2008 Campaign Gossip

Ah, the 2008 campaign. Who wouldn't want to relive it? John Heilemann and Mark Halperin dig up several juicy new tidbits in Game Change, to be released shortly. Marc Ambinder on the Edwards campaign:

I don't want to give away the whole book... but I would be remiss if I did not point to the chapters about the unbelievably dysfunctional husband and wife team of John and Elizabeth Edwards. Not only, it turns out, did many senior Edwards staffer suspect that John was having an affair, several confronted John Edwards about it, and came away believing the rumors. At least three campaign aides resigned because of their knowledge of the affair well before the national media picked up on those early National Enquirer stories.

And John and Elizabeth (who the book says was known to Edwards insiders as an "abusive, intrusive, paranoid, condescending, crazywoman") fought, in front of staffers, about the affair. The authors describe a moment where Elizabeth, in a such a state of fury, deliberately tears her blouse in the parking lot of a Raleigh airport terminal, "exposing herself. 'Look at me," she wailed at John and then staggered, nearly falling to the ground."

And Jeff Zeleny on Sarah Palin:

In the days leading up to an interview with ABC News’ Charlie Gibson, aides were worried with Ms. Palin’s grasp of facts. She couldn’t explain why North and South Korea were separate nations and she did not know what the Federal Reserve did. She also said she believed Saddam Hussein attacked the United States on Sept. 11, 2001.

It looks like there's going to be plenty of other blog fodder in the book as well. Bill Clinton was having an affair. (Maybe.) Harry Reid said something slightly impolitic. George Bush didn't think much of John McCain's campaign. Etc. Should be good for 24 or maybe even 48 hours worth of nonstop cable coverage.

Netflix by Zip Code

What movies are the most popular with your neighbors? Netflix has the answer and the New York Times has the interactive graphic. Here in lovely downtown Irvine, for example, the most rented title of 2009 was The Curious Case of Benjamin Button. Draw your own conclusions. That was a broadly popular rental, but plenty of movies have strong geographic appeal. Here in Southern California, for example, Religulous, Milk, and Vicky Christina Barcelona were popular among the liberal West LA set, but not so much elsewhere. (The map on the right is for Milk.)

If you live in one of the 12 biggest metro areas, you can play around with maps for your zip code too. Not only is it good clean fun, but surely also something that can inspire plenty of amateur sociology as well as blog posts full of partisan condescension. Latte-sipping lefties didn't like Paul Blart: Mall Cop! Orange County reactionaries refused to see Frost/Nixon! Nobody liked Indiana Jones and the Kingdom of the Crystal Skull! (Which goes to show that at least there's some justice in the world.) Have fun.

Earning Some Hatred


Toward the end of my appearance on the Bill Moyers show I dredged up a quote from FDR but couldn't remember his exact words. So now's my chance to revise and extend my remarks. The quote is a famous one from a speech he gave shortly before the 1936 election. Here's what he actually said:


We had to struggle with the old enemies of peace — business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering.

They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob. Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me — and I welcome their hatred.

The point of quoting FDR was simple: I think Barack Obama could use a little more of his attitude. There are times when you need to be conciliatory — I think healthcare reform is such a case, for example — but there are times when you need to let people know whose side you're on. When it comes to financial regulatory reform, Obama needs to let us know whose side he's on. Even if he picks some battles he doesn't win, drawing a line in the sand would, at a minimum, change the terms of the conversation and make future reform a little bit easier — and it probably wouldn't do any harm to the current efforts. So: more spine, please, Mr. President.

Friday Cat Blogging - 8 January 2010

It's Friday! Hooray! Time for cats. On the left, Domino is helping Marian as she works on some pattern drafting. This help consists primarily of sitting on her left arm, which she doesn't really need anyway. So it all works out.

But what about Inkblot? What's he doing? Answer: looking wistfully at the TV wondering how long he has to wait until Kevin shows up on Bill Moyers Journal. Not long, Inkblot! It airs on PBS, and David Corn and I will be on tonight at 9 pm (though you should probably check your local listings to make sure that's when it airs in your area).  We'll be talking about the finance lobby and its almost unchecked influence over both Congress and the country as a whole during the past several decades. Hopefully I was not totally incoherent as I railed against banks, talked about the evils of excessive leverage, described the outrageously favorable treatment that the financial sector gets from Congress, and chastised Barack Obama for not doing enough to fight back. A program description is here. And the article that sparked my television debut, "Capital City," is in the latest issue of the magazine.

