Kevin Drum - May 2010

Lies, Damn Lies, and Polls

| Tue May 25, 2010 4:07 PM EDT

Jon Chait, after judiciously conceding that it's possible that "Rasmussen is right and everybody else is wrong," basically makes the case that Rasmussen's polls are, in fact, just right-wing hackery. Their questions are often loaded, they pick odd topics, and even when they poll on ordinary subjects they produce results that are wild outliers compared to everyone else:

Rasmussen polling occupies an odd place in the political culture. In the conservative world, it is the gold standard. If you go to a conservative [site] on basically any random day, you'll see somebody touting a Rasmussen poll.

....The habitual practice by conservative pundits of quoting only Rasmussen polling reinforces conservatives' overweening certainty that they embody public opinion. It's an important component of right-wing epistemic closure, the Republican base having its own pollster who always tells them what they want to hear. In theory, there ought to be a corrective dynamic. If Rasmussen is wrong about the 2010 elections — and, again, you can't be certain he will be — in theory, this would cause Republicans to question their reliance upon his unusual findings. But it's entirely possible that Republicans would simply question the validity of the results themselves. It's massive voter fraud! Obama dirty tricks!

Some time ago I decided to ignore all Zogby polls for everything other than plain-Jane election projections, and over the past year or so I've added Rasmussen to that list. I don't write about them to debunk them, I don't write about them when they happen to produce a result I like, I just treat them as null data. Now, I might be wrong about this. On Zogby in particular, I don't even quite remember what it was that prompted me to put him on my permanent shitlist. But that's where things stand: with the exception of campaign polling, where the questions are straightforward and house effects are generally modest (though rising in Rasmussen's case), I just don't trust either of these outfits.

That said, I think Rasmussen does provide a public service: it gives us some idea of where public opinion will be once Republican talking points enter the civic consciousness. Ask people what they think about financial reform and they'll tell you X. Ask them what they think about, say, financial reform that includes a fund to bail out banks, and they'll say something else. Is that a loaded question? Sure, but that's how Republicans are going to attack it, so it's useful to know what public opinion might be once they start repeating that talking points a few dozen times a day. It's not exactly an accurate reflection of the public mood, but it can still be useful information.

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Checking Up on Financial Reform

| Tue May 25, 2010 1:25 PM EDT

If financial reform is passed — and it looks like it will be — how can we tell if it's working? Mike Konczal offers a couple of metrics:

The most obvious problem would be if the market finds resolution authority non-credible and starts lending to the five biggest firms as if they had a permanent government and Federal Reserve backstop....The next thing to watch is whether derivatives are reformed, and how much the laws are gamed in general. Will Goldman Sachs drop its bank holding company status, add a 20 percent non-financial wing and declare itself an end-user, and whatever other complicated acrobatics the lawyers are dreaming up? That all depends on the wink-winks that the regulators will give, and we will never see those on the outside. All we can do is watch for the effects.

I'd add a couple of other things. The first is leverage. This is easy to hide and hard to measure, so it's imperfect. Still, there are various good measures of leverage in the banking industry, and if reform works they should stay at moderate levels even when the economy picks up.

The second is easier: industry profitability. If reform works, Wall Street should be less profitable. Not because anyone is trying to punish them (though obviously plenty of people would like to), but because a safer, more real-world-oriented banking sector is inherently less profitable than the trading and finance-oriented one we have right now. If industry profits stay at 2005-07 levels, it's solid evidence that nothing has changed and they're acting pretty much the same way as always. So that's four things to watch for:

  • Borrowing rates for large banks
  • Derivatives trading
  • Leverage ratios
  • Industry profitability

My guess is that on all four of those metrics, we'll end up improving on where we were in 2005-07 but not by as much as we should. But at this point, any improvement at all is a big win.

