Kevin Drum - September 2009

GDP vs. RMI

| Tue Sep. 15, 2009 1:40 PM EDT

Joseph Stiglitz argues that GDP isn't really a very good measure of the health of an economy.  Ezra Klein comments:

Stiglitz, happily, is involved in a French project to come up with a successor to GDP. But there have been many of these projects in the past and many alternatives proposed. The question isn't developing these measures. It's popularizing them.

I wish them the best of luck.  In the meantime, however, I propose that instead of obsessing over GDP growth, we obsess over real median income growth.  It's simple and easy to popularize, and it could be made available quarterly, just like GDP.  Here's my hypothesis: If RMI is growing at a healthy clip, then the economy is almost certainly doing fine.  If it's not, then most people are going to be unhappy regardless of what GDP figures show.

I should note that I'm willing to accept any reasonable definition of "income" as part of the official RMI calculation.  Regardless of what you include, the bottom line is that if we paid more attention to RMI, we'd all be a whole lot better off than we are now.

UPDATE: I originally said that RMI is available quarterly, which isn't true.  However, I imagine that estimates could be made quarterly if this were something we were more serious about tracking.  The text has been corrected to reflect this.

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Why So Serious?

| Tue Sep. 15, 2009 1:18 PM EDT

Atrios complains about the hassles of flying:

Some of this is not the fault of the individual airlines, such as stupid security theater, but plenty of it is. I mean bag fees, what the fuck? And it isn't simply the money, it's the extra hassle and just general sense of being screwed and harassed throughout the entire process.

If I can put on my Andy Rooney hat for a moment, doesn't it seem as if this describes most of American business these days?  It's not just the airlines.  As near as I can tell, consumer-facing businesses these days virtually never think about how they can make things genuinely more convenient for people.  Rather, they seem almost obsessively concerned with calculating the maximum amount of pain people will put up with before they finally get pissed off enough to take their business elsewhere.  When you venture out into the shopping world these days, you almost feel like you ought to have a lawyer at your side at all times to try and figure out what new and different way you're going to get screwed this time around.  It's sort of exhausting.  Is it any wonder that so many people are so angry all the time?

Up, Up, and Away

| Tue Sep. 15, 2009 12:35 PM EDT

Michael Mandel at Business Week looks at how fast healthcare costs are rising around the world and says:

It’s interesting to see that the UK, with its “socialized medicine,” actually had faster health spending growth than the U.S., at least according to these figures. On the other hand, other countries with single-payer systems, such as Canada, had slower growth.

Probably the safest thing to say is that healthcare costs are rising at a pretty good clip everywhere in the world, no matter how different countries organize things.  The main drivers of rising costs, after all, are global in nature.

Beyond that, though, you need to be aware of specific local issues too.  When Tony Blair came to office in 1997, for example, one of his campaign promises was specifically to increase funding for the NHS.  Britain was spending too little on healthcare, and he wanted spending to rise quickly.  So it's no surprise that spending went up.

Likewise, South Korea, which is #1 on the chart, spent the 80s and 90s implementing a national healthcare plan.  Their spending rose considerably, but again, that was because they deliberately chose to extend coverage universally.  They wanted to spend more money.

On the other hand, the timeframe in Mandel's chart excludes the late 80s, when U.S. healthcare spending exploded, and includes the years 1994-2000, when the great HMO revolution in the United States suppressed healthcare costs somewhat.  So our numbers probably look a little lower than they really are.  But the HMO revolution turned out to be a one-shot deal: costs shot back up in the early 2000s and have since come back down only a bit.

None of this is meant to really argue a lot with Mandel.  Roughly speaking, as his chart shows, the biggest increases have been in countries that currently spend the least on healthcare (Poland, Greece, Mexico, etc.) or in countries that were deliberately trying to spend more (South Korea, UK).  Contrariwise, with the exception of Norway, most of the big-spending countries are in the bottom half of the graph.  The United States is an obvious outlier, with enormous spending and a high growth rate, but everyone is having trouble controlling costs.  We're not the only ones who want all the latest treatments, after all.

UPDATE: It's also worth keeping in mind the power of compound growth.  Even a seemingly minuscule difference adds up over the years.  France's growth rate is only 0.3% less than ours, but $100 of healthcare in 1990 would now cost $276 in the United States and $262 in France.  That's nearly a 10% difference.  Germany is even more impressive: $100 of healthcare in 1990 would cost only $213 in Germany today.  That's a whopping 23% less than we're paying.  And of course, their costs were a lot lower to begin with.

How the Economy Feels

| Tue Sep. 15, 2009 11:37 AM EDT

Bob Herbert writes about the unemployed:

Fifteen million Americans are locked in the nightmare of unemployment, nearly 10 percent of the work force. A third have been jobless for more than six months. Thirteen percent of Latinos and 15 percent of blacks are out of work. (Those are some of the official statistics. The reality is much worse.)

....A national survey of jobless workers by a pair of professors at Rutgers University shows just how traumatized the work force has become in this downturn. Two-thirds of respondents said that they had become depressed. More than half said it was the first time they had ever lost a job, and 80 percent said there was little or no chance that they would be able to get their jobs back when the economy improves.