FUN TIDBIT ALERT: When they put on makeup for the show, they applied it to both my face and my hands. Apparently it's important to make sure your skin tone is even for all exposed parts of your body.

Employment Woes

I don't really know what kind of track record these guys have, but e-forecasting now thinks that GDP grew 5% in the final quarter of 2009. At the same time, the economy lost 85,000 jobs in December, for a total of over 200,000 jobs lost in Q4. Using the rule of thumb that we need to add about 400,000 jobs per quarter just to tread water, this means that we fell behind by about 600,000 jobs even as GDP was growing at a pretty good clip.

I don't know quite what this means. Maybe e-forecasting will turn out to be wrong. But if we're really still losing jobs at this clip even with GDP picking up smartly, it doesn't suggest anything good. I sure hope the conventional wisdom that employment is just a lagging indicator and it will soon start climbing rapidly turns out to be right. I don't think I believe it, though. A long, slow recovery still seems more likely than not.

UPDATE: More here: "Total underemployment — the famous U-6 — is still extremely and stubbornly high at 17.3%, and the total number of unemployed persons, at 15.3 million, is double what it was at the start of the recession in December 2007....The bigger picture [] is important. And it shows a US workforce which is underemployed and looking at jobs which, when they do exist, are insecure and often temporary. Capital took its lumps in 2008 and the early months of 2009; it then recovered astonishingly quickly. It’s labor which is suffering the real hangover."

Carter's Legacy

Matt Yglesias pushed back yesterday against the idea that the only people who think Jimmy Carter was a good president are "people who are too young to actually remember the Carter years." But then he conceded: "Does that mean Carter was a great president? No. Obviously, he left little in the way of enduring achievements."

I think that deserves some pushback of its own. Carter was president during a difficult period, and politically he turned out to be fairly tone deaf and ineffective. As someone who didn't vote for his reelection in 19801 I won't defend him as a great president, but substantively he left behind more in the way of enduring achievements than most people give him credit for. He was the first president to make human rights a centerpiece of our foreign policy, a stance that Ronald Reagan adopted to great effect and something that's been a part of American diplomatic relations ever since. He managed to return the Panama Canal to Panama, a brave, politically costly fight that could have been disastrous if he'd lost it. He helped make peace between Israel and Egypt at Camp David. He appointed Paul Volcker as Fed chairman and allowed him to begin squeezing inflation out of the economy — something that very possibly cost him the 1980 election. He began the wave of deregulation that Reagan and others extended for the next 30 years. He started the secret war against the Soviets in Afghanistan. And although his efforts to push energy conservation died after he left office, they look prescient now.

This is actually a pretty substantial legacy — but it isn't entirely liberal or conservative. Liberals generally look favorably on Carter's work on human rights and the Middle East. Conservatives favor — or should favor, if they're being honest — his deregulatory efforts, the appointment of Volcker, and his willingness to engage the Soviets in Afghanistan. I've always suspected this is why Carter gets so little love: his overall legacy has too many conservative elements for liberals to really embrace him, but his non-hawkish attitude toward the Cold War and his inability to rally the country make him a conservative bête noir. And of course, his achievements have been overshadowed by his ultimate association with stagflation, oil shocks, and the Iranian hostages. But none of that alters the fact that, for better or worse, he changed the country more substantially than I think most people realize.

1Since I always get asked this, no, I didn't vote for Reagan. I voted for John Anderson.

Leverage and the Housing Bubble

Paul Krugman and Megan McArdle agree: the housing bubble wasn't caused by either predatory lending or the evil CRA. How do they know? Because if either of those were the explanation, then only residential housing would have been affected. But in fact, commercial real estate went through essentially the same boom/bust cycle,as shown in the chart on the right.

I think that's basically right. There was plenty of predatory lending, but I suspect that causation goes in the other direction: the bubble provided more opportunity for predatory lending, not the other way around. And the right-wing theory about the Carter-era Community Reinvestment Act being responsible for the bubble has never been anything other than crazy. There's just no evidence for it at all.