High-Stakes Testing in San Antonio

| Tue May 25, 2010 12:52 PM EDT

A reader emails me regarding a story about Sam Houston High School in San Antonio, which has finally met state standards for academic achievement:

It's actually a very sad story about kids who are getting screwed by the system and by some educators, and perfectly encapsulates so much of what is wrong with education reporting. At least twice officials explain to the reporter (apparently without realizing they are doing so) why the results being touted are bogus, and yet the paper still presents this as good news about a success. And the school held a pep rally.

Let's take a look. Here's the first explanation:

“I think the main thing is we tested less kids,” English teacher Richard Acuña said. The school identified additional special-needs students who qualified to take tests that aren't counted when the state determines accountability ratings, he said.

And here's the second:

The state requires a 60 percent pass rate in math to reach the academically acceptable threshold. Though Sam scored lower than that, it is still set to receive the acceptable rating because last year the state introduced a new tool that allows schools to get credit for some students who did not pass the TAKS if they appear to be on target to pass in the future.

The formula, the Texas Projection Measure, uses a student's current test scores in several subjects as well as a previous year campus average score to project the student's future test performance. With the TPM, Sam's pass rate in math is 72 percent, enough to put it into academically acceptable territory.

For what it's worth, I'd add a third: the school's passing rate in science jumped from 38% to 62%. In one year. I mean, maybe that's legit, but if it is, they need to figure out how to bottle it and sell it. I'd usually be impressed by a five-point rise in a single year. A 24-point rise hardly seems believable.

As longtime readers know, I have pretty ambivalent feelings about high-stakes testing. I've heard too many horror stories, both in the press and from friends, to be a big fan, but at the same time it's not clear what better option we have. But even if you are a big fan, there's just too much anecdotal evidence that a lot of success in testing regimes comes from gaming the system and lowering the standards of the tests when necessary. Both seem to be in play in this story.

Awe-Inspiring China

| Tue May 25, 2010 11:55 AM EDT

I don't have any big point to make about this, but here's a comment from Matt Yglesias after taking a train trip from Shanghai to Yiwu:

At any rate, along the train route evidence of an enormous boom in construction was obvious. The scale of some of the new housing developments I saw was unbelievable, almost awe-inspiring.....But it really all does make you wonder how much of the Chinese economy consists of construction these days. The scale of everything in a country of 1.3 billion is just so enormous that it’s difficult to eyeball anything.

Italics mine. But seriously: is this true? China has a population of 1.3 billion. The United States has a population of 300 million. So they're about 4x our size. That's not really such an awe-inspiring scale, is it? We're about four times bigger than Germany, after all, and it's not as if German visitors come to America and routinely marvel at the enormous size of our country — and when they do, it's usually about our wide open spaces, not the fact that Los Angeles is overwhelming compared to Frankfurt. What's more, a city is a city. Shanghai is big, but not wildly bigger than New York City. And considerably less dense.

Like I said, I don't have any big point here except for one: China is big on a macro scale. It's big on a statistical scale. It's growing fast. But on a ground level scale? It's just a place. It's no bigger or denser or busier than lots of other places. So why is everyone always so awe-stricken about it?

(This is actually sort of a genuine question. I've never been there aside from a few days in Hong Kong a long time ago. Is there really something about China from a tourist perspective that makes it seem awe-inspiringly big? I mean, you can talk about how many cities with populations over 10 million it has, but that's only impressive as a statistical measure.1 Once you're actually in one of those cities, it's just one city.)

1Actually, China only has two, so it's not all that impressive even statistically. However, they've got more than two dozen cities with populations bigger than Chicago.)

UPDATE: The consensus in comments so far is, yes, you just have to experience it. The scale of the construction is just unlike anything you see in America or Europe. And two dozen Chicagos is impressive no matter how you slice it.

President Obama's Line Item Veto

| Tue May 25, 2010 11:25 AM EDT

President Obama wants a line-item veto. No surprise there: every president wants a line item veto, despite Peter Orszag's admission that "[this] alone is not enough to cut waste [or] streamline government operations." This is an understatement. Here in California the line item veto has been part of the governor's powers forever, and it hasn't had a noticeable impact on improving our fiscal rectitude. (Maybe you've noticed?)

