve, "a group organized by governors and business leaders and funded by corporations and their foundations, to improve the skills of the workforce." OK. But I'm willing to bet a significant amount of my income that there's no causal relation at all between Algebra II and success in holding a top tier job. The only correlation is that smart kids tend to take Algebra II and smart kids also tend to go to college and end up in top tier jobs. Algebra II itself has nothing to do with it.

I'm a math nerd — or at least I used to be until I discovered I wasn't as smart as I thought I was — but this seems crazy even to me. What say you, commentariat?

Transocean Execs Donate Part of Bonuses, Keep More

| Wed Apr. 6, 2011 10:41 AM PDT

Five Transocean executives got massive bonuses for their performance and safety record in 2010. A Transocean Annual Report called 2010 "the best year in safety performance in our company's history," which seems patently false (or incredibly callous) in light of the April Deepwater Horizon explosion that killed 11 workers and spawned the second-largest oil spill in history. Public outrage has motivated executives to donate $250,000 of their 2010 bonuses to the families of workers who died in the explosion. But $250,000 is just the part of the bonuses that's directly linked to safety. There's a lot of compensation they're getting for 2010 performance that they're keeping. From Forbes

The five executives will retain about $650,000 in cash incentives... They will also retain much more valuable “long-term incentives” in the form of stocks and options... CEO Steven L. Newman will donate about $93,500 to Transocean’s Deepwater Horizon Memorial Fund. Newman received a $900,000 salary in 2010 that ballooned to $6.6 million through categories of remuneration described as bonuses, incentives, stocks, options, and allowances. For 2011, Newman received a 22 percent raise in his base salary—an additional $200,000.

I'd be more able to applaud the executive's donation of $250,000 to the workers' families if it weren't such a small part of their total compensation package. It makes it even harder to be sympathetic when the reason (the Annual Report says) the executives were compensated as they were was because they had to spend so much time and effort dealing with the Deepwater Horizon disaster. In reading the Annual Report, the company seems to take little responsibility for the rig's destruction, and puts yearly profits far ahead of any ongoing environmental costs.

 

Will the Public Blame Paul Ryan if There's a Shutdown?

| Wed Apr. 6, 2011 10:14 AM PDT

The countdown to a government shutdown has begun. House Speaker John Boehner (R-Ohio) and Senate Democrats have still not reached an agreement on funding the government, much of which will stop functioning on Friday if no deal is struck. Recent polling indicates that voters are slightly more inclined to blame Democrats than Republicans for a government shutdown, though an earlier poll showed they'd be split. But the GOP may have just shot itself in the foot by deciding to introduce Paul Ryan's controversial, entitlement-slashing budget plan for next year the very same week they move towards a shutdown. Though Ryan's 2012 budget isn't germane to the current negotiations—which concern funding the government for rest of 2011, using a bill known as a "Continuing Resolution"  (CR)—people who aren't familiar with the intricacies of the budget negotiations may be inclined to lump both proposals together.  

Even House Republicans admitted as much on Tuesday. As I reported in my story today, some GOPers seem outright baffled by Boehner's decision to tackle both 2011 and 2012 budgets simultaneously. Rep. Lee Terry (R-Idaho) admitted as much when I spoke with him on Tuesday, after Ryan officially released his plan. "A lot of people back home are confusing the CR with the [2012] budget," he said. Terry appeared confident that voters would ultimately figure out the difference—and credit the GOP for being bold enough to tackle both. But I'm not so sure that will happen.

What's more, Democrats may even try to encourage this confusion in the public's mind, at least indirectly. They've already pointed to Ryan's budget as just more evidence of GOP extremism. And, in fact, Boehner may have pushed Ryan's plan this week in hopes of appeasing his party's right-wing if and when he finally comes to a CR deal with the Democrats. Certainly, if there's a shutdown, Democrats will try to drive the Ryan connection home to the public. 