....It’s eerie to me how little attention this crisis is receiving. The poor seem to be completely out of the picture.

It is kind of eerie, and I've noticed the difference in mood too.  It's true that the unemployment rate isn't quite as high (yet) as it got in 1981-82, but it's pretty damn close — and yet the tone of news coverage seems quite different.  My recollection of the early 80s is of lots and lots of coverage of plant closures, homelessness, food banks, and a serious sense of panic and despair.  This time, not so much.  Has this been purely a difference in media coverage?  A difference in the way unemployment is distributed?  The fact that hard times have only been with us for about a year so far?  A genuine difference in the way people are reacting?  Or what?  I really don't know the answer.  But yes, it feels quite different than it did in 1981.

Help me out, fellow oldsters.  Does it feel different to you too?  Or am I just imagining this?

Quote of the Day

| Mon Sep. 14, 2009 9:00 PM EDT

From Sen. Tom Harkin, Ted Kennedy's replacement as chairman of the HELP committee, to a crowd cheering about healthcare reform at his annual steak fry:

You might as well stay standing because that strong health reform bill — mark my word, I'm the chairman, it's gonna have a STRONG PUBLIC OPTION!

Those are stirring words.  I don't really believe them, unfortunately, since being HELP chairman doesn't exactly make Harkin emperor of the Senate.  But even if it's just steak fry talk, it's nice to hear.

The Ag Lobby

| Mon Sep. 14, 2009 7:20 PM EDT

Over at Grist, Tom Laskawy reacts to the recent changes in the Senate Agriculture Committee:

As suspected, agribusiness is indeed turning cartwheels over the news that Arkansas Sen. Blanche Lincoln is now chairman of the Senate Ag Committee. The public policy director for the retrograde American Farm Bureau told The Hill, “We couldn’t have handpicked a chairman better than this.” The giant sucking sound you’re hearing is agricultural reform rushing down the drain.

The headline of The Hill’s piece tells you all you need to know:  “K Street welcomes Lincoln as the new head of Ag committee” — K Street being the center of the lobbying biz. If you read on, however, you’ll discover all sorts of lovely little Lincolnian tidbits. Did you know that in 2007 Lincoln tried to exempt agribusiness from toxic waste lawsuits? The fact that Tyson Foods, the nation’s largest chicken (and chickensh*t) producer, is based in Arkansas and is a major campaign contributor to her is, of course, a total coincidence.

I wouldn't normally link to this, but I just got finished writing a piece for the magazine about the ag lobby and its malign effect on the Waxman-Markey climate change bill, so this stuff is on my mind right now.  While I wouldn't say the ag lobby is the most powerful lobby in the country — that title is probably reserved for the finance lobby, the target of my next piece — it's definitely right up there.  And it's equally powerful no matter which party is in charge, too.  The ag lobby owns 'em both.

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Gumming Up the Works

| Mon Sep. 14, 2009 4:26 PM EDT

Via Jeralyn, I see that Jeffrey Toobin has a long piece in the New Yorker this week about how Barack Obama's post-partisan instincts have run aground on the shoals of the modern Republican Party.  It started with his very first judicial nomination:

On March 17th President Obama nominated David Hamilton, the chief federal district-court judge in Indianapolis, to the Seventh Circuit court of appeals. Hamilton had been vetted with care. After fifteen years of service on the trial bench, he had won the highest rating from the American Bar Association; Richard Lugar, the senior senator from Indiana and a leading Republican, was supportive; and Hamilton’s status as a nephew of Lee Hamilton, a well-respected former local congressman, gave him deep connections. The hope was that Hamilton’s appointment would begin a profound and rapid change in the confirmation process and in the federal judiciary itself.

You can probably guess how this turned out, can't you?  Obama continued nominating people he thought could be quickly confirmed, but then:

But then, as the first White House official put it, “Hamilton blew up.” Conservatives seized on a 2005 case, in which Hamilton ruled to strike down the daily invocation at the Indiana legislature because its repeated references to Jesus Christ violated the establishment clause of the First Amendment. Hamilton had also ruled to invalidate a part of Indiana’s abortion law that required women to make two visits to a doctor before undergoing the procedure. In June, Hamilton was approved by the Judiciary Committee on a straight party-line vote, twelve to seven, but his nomination has not yet been brought to the Senate floor. Some Republicans have already vowed a filibuster. (Republican threats of extended debate on nominees can stop the Democratic majority from bringing any of them up for votes.)

“The reaction to Hamilton certainly has given people pause here,” the second White House official said. “If they are going to stop David Hamilton, then who won’t they stop?”

Toobin's overall take is that Obama isn't a big fan of relying on the judiciary to accomplish liberal goals.  Obama thinks that's Congress's job, and for that reason he's willing to nominate relative pragmatists to the bench in the hope of avoiding some of the bitter confirmation battles of the Clinton and Bush years.  But he's finding out that it doesn't matter: he could nominate the ghost of John Marshall to the federal appellate court and Republicans would fight to keep him off.  It's good politics, after all, since the more energy the Senate expends on judicial nominees, the less it has for anything else.

