Kevin Drum - June 2009

Obama in Cairo

| Thu Jun. 4, 2009 8:50 AM PDT

I didn't watch Obama's big speech in Cairo, but I've read the transcript.  It's first rate: long, detailed, honest, evenhanded, and temperate.  If I have a complaint, it's that it struck me, both literally and figuratively, as maybe a little bit too by-the-numbers.  But I think part of that is a reaction to the high bar Obama has set for himself: his oratory is so good that it's easy to get a little jaded by yet another great performance.

I imagine that this part will end up getting a lot of attention:

Palestinians must abandon violence. Resistance through violence and killing is wrong and does not succeed. For centuries, black people in America suffered the lash of the whip as slaves and the humiliation of segregation. But it was not violence that won full and equal rights. It was a peaceful and determined insistence upon the ideals at the center of America's founding. This same story can be told by people from South Africa to South Asia; from Eastern Europe to Indonesia. It's a story with a simple truth: that violence is a dead end. It is a sign of neither courage nor power to shoot rockets at sleeping children, or to blow up old women on a bus. That is not how moral authority is claimed; that is how it is surrendered.

Now is the time for Palestinians to focus on what they can build. The Palestinian Authority must develop its capacity to govern, with institutions that serve the needs of its people. Hamas does have support among some Palestinians, but they also have responsibilities. To play a role in fulfilling Palestinian aspirations, and to unify the Palestinian people, Hamas must put an end to violence, recognize past agreements, and recognize Israel's right to exist.

At the same time, Israelis must acknowledge that just as Israel's right to exist cannot be denied, neither can Palestine's. The United States does not accept the legitimacy of continued Israeli settlements. This construction violates previous agreements and undermines efforts to achieve peace. It is time for these settlements to stop.

In some sense, there's nothing new here: most of it is longstanding American policy, and Obama's stand on West Bank settlements was made clear last week.  Still: it might light a fire under both sides.

Nick Baumann calls Obama's speech "Nine Hard Truths," and there's something to that.  It offered something to everyone, but it also offered challenges to everyone.  Marc Lynch has a few initial thoughts here, but warns us to hold off a bit on trying to gauge Arab reaction: "A cautionary note, though — English-language Egyptian blogs are likely to be a particularly poor initial 'focus group' for  judging the response.  But listening to the response and engaging in the debate which emerges will be key, for American officials and for the American public.  Because Obama's address sought to reframe the conversation, we won't know whether it succeeds until we see how the subsequent political debate unfolds."

The full text of the speech is below the fold.

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Healthcare and Bankruptcy

| Wed Jun. 3, 2009 11:03 PM PDT

On the campaign trail, Barack Obama frequently cited research showing that medical expenses were a contributing factor in 55% of all personal bankruptcies.  A new study says he was wrong. It was actually more than that:

The study found that medical bills, plus related problems such as lost wages for the ill and their caregivers, contributed to 62% of all bankruptcies filed in 2007....Medical insurance isn't much help, either. About 78% of bankruptcy filers burdened by healthcare expenses were insured, according to the survey, to be published in the August issue of the American Journal of Medicine.

....Most people who filed medical-related bankruptcies "were solidly middle class before financial disaster hit," the study says. Two-thirds were homeowners, and most had gone to college.

The study does not suggest that medical expenses were the sole cause for these bankruptcies, but it does identify them as a contributing factor. The increase in such filings occurred despite a 2005 law aimed at making it more difficult for individuals to seek court protection from creditors.

Among bankruptcy filers, those without insurance reported average medical expenses of $26,971.  Those with private insurance reported average medical bills of $17,749.

Will the Uighurs Be Released?

| Wed Jun. 3, 2009 2:42 PM PDT

Here's a peculiar story from Bloomberg:

Some of the 17 Chinese Uighur Muslims being held at Guantanamo Bay, Cuba, will likely be released in the U.S. in an effort to convince other countries to accept prisoners from the detention facility, according to current and former American officials.

Why peculiar?  Because there's not even a smidgen of backup for this claim in the rest of the story, which runs to over a thousand words.  There's one speculative quote from a Bush-era legal advisor and that's it.  Nothing from current American officials at all.  All in all, the story gives no reason to believe that the Obama administration is any closer to releasing any of the Uighurs into the U.S. than it was a month ago.

Still, I'd like it to be true.  So here's hoping there's more to this piece than meets the eye.