How to Unsuck Corporate Jargon

| Wed Apr. 6, 2011 10:00 AM PDT

Somewhere, a grammarian cries whenever an office email contains jargon like "upskill" or "calendarize." Fortunately, Mule Design Studio's Unsuck-It.com transforms business twaddle into sparse Hemingway prose—or at least English. Here, for example, is a soul-crushing bizspeak sentence translated into something E.B. White might recognize:

"We can't boil the ocean, so let's start by bucketizing the deliverables and picking the low-hanging fruit."

Unsucked: "We can't waste time, so let's prioritize what we can easily accomplish."

More corporate argot defanged for your amusement and dismay:

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Huckabee: No Love for Wiped-Out Hard Drive Story

| Wed Apr. 6, 2011 9:20 AM PDT

Mike Huckabee read the Mother Jones story on the destruction of the records from his time as governor of Arkansas. He didn't like it.

Speaking to US News and World Report yesterday, Huckabee slammed Mother Jones. "[Mother Jones] doesn't pretend to be a real news outlet, but a highly polarized opinion-driven vehicle for all things to the far left," he said. "You expect that wolves will eat meat."

Here's part of Huckabee's defense:

The absurd insinuation that my office "destroyed" state records or that records are "missing" is the same old political canard that was attempted years ago and failed then for the same reason it will fail now—it's factually challenged.

As we reported, these are not "absurd insinuations." What happened to Huckabee's gubernatorial records was documented in this memo from the Arkansas Department of Information Systems. It confirms that the hard drives containing the records were erased and then destroyed. Copies of the records were placed in the hands of former Huckabee staffer Brenda Turner, who is now the communications director for a Christian greeting card company. Turner has not said what she did with the backups. She refused to talk to us. Here's the relevant part of the 2007 document, which was addressed to the outgoing Gov. Huckabee:

We also reported that the state of Arkansas had to shell out $335,000 to replace the hardware that the Huckabee administration had destroyed. Huckabee doesn’t deny this. But he blames the decision to spend that money on his Democratic successor, Gov. Mike Beebe, who "wanted all new equipment, even though the existing hardware was operable and modern." Again, Huckabee is contradicted by the above mentioned memo, which notes that "the drives have been subsequently crushed under the supervison of a designee of your office." That is, the drives were destroyed on Huckabee's watch, not Beebe's.

The US News and World Report reports says the Mother Jones story "suggests a sinister motive," which may well be true, to the extent that signing off on the destruction of political history seems a little shady. Can Huckabee—a potential presidential contender who extols the cleansing virtue of transparency—explain why these records were destroyed, and what happened to the backups handed to his aide? He's scheduled to appear on The Daily Show tonight. Perhaps he ought to show up with Brenda Turner and tell all—whether it's funny or not.

Grasping Reality For Real

| Wed Apr. 6, 2011 9:16 AM PDT

Ezra Klein makes an important but wonky point today about Paul Ryan's plan to cap Medicare costs: instead of capping growth at GDP + 1%, it caps growth at the rate of inflation:

Here’s the catch: The way GDP gets calculated includes inflation. So think of GDP+1% as the rate of inflation plus the rate of productivity growth plus one percentage point. With me so far?

....So let’s say that in 2024, inflation was 2 percent, productivity growth was 2 percent, and health-care costs grew at 6 percent. Under Ryan-Rivlin, Medicare and Medicaid would grow at 5 percent — a bit less than health-care costs in general, but not that much less. Under Ryan, Medicare and Medicaid would grow at 2 percent — beneficiaries would have to make up the difference.

This can all seem like so much gobbledygook, so here’s the bottom line: it’s totally unrealistic — and I say that as a cost control optimist. Look at the other health-care plans that have been proposed: none of them suggest they can get the growth of Medicare or Medicaid down to inflation*. But that’s where a lot of Ryan’s savings come from. Which is to say, either those savings aren’t real or we’re assuming America is going to abandon seniors and the disabled in a way that has no recent precedent.

