Kevin Drum - January 2009

Today's Two Minutes Hate

| Sat Jan. 31, 2009 12:35 PM EST

TODAY'S TWO MINUTES HATE....Here's the latest reason to hate credit card companies: Shop at Wal-Mart, obviously a sign of financial distress, and your credit limit gets lowered. Hallelujah!

This is from American Express, which has now decided to hunker down and simply lie about their habit of doing this. Compare and contrast the following news accounts. When Kevin Johnson returned from his honeymoon last year he got a letter from Amex saying, "Other customers who have used their card at establishments where you recently shopped have a poor repayment history with American Express." Here's what they told the Atlanta Journal Constitution about this in December:

"We're just doing this to manage risk," said Lisa A. Gonzalez, an American Express spokeswoman. She declined to say which retailers or mortgage companies are associated with consumers with higher default rates. She said it makes sense to examine these factors because "customers who have loans outstanding with certain lenders or customers who make transactions with certain merchants tend to have a higher proportion of credit issues or a higher probability of default."

And here's what they told the New York Times this week:

"The letters were wrong to imply we were looking at specific merchants," said Susan Korchak, a company spokeswoman....Now, the company says that there never was such a list. So what about the language in its letters to cardholders, which calls out particular "establishments" where cardholders had shopped, I asked. Well, apparently that was all just a big misunderstanding, despite the number of people who must have been in on drafting the notes in the first place.

So: a month ago monitoring your transactions with "certain merchants" was a legitimate way of managing risk. This month the story is that they were never doing it in the first place. You betcha.

Bastards. I really hate these guys and their entire sleazy industry. More here. Kevin Johnson's website is here.

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*Picking Up

| Sat Jan. 31, 2009 12:49 AM EST

PICKING UP....David Cay Johnston is unhappy with the Obama press operation. It took a week for anyone at the White House press office to pick up the phone when he called, and when someone finally did things didn't get much better:

After a full week of such calls, a human being answers. But Ben LaBolt immediately bristles when asked to spell his name, refuses to give his job title, and says he is going "off the record" until I stop him to explain that the reporter grants that privilege, not the other way around — a basic journalistic standard that LaBolt seems unaware of. He soon hangs up without even hearing what I called to ask about.

A return call is answered by Priya Singh, who spells her name when asked, but does not know (or will not say) what her job title is and several times describes requests for information about how the Obama administration press office is operating as a "complaint" which she would pass on. She says she is not authorized to comment, though she at one point tells me she is a spokesperson.

....My questions to LaBolt and Singh prompted a return phone call the next day from Nick Shapiro, who spelled his name, but had to be prodded several times to give his job title: assistant press secretary.

During our brief conversation, Shapiro, like LaBolt (whose name Shapiro did not recognize), started one sentence with "off the record." Told that the journalist grants the privilege, and that none would be granted here, Shapiro expressed surprise. His surprise was double-barreled, at both the idea that the reporter issues any privilege and that any reporter would decline to talk "off the record."

"Off the record" has become a cancer. It's now practically a default presumption, rather than a rare exception granted for specific and justifiable reasons. Unfortunately, no one is willing to do anything about it. A few years ago the big newspapers all instituted policies that banned blind quotes unless there was a good case for them, but as near as I can tell the only result was to force their reporters to concoct ever more inventive ways of saying "because he wouldn't talk otherwise." Beyond that, life went on as usual.

Reporters are as much to blame for this as politicos, and Johnston concedes that some of what happened here may just be birthing pains. Everyone is new, policies haven't been set, equipment isn't all working, etc. etc. Let's hope so. Obama didn't have much of a reputation for openness with the press during his campaign, though, so it's worth holding his feet to the fire over this. Let's not have another Bush administration, please.

Michael Steele

| Fri Jan. 30, 2009 7:40 PM EST

MICHAEL STEELE....I see that the candidate I was rooting for to head up the GOP has won:

It's official. The new face of the National Republican Party is Michael Steele, a 50-year-old African American, the first in the history of Abraham Lincoln's party.

Ah, but he's not just 50 years old. Steele was born on October 19, 1958, the exact same day as me. That's why I was rooting for him.

But it's not all sunshine on the Michael Steele front. Because of our shared birthday I once pinged him to be my friend on Facebook. He never responded. Very sad. I guess he didn't want to reach out.