Twitter v. Real Life

| Wed Jun. 3, 2009 10:38 AM PDT

According to some new research out of the Harvard Business School, 10% of Twitter users account for 90% of all tweets, and the median number of tweets per day is 0.01.  That makes me above average!  Barely.  I think my last tweet was sometime in April.

What's more, in news that should surprise no one, men who tweet generally pay more attention to other men.  Even though women outnumber men on Twitter, and even though men and women tweet at about the same rate, men still have more followers.  Why?  Gender solidarity, apparently:

Although men and women follow a similar number of Twitter users, men have 15% more followers than women. Men also have more reciprocated relationships, in which two users follow each other....Even more interesting is who follows whom. We found that an average man is almost twice more likely to follow another man than a woman. Similarly, an average woman is 25% more likely to follow a man than a woman. Finally, an average man is 40% more likely to be followed by another man than by a woman.

However, it turns out that the researchers are suprised by this because apparently it's unusual: "On a typical online social network, most of the activity is focused around women — men follow content produced by women they do and do not know, and women follow content produced by women they know."  Maybe so, though I suspect this might have to do with a massive bias toward teenagers in most social networks.  Certainly these results seem to match similar patterns in Usenet, chat groups, the blogosphere, and real life.  Frankly, I would have been surprised if men hadn't turned out to be pigs.

(Via Tyler Cowen.)

Rule of Thumb of the Day

| Wed Jun. 3, 2009 10:08 AM PDT

Via Alex Tabarrok, a pair of researchers asked people how big the economy would be if it grew 5% a year for 25 years:

Only around 10–15% of the participants gave estimations between 50% less and 100% more than the true value...furthermore, the majority of the false estimations were systematically below the true value ...which was underestimated by 88.9–92.1% of the participants.

Of course, this is actually a fairly tough calculation even if you're mathematically inclined and understand the whole compound interest thing.  I guessed vaguely that 5% growth would produce a doubling in about 12 years, so the economy would quadruple in 25 years.  Wrong!  Turns out that doubling takes 14 years, so the answer isn't 300%, it's 238%.  But Alex made this worth my time by teaching me a new rule of thumb I hadn't heard of before:

A good way of approximating is to use the rule of 70.  If x is the growth rate then the doubling time is approximately 70/x.  Thus, with a growth rate of 5% we expect a doubling (100% increase) in 14 years and a quadrupling in 28 years so a bit more than a tripling in 25 years (200% increase) is a good guess.

I love good rules of thumb, and this one makes me slightly more knowledgable than I was five minutes ago.  Thanks, blogosphere!

Obama and the Muslim World

| Wed Jun. 3, 2009 9:30 AM PDT

From Barack Obama, explaining the value of diplomacy and talk:

“What I do believe is that if we are engaged in speaking directly to the Arab street, and they are persuaded that we are operating in a straightforward manner, then, at the margins, both they and their leadership are more inclined and able to work with us....And if there are a bunch of 22- and 25-year-old men and women in Cairo or in Lahore who listen to a speech by me or other Americans and say: ‘I don’t agree with everything they are saying, but they seem to know who I am or they seem to want to promote economic development or tolerance or inclusiveness,’ then they are maybe a little less likely to be tempted by a terrorist recruiter.”

This is exactly the right formulation, and gives the lie to the endless cavalcade of right-wingers who like to pretend that Obama is some kind of foreign policy naif who's convinced he can persuade the world's terrorists and despots into laying down their arms by the power of sweet talk alone.  As he's made clear many times before, though, he's not.  He knows perfectly well that what he's doing will take a lot of time and will work, at best, "at the margins."  It will reduce the recruiting power of terrorists a bit, it will reduce the intransigence of Middle Eastern governments a bit, and it will reduce the general hatred of American foreign policy a bit.  But add up the bits over several years, and they can make a real difference.

Still, there's no question it's a long-term project.  A recent PIPA poll, for example, shows that the Egyptian public is way more enthusiastic about Obama than about Bush.  But click the link for more and you'll see that their view of U.S. goals in the Middle East is every bit as negative as it's ever been.  This is going to be the work of many, many years.

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Reid and Sotomayor

| Wed Jun. 3, 2009 9:05 AM PDT

Harry Reid says he's never read one of Sonia Sotomayor's opinions and hopes he never does.  But she's a great choice anyway!  Conor Friedersdorf laments:

Unsurprising but depressing! As Gene Healy’s cult of the presidency continues apace, it is equally remarkable that the legislative branch so often seems unable or unwilling to carry out basic functions [prescribed] by the Constitution. This is a lifetime appointment! And Harry Reid feels comfortable consenting to it having read less of Judge Sotomayor’s work than I have?