This is all in service of Ryan's real goal. His document isn't primarily concerned with the federal deficit or with Medicare reform. The key goal in his budget is to reduce federal spending to 18% of GDP. Everything else is simply shoehorned in to meet that goal.

But it's an absurd goal. Over the past 30 years, federal spending has averaged about 21% of GDP. And since America is aging, even if we control costs carefully we're going to need to spend more money on the elderly. This isn't because we're being wildly generous toward them, it's simply because there are going to be more of them. So any realistic budget needs to assume that spending will slowly increase over time, ending up at maybe 25% of GDP a couple of decades from now. Ryan's 18% goal is just pie in the sky pandering to his tea party base.

Matt Yglesias agrees, "But I think it does set the stage in which the White House or someone in congress ought to produce a pie-in-the-sky counter budget." But why follow Ryan's pie-in-the-sky approach? Call me a crazy idealist, but why not propose something genuinely serious instead? Start with letting the Bush tax cuts expire. Add in Social Security reform that increases payroll tax revenue by about 1% of GDP and trims benefits by about 1% of GDP. Set a goal of cutting defense spending to 3% of GDP. Federalize Medicaid. Build on the reforms of ACA to rein in Medicare growth in a reasonable way starting now, a la Ryan-Rivlin. Raise additional revenue via a carbon tax and revenue positive tax reform. Agree on some genuinely bipartisan program cuts in areas like ethanol subsidies, farm support, and some of the least effective social programs. Keep PAYGO in place to restrain the growth of discretionary spending.

Something along these lines would be a genuine proposal. It takes from both left and right, it's not balanced entirely on the backs of the poor, and it deals realistically with the needs of an aging nation. And there are plenty of blueprints to pick and choose the details from. Politically it might be wiser to either stay quiet or else just throw out a Ryanesque piece of PR bait. But it would be more responsible to actually tackle the problem. If not now, when?

UPDATE: Ryan's plan caps Medicare growth at the rate of inflation, not inflation + 1% as I originally wrote. I've corrected the text.

How to Be Serious (Really!)

| Wed Apr. 6, 2011 8:46 AM PDT

Just as a willingness to tackle Medicare (and healthcare costs in general) is the litmus test for being serious about the long-term federal deficit, there's a litmus test for being serious about the medium term deficit too. Here it is: you should be in favor of letting the Bush tax cuts expire in 2012. All of them.

There was a case for keeping them in place last year since the economy was still fragile. By 2013 this won't be true any longer, and letting the cuts expire would wipe out half of the federal deficit at a stroke over the next decade. What's more, since we'd just be reverting to the same tax rates we had in the 90s, when the economy boomed, we know that this would do no harm to economic growth.

This ought to be the first question you ask any deficit hawk. If they're OK with letting the cuts expire, then the conversation can continue. If not, they're just preening.

British Royal Family Submits to Sharia

| Wed Apr. 6, 2011 7:30 AM PDT

Right-wing opponents of the non-existent threat of Sharia law frequently warn that, if we don't act now, the United States will quickly turn into Western Europe—which, they say, has succumbed to the slow creep of Islamic law. I thought that sounded like a lot of empty fearmongering, but then I saw this:

[The] Duke of York, Prince Andrew Albert Christian Edward, who is well known by the name Prince Andrew calls on Indonesia to plot sharia financing in the country.

During the meeting between Prince Andrew and Indonesian Finance Minister Agus Martowardojo on Wednesday, both parties are planning to discuss several policies on financial services including future sharia financing in Indonesia and partnership between UK and Indonesia in the development of financial market and protection toward customers' assets.

Sound the horn of Gondor! It's worse than we thought.

Well, that, or maybe permitting Sharia-compliant finance is really just a smart business decision, allowing UK companies to stay competitive in new markets. Just throwing that out there.