Friday Cat Blogging - 30 January 2009

| Fri Jan. 30, 2009 3:04 PM EST

FRIDAY CATBLOGGING....Last week I promised guest catblogging, and guest catblogging we shall have! This week's episode comes via my sister, who's doing some long-term catsitting for a friend and now has two new companions. That's Azrael on the left, examining that perennial cat favorite, a cardboard box, and Jasper on the right. Azrael is a cute little lap cat who (apparently) demands attention at all times and all places. Jasper is more the economy size, and my sister complains that he keeps her up at night by sleeping next to her and purring loudly. This sounds absurd to me, since purring is a well known tranquillizer, but there you have it. Welcome to catblogging, A&J. The usual suspects will return next week.

So How's That Working Out For You Guys?

| Fri Jan. 30, 2009 2:45 PM EST

SO HOW'S THAT WORKING OUT FOR YOU GUYS?....Lockstep opposition to all things Obama isn't working out too well for the GOP according to recent polling done by Democratic pollster Stan Greenberg. CQ's Balance of Power reports:

A survey of 1,200 voters in 40 traditionally Republican congressional districts now held by Democrats [] shows Obama's post-election honeymoon reaching a rapturous stage, with 44 percent of voters strongly supporting his policies. [Another 26% "somewhat support" his policies. –ed]

A full 64 percent favor his economic plan, compared to 27 percent against. And precisely that same proportion favors the stimulus in 13 states that are expected to have competitive Senate races in 2010: Kentucky, Florida, Missouri, North Carolina, New Hampshire, Pennsylvania, Louisiana, Colorado, Ohio, Kansas, North Dakota, Wisconsin and Illinois.

If DC Republicans continue to lash their fate to the SS Talk Radio, I think they can expect to see more and more of this.

Broadband

| Fri Jan. 30, 2009 2:34 PM EST

BROADBAND....Over at TPMCafe, Yochai Benkler provides a nice little summary of the broadband provisions in the stimulus bill:

The Senate proposal is better along two dimensions. First, it stands at 9 billion dollars instead of 6 billion dollars....Second, it is all to be administered through the NTIA, through a program that was set up during the Clinton Administration to support experimentation and deployment of public and non-profit efforts, and to study public networks.

....The House bill is, however, clearer on the access conditions imposed on those who receive funds. It requires grantees not only to adhere to the minimal net neutrality standards adopted by the FCC's Statement of Principles, but also to run both wired and wireless broadband networks on an "open access basis." The FCC is charged with defining what "open access" means within 45 days of the passage of the Act, but historically (that is, before the Bush-appointed FCC reversed course), open access was the loose term applied to the approach that typified the 1996 Telecommunications Act: that is, competition from new entrants would be the best check on incumbent abuses, and competition would be created by forcing the incumbents to let the new entrants use some pieces of the incumbents' network as leverage to overcome the very high startup costs associated with offering any useful service at all to customers.

There's more at the link, including this weird factlet about the House bill: it stipulates that half the broadband money would be under the control of the Secretary of Agriculture. Because, um, who else comes to mind when you think of high-speed telecommunications infrastructure policy?

Anyway, it would be nice if the final bill makes at least a start at reinstituting the principles of net neutrality as part of its language. I think this is a more complex issue than a lot of the blogosphere likes to admit, but it's fundamentally the right direction to go. This is a good sign that Barack Obama agrees.

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The World's Most Famous Shoe

| Fri Jan. 30, 2009 2:07 PM EST

THE WORLD'S MOST FAMOUS SHOE....An orphanage in Tikrit has constructed a giant statue of a shoe to commemorate the "heroic action" of Muntadhar al-Zeidi, the journalist who threw his shoes at George Bush last month. Seriously. But then the government took it down. Spoilsports.

*Who's Your Sugar Daddy?

| Fri Jan. 30, 2009 1:16 PM EST

WHO'S YOUR SUGAR DADDY?....Is the massive U.S. stimulus plan sucking up all the liquidity in the world, preventing developing countries from stimulating their economies? Apparently this is the complaint du jour at Davos, but Daniel Drezner is unimpressed:

To be generous, these complaints are not completely without foundation. They are a little odd, however. If the United States does not engage in greater stimulus, then other countries are going to have to pick up the slack, or this recession will last a long time. Indeed, count me in the Martin Wolf/Brad Setser camp of those who would love to see other countries — *cough* China, *cough* — starting to boost their own consumption as a means for igniting global growth, because that would also help to redress the macroeconomic imbalances that are at the heart of the current predicament.