The one thing that does tie together both the residential and commercial bubbles, however, is leverage. In both cases, prices were propped up by vastly increased use of debt and leverage at all levels. Home buyers were allowed to take out mortgages with tiny (or no) down payments. Loan-to-value ratios (the rough equivalent in the CRE world) took off. The resulting mortgages were securitized and sold off so they wouldn't count against bank capital requirements. Those in turn were transformed into derivatives with lots of additional baked-in leverage. The derivatives were then insured via credit default swaps to essentially remove them from bank balance sheets. And all along the way, both the SEC and international regulators obligingly reduced bank capital requirements. Put together, all of this allowed effective leverage ratios at big banks and hedge funds to soar and debt levels among consumers to reach record heights.

All of that affected the pool of money that drove both the residential and commercial real estate booms in multiple countries. It's not the only explanation for the bubble (fraud and predatory lending helped feed the fire, as did Ben Bernanke's "savings glut" and the insane belief in the ability of derivatives to hedge away all risk), but it's at the core. It was at the core of this bubble, just as it was at the core of the collapse of Long Term Capital Management, the Asian crisis of 1998, the Nordic bubble of the early 90s, the Japanese bubble of the late 80s, and, if you want to back further still, the stock market crash of 1929. If you want to control asset bubbles, you have to control leverage. Not eliminate it, but control it. The fact that neither U.S. nor European regulators have seriously taken this on over the past year is a very discouraging sign that all we're doing with regulatory reform is tinkering around the edges. If we don't get serious about leverage, 2008 is going to happen all over again in another decade.

Healthcare and Wages

Do increases in healthcare costs restrain wage growth? Or, put another way, can we blame skyrocketing healthcare premiums for the fact that cash wages over the past three decades have been largely stagnant for the middle class?

There was some discussion of this topic while I was away, but I think it got a bit confused because there are actually two questions here. First, if employers have to pay more for healthcare, will they pay less in wages? I don't think there's any question that this is the case. Austin Frakt rounds up the academic evidence here, but frankly, you hardly need it. The effect of healthcare costs will vary over short-term periods thanks to economic conditions and general wage friction, but over the long term employers are plainly willing to pay only a certain amount for certain jobs. That amount includes wages, benefits, retirement, payroll taxes, and so forth. There's just no way around that. Money paid for healthcare is not some magical source of income that doesn't count against a company's income statement, and every company in the world bigger than your local dry cleaner works on the basis of total burdened payroll, not just cash wages.

But the second question is quite different. Lawrence Mishel of EPI tries to argue here that healthcare premiums don't have much effect on wages, but all he really shows is that the correlation is imperfect over short time periods. That's not controversial. Over the long term, however, it's simply not plausible that healthcare costs don't affect total compensation on pretty much a 1:1 basis.

But Mishel does answer the second question: can we really blame healthcare for stagnant middle class earnings?

Health care costs were just 7.6% of total compensation and 9.4% of total wages (all wages paid, including premium pay, paid leave, and so on) in 2007. The share of health care in total wages (in nominal, non-inflation adjusted terms) grew from 7.2% in 1989 to the 9.4% in 2007, suggesting that the expanded role of health costs could have reduced wage growth by 2.2% over this entire 18-year period, or 0.12% each year.

A couple of months ago, I did a quick and dirty calculation of healthcare costs over the past decade and concluded that their overall effect was small. In pure cash terms, median wages went down about 4%. If you add in healthcare premiums, median wages went up 1%. That's a difference of about 0.5% per year, which is nothing to sneeze at, but the fact remains that even if you count healthcare premiums, average incomes were almost completely flat. I've done the same rough calculation for the past three decades and come to the same conclusion over that period: There's no question that healthcare premiums have an effect on wages, but even when you account for them, median income still grew very slowly. Healthcare simply isn't more than a modest part of the explanation for sluggish wage growth.

Uganda and "Kill the Gays"

Flickr/eye2eye (Creative Commons).Flickr/eye2eye (Creative Commons).Over at Digby's place, tristero highlights this section of my post on Uganda's proposed "Kill the Gays" law:

...it's been hard for [Andrew] Sullivan to find examples of the National Review or the Weekly Standard or the American Conservative or Commentary denouncing the Ugandan law. The writers at those magazines may disagree with Sullivan on a lot of things, but I suspect they think it's pretty obvious to most Americans that executing gay people is wrong.

But not all conservatives think executing gay people is wrong, tristero says:

I doubt - except when I'm in a particularly unforgiving mood - that any American evangelical directly told anyone in Uganda to sponsor a "kill the gays" law. But the concept is far more common among American christianists than Nick Baumann realizes, and I have no doubt that the language those evangelicals did, in fact, use in Uganda, made capital punishment for homosexual behavior sound like a reasonable idea....