Is this fair?  It seems to me that judicial opinions are generally pretty technical pieces of work that are hard to analyze without a fair amount of relevant expertise — and that's true even for someone like Reid, who has a law degree.  Most of us, then, as we do with other technical subjects, primarily rely on the judgment of legal experts rather than fruitlessly trying to read the primary literature in order to develop our own amateur conclusions.  Senators, who deal with hundreds of different topics and are accustomed to relying on their staffs to provide expert analysis, probably do this even more than most of us.

When senators decline to read reports on big issues that are specifically written to be understood by laymen, they deserve some flack.  But not here.  I don't think Reid is doing anything unreasonable.

Healthcare Costs

| Wed Jun. 3, 2009 8:38 AM PDT

Yesterday the blogosphere was crammed with charts showing that if the rise in healthcare costs is reduced by 1.5 percentage points a year, then long-term healthcare costs would be a lot lower than current projections.  That's hard to argue with, but what I kept wondering is, how are healthcare costs going to be reduced 1.5 percentage points a year?  The Council of Economic Advisers produced the charts, so Ezra Klein asked CEA chair Christina Romer about this:

It's not really something we looked at in the report. The report asks "if we manage to attain cost savings, what will it do to the economy?" We didn't look so much at the mechanisms that would bring those savings about. It was more about what health reform can do. I didn't get too much into the literature of how coverage could control costs. That's another project for the CEA to take on!

Well, OK.  I'm still a little confused about what the point is here, since I thought everyone was already largely in agreement that controlling the growth of healthcare costs would be a fine thing indeed.  It's how to do it that generates the controversy.  So I guess I'm still not entirely sure what the point of this exercise was.

Wall Street Loves Banks Again

| Tue Jun. 2, 2009 6:14 PM PDT

A few days ago I wrote that I was hopelessly confused about what was going on with the economy.  Here's Exhibit A: I thought it was a fantasy to expect banks to raise lots of private capital after the stress tests were completed, but apparently I was wildly, spectacularly wrong:

J.P. Morgan Chase & Co., Morgan Stanley, American Express Co. and regional bank KeyCorp said Tuesday they sold a combined $8.7 billion in common stock. That pushed the total value of shares sold by the 19 financial firms that were stress-tested by the government to at least $65 billion since the results were announced May 7.

Nonguaranteed debt sales and the conversion of preferred shares to common stock have generated roughly another $20 billion, for a total of $85 billion or more, giving most of the banks considerably more capital than U.S. regulators have required them to amass as they ride out the recession. Money is pouring in so fast that surprised bankers can hardly believe it, especially since most investors didn't want to go near financial stocks just three months ago, even though they were nearly 40% cheaper.

"It's easy to raise capital now," one executive at a bank that recently raised capital through a public stock offering said Tuesday. Investors are "happy to gobble it up."

I dunno.  I continue to think that there are a lot of trouble signs for the economy, with further shocks still to come.  If I had to pick the most likely one, I'd say Eastern Europe, but really, there are a dozen candidates.  Overall, I'm with the unnamed "executive at a New York bank" who thinks investors are chasing after any tidbit of good news even though the financial system remains fragile.  "A bucket of cold water will be thrown in people's faces," he says.

Still, there sure are a lot of people who disagree and are willing to put their money where their mouths are.  I hope they're right but I fear they're wrong.  There are just too many imbalances left in the global economy, too many writedowns yet to come, and no obvious place for sustained consumer demand to come from.  Caveat emptor.

I Am Officially Old

| Tue Jun. 2, 2009 3:14 PM PDT

I just got back from the optometrist with my first pair of bifocals.  (Thanks, Ben!)  Progressives, actually, and I guess these things take some getting used to, don't they?  I stopped in at the market on my way home, and when I moved my head around while looking down an aisle I felt like I was watching a bad student film project from the 60s.  Weird.  But I suppose my neurons will eventually adjust and trick me into thinking that everything is OK.  Or will they?  I actually don't wear my glasses very much, so it might take a while for my brain to figure out the new order of things.  We'll see.  In the meantime, hopefully I'll be able to watch TV and do a crossword puzzle at the same time once again.