This isn't anything new.  Judicial nominations have been a warzone for the past three decades.  But it continues to get worse and worse, and now it's become pathological: nominees are no longer opposed only if they genuinely hold some extreme position disliked by the minority, they're opposed as a matter of course simply as a way to gum up the works.  It's crazy that it should take six months to confirm a routine judgeship, let alone a year or two, but that's the current reality.  Ditto for midlevel bureaucratic positions, all of which take longer to confirm than the high-profile cabinet secretaries they report to.

“Post-partisanship has not yet arrived in judicial selection, or in anything else” says an unnamed Obama advisor at the end of the article.  I hope the rest of his staff has figured this out by now too.

Obama and the Chinese Tires

| Mon Sep. 14, 2009 1:09 PM EDT

Dan Drezner is unhappy with the Obama administration's decision to slap an import tariff on Chinese tires.  But he admits:

We trade enthusiasts are an excitable lot, however, what with everything leading to falling off cliffs, crossroads being reached, and red zones being breached.  Seven years ago, the allegedly free-trade Bush administration imposed steel tariffs that were found to be WTO-inconsistent.  There was a lot of gnashing of teeth and wailing, yet the world trade system proved to be pretty robust.  So maybe my trade compatriots are exaggerating things a wee bit, yes?  In all likelihood, won't this be resolved via the WTO dispute settlement mechanism about 18 months from now?

Yeah, I was kind of wondering where the WTO was in all of this, too.  Now that China is a member, all this means is that they file a complaint, it grinds slowly through the gears of the trade dispute resolution process, and eventually they either get relief or they don't.  All very civilized.

But Dan offers four reasons why this might be worse than it seems.  Click the link to see what he has to say.  In the end, though, his biggest concern is that unlike Bush's steel tariffs, which were a one-shot deal, this might not be:

With the Obama administration, however, this feels like the tip of the iceberg.  Most of Obama's core constituencies want greater levels of trade protection for one reason (improving labor standards) or another (protecting union jobs)....If I knew this was where the Obama administration would stop with this sort of nonsense, I'd feel a bit queasy but chalk it up to routine trade politics.  When I look at Obama's base, however, quasiness starts turning into true nausea.

Well....I'm not so sure about this.  For starters, the steel tariffs weren't a one-off.  Remember the bra wars?  And unlike the steel decision, that one was quite clearly aimed squarely at the Chinese.  And there was the softwood lumber tariff.  And a few others.  Ending with the almost comical Roquefort cheese duties.

None of which is meant to defend Obama's decision one way or another.  But with advisors like Larry Summers and Austan Goolsbee on staff, I'd be pretty surprised if Obama has turned into some kind of tariff warrior.  Frankly, the tire decision looks to me like a fairly standard payoff to a core constituency, not something that suggests a long-term change in policy.  And just as with Bush's tariffs, my guess is that a white hot Chinese reaction will be quite enough to turn him around even if he did have plans for a more protectionist trade policy.  (Note, for example, that this decision was announced late on Friday, the usual dumping ground for things that you'd just as soon not have to defend very vigorously.)  My guess: China will retaliate, the WTO's gears will grind, and the whole thing will blow over.

The Art of the Scare Ad

| Mon Sep. 14, 2009 12:12 PM EDT

"Republicans want to end Medicare," insists the breathless narrator of the ad on the right.  FactCheck.org says it isn't true.  And Megan McArdle asks: "I'd really like to know whether this sort of thing works, or whether it comes across as so ludicrous that people start wondering about the Democrats' sanity."

My guess: yes, it works, and no, no one will be wondering about Dems' sanity.  I mean, when you're competing with "Obama is a socialistfascistcommunistthug," you've got a pretty high bar to cross before you look extreme.  Instead, what I'm curious about is why the DNC bothered with this.  Why not just tell the truth: Republicans essentially voted in favor of turning Medicare over to private industry.  With only a few words of explanation, this could easily be more effective than the ad that actually ran.  Like so:

Republicans voted to turn Medicare over to private insurance companies!  You heard right: they want to hand Medicare over to the same companies that [insert two or three insurance company outrages here, maybe a Wall Street reference, something about profits over people, etc.].  Democrats will never do that.  Blah blah blah.

Would that really be any less scary than the ad that actually ran?  Or is the DNC afraid that the urban legends are true, and everyone thinks Medicare is a private plan already?

Headline of the Day

| Mon Sep. 14, 2009 11:26 AM EDT

From the LA Times this morning:

Some fear GOP is being carried to the extreme

All well and good, but it might be a better story if "some" turned out to be more than a grand total of two people.  And even at that, one of the two is David Frum, who's been estranged from the loony bin wing of the party for nearly a year now.  By contrast, the article quotes four people defending the crackpots.  "Some" might indeed fear that the GOP is being carried to extreme, but apparently it's a pretty small movement so far.