There's a larger point here: Christianists, and the modern GOP, are far more radical than many people, no matter how well-meaning and intelligent, realize. Buffoons they certainly are, but they are very, very powerful buffoons. The Ugandan law is a direct outgrowth of radical American christianism and its high-level reach within our national politics.

There are a lot of good points in there, and the whole post is worth a read. Part of what I was trying to get at in my post is that one reason conservative writers might be reluctant to make detailed arguments against the Ugandan law is that doing so would force them to confront the more unpleasant parts of their coalition. It's not good politics (or particularly pleasant) to be seen associating with people who need to be convinced that gays shouldn't be executed or that slavery is bad. The reason that most people don't realize how radical some "Christianists" are is that smart politicians keep their most controversial views and associations close to the vest. It's not good politics if you're known to be associated with an organization whose members (according to Jeff Sharlet) were supposedly behind the Ugandan "kill the gays" bill. In other words, there's a reason that the Family is a secret organization.

Kevin is traveling today.

Why Richard Blumenthal is Popular

Flickr/kellynigro (Creative Commons).Richard Blumenthal | Flickr/kellynigro (Creative Commons).Sen. Chris Dodd announced his retirement on Wednesday. Later that day, Richard Blumenthal, Connecticut's attorney general, announced he would run for Dodd's seat. Democrats are psyched because they know they have a better chance to hold on to the seat with the very popular Blumenthal on the ticket as opposed to the unpopular and scandal-tainted Dodd. But who is this Dick Blumenthal? And why is he so popular?

Back in 2000, David Plotz wrote a great piece for Slate about Blumenthal, who was about to enter his second decade as Connecticut's attorney general:

Blumenthal was supposed to be "the Jewish Kennedy." Now the 54-year-old finds himself in the autumn of his career fighting for Joe Lieberman's sloppy seconds. Blumenthal is blessed with every political virtue except recklessness and luck. His résumé makes Gore's look like a high-school dropout's....

What Lieberman had begun [as Connecticut attorney general before him], Blumenthal perfected. He turned consumer advocacy into high art and helped lead the nationwide trend of AG activism. According to Yale legal scholar Akhil Reed Amar, Reagan-era deregulation and congressional gridlock left a power vacuum, especially in antitrust law and consumer protection. AGs, always trolling for power and press, rushed to fill it. Blumenthal proved a master. Ambitious, independent, and fiercely committed to progressive activism, he was creative in finding causes related (however tenuously) to the well-being of Connecticut. He joined the anti-tobacco posse early then led the AGs as they piled on the Justice Department's Microsoft suit. Blumenthal spearheaded the national campaign against deceptive sweepstakes mailings and has taken a prominent role in negotiating with gun manufacturers.

In 2007, Mother Jones' own Stephanie Mencimer wrote about Blumenthal's No. 1 foes: big business lobbies like the US Chamber of Commerce and the Competitive Enterprise Institute:

[T]he Competitive Enterprise Institute issued a "study" on the nation's "Top Ten Worst State Attorneys General." CEI has been heavily funded by tobacco, auto, and utility companies and has been active in fighting off attempts to mitigate global warming. Public enemy No. 1 for CEI is Connecticut attorney general Richard Blumenthal.

In all this is a clue to Blumenthal's popularity. He's visible—he's always in the news, taking on "bad guys" and suing corporate villains. And he has a job in which it's really easy to be on the side of "the people."

I grew up in Connecticut. When people had a problem with a company, they seemed just as likely to go straight to the AG's office as they were to call the Better Business Bureau or their state representative. And when you complain to the AG's office about a problem and they end up doing something about it, you remember it. Blumenthal has two decades worth of individuals who his office helped, and two decades worth of suing companies like Countrywide that were the focus of populist rage. Those companies hate him for it, of course, but ordinary people tend to like him—a lot.

This is part of why liberals shouldn't shed too many tears for Dodd. Blumenthal's a better candidate, but he also has a chance to eventually become a better senator. He doesn't have Dodd's ties to Washington or Wall Street. He has all the right enemies. And he has lots of experience fighting the same interests that Dodd was seen as too cozy with. Blumenthal pioneered the concept of the modern state AG—Eliot Spitzer (first AG, then governor of New York) and Sheldon Whitehouse (first AG, then senator from Rhode Island) were just following in his footsteps. Now it's finally Blumenthal's turn.

Kevin is traveling today.