To date, however, the efforts by most of these other countries have been underwhelming. [What about China?–ed. Their stimulus has targeted investment rather than personal consumption, so yes, them too.] If I were Obama, I wouldn't trust other countries to provide the locomotive power necessary to get the global economy moving again. So I don't see how they can blame the United States for doing what they are choosing not to do.

Agreed. But we still need a long-term plan to address those macroeconomic imbalances eventually.

Root Causes

| Fri Jan. 30, 2009 1:00 PM EST

ROOT CAUSES....Ryan Avent, plugging a blog that will remain nameless because it inexplicably continues to host anonymous posts, a practice I despise, says:

This week, the blog is hosting a discussion among economists on IMF economist Olivier Blanchard's suggestion that pervasive uncertainty is at the root of the crisis....

Sounds like a fine discussion. But just as an aside, why do people so frequently insist on trying to root out the cause of the crisis? Can't it be a liquidity crisis and a solvency crisis and a confidence crisis and a regulatory crisis all at once? Who says there has to be one true cause?

Funding the Feds

| Fri Jan. 30, 2009 12:32 PM EST

FUNDING THE FEDS....Via Matt, Pete Davis reports on a lunch talk yesterday from spending guru Alice Rivlin:

Her most striking remarks were how forcefully she warned that we should undertake long-term deficit reduction measures now. Without them we will face rising interest rates before the economy has enough time to recover as foreign purchasers of U.S. Treasury debt balk at buying a lot more of it. She boldly asserted "Now is an excellent time to fix Social Security and Medicare."

....Rivlin predicted we will need a new revenue source to cope with our long-run deficit problem, a value-added tax. I'm biased on this subject. I formulated House Ways and Means Chair Al Ullman's VAT proposal in 1979. There's no way to protect the poor and the elderly from such a tax, and it could become quite a money machine for a lot of government spending I would prefer to avoid. Rivlin has promoted a VAT for a long time because it is a more efficient tax and because it would harmonize our trade with the rest of the world, almost all of which has a VAT.

I have a lot of sympathy for Rivlin's view. Here are a few random comments to add to what she says:

  • I'm all for fixing Social Security now if it will get the issue off the table once and for all. It's a distraction. What's more, the fixes needed are fairly minor and doing it while Democrats have a big majority is good timing. But — although the fixes can be legislated now, they should be scheduled to phase in slowly starting around ten years from now. The last thing we should be doing is pouring more money into the trust fund right now.

  • If we're looking for a new revenue source that won't hit us in the pocketbook immediately (while we're in a recession), but will provide a medium and long-term funding source, how about passing cap-and-trade? Even if we move full speed ahead, the machinery takes a while to implement, which means it won't start up until 2012 or so. And even if part of the revenue is rebated to low-income families, it still provides a steady and growing revenue stream after that.

    Oh, and it helps to keep us from destroying our planet, too. Just a little side benefit.

  • I'm a big fan of using a VAT (in addition to the payroll tax and other existing funding) to fund national healthcare. Economically, it's a pretty good tax; it can be made progressive if it's properly implemented; and it's a universal tax for a universal program. More details here.

  • I am, oddly enough, not really in favor of vastly increased funding for other social programs. Some increased funding is OK, but it should be kept under pretty strict scrutiny — and not just on the generic grounds that all spending ought to be monitored carefully to make sure it's effective and pruned away when it's not.

    Here's why. I'm obviously more open to high government spending than most conservatives, but even liberals think there's a limit to how much of the economy ought to be under government control. Speaking for myself, I'd put that limit at 40-45% of GDP. Somewhere in the low 40s, anyway. Currently, total government spending (state/local/federal) is in the low 30s, which means we can afford to increase spending by about 10% of GDP. I figure that changes to Social Security will eat up about 2% of GDP and funding a true national healthcare plan will eat up around 7-8%. That doesn't leave room for very much more, and even reductions in defense spending only give us another point or so to work with. So we should be pretty careful with other long-term spending commitments.

That's my take, anyway. This is a pretty good time to be talking about these changes, even if they don't get phased in immediately. We desperately need credible plans for future reductions of our current account deficit (which is tied to the federal deficit), and this is a good time to do it even if the plans don't get phased in immediately. I expect Obama to kick off a rollicking discussion of this stuff later this year.