Anyway: a true line item veto is unconstitutional. So instead the president is asking for "enhanced recission authority":

Under this new expedited procedure, the President would submit a package of rescissions shortly after a spending bill is passed. Congress is then required to consider these recommendations as a package, without amendment, and with a guaranteed up-or-down vote within a specified timeframe.

As Stan Collender explains, this is basically the same authority the president has today with one change: under current law, if Congress does nothing with the president's request then the spending stays intact. Under the new law, if Congress takes no action then the spending is halted. This allows Congress to avoid responsibility for spending cuts since they never have to take a vote to approve them. But would it be constitutional? Bruce Bartlett isn't so sure and has a different suggestion:

I think there really is a much simpler way of getting around the constitutional problem — just repeal the part of the Budget Act which prohibits impoundment.

In essence, impoundment means that if the president doesn't want to spend money appropriated by Congress he simply impounds it; i.e., doesn't spend it. It has exactly the same effect as a line-item veto and is unquestionably constitutional — every president up until Nixon had and routinely used impoundment to control spending.

But in 1973, Nixon became heavy-handed in his use of impoundment, which outraged members of Congress of both parties. Legislation was drafted to eliminate impoundment and force the president to spend every penny appropriated by Congress exactly as Congress intended....Therefore, it would seem to me that simply getting rid of or amending the section of the Budget Act relating to impoundment could give the president de facto line item veto power in a way that would be much more effective than enhanced rescission authority and would certainly be constitutional.

OK, fine. Impoundment isn't as elegent as enhanced recission, but it would almost certainly work. Unfortunately, Bruce's potted history suggests why it doesn't matter all that much: Congress doesn't mind the practice too much as long its use is fairly trivial. But if a president actually uses it in big enough chunks to make a difference, they go nuts — and there goes your faux line-item veto.

But look: if it's only used for occasional little doodaws and gimcracks, it's hardly worth the trouble. It might be worth having just as a PR tool, or as a way of giving the president a bit of bargaining power over the budget, but not much more. So I have a hard time understanding why this topic is such a perennial favorite in Washington. If anyone were really serious about this, we would have approved a constitutional amendment giving the president a real line-item veto long ago.

The End of DADT is Near

| Mon May 24, 2010 7:58 PM EDT

We have some genuinely good news today. President Obama promised in his State of the Union address to work with Congress this year to "finally repeal the law that denies gay Americans the right to serve the country they love because of who they are." He hasn't exactly been a ball of fire on this topic since then, however, and Defense Secretary Robert Gates, though plainly in favor of repealing DADT, wants to wait until the Pentagon has finished studying how to implement repeal later this year. Meanwhile, Sen. Carl Levin has promised to put repeal in this year's Senate's annual defense spending bill but Rep. Ike Skelton hasn't been keen on doing the same thing in the House bill.

But now it appears we have a deal:

Under the compromise, worked out in a series of meetings Monday at the White House and on Capitol Hill, lawmakers will proceed to repeal the Clinton-era policy in the next several days, but that action will not go into effect until the Pentagon completes a study about implementing the repeal.

In a letter to lawmakers pushing for a repeal, the White House wrote Monday that "such an approach recognizes the critical need to allow our military and their families the full opportunity to inform and shape the implementation process through a thorough understanding of their concerns, insights and suggestions."

This is actually not much of a compromise. It's basically a complete win the DADT repeal forces, since implementation always would have taken some time no matter when repeal was passed. Pelosi and Reid already support repeal, and now, with Obama's active support, the chances of getting it through Congress are excellent. Adam Weinstein has more here.

So if things go the way I think they'll go, by later this year Obama, Pelosi, and Reid will have passed a historic stimulus bill, the Lily Ledbetter Act, healthcare reform, college loan reform, financial reform, repeal of DADT, and Obama will have withdrawn from Iraq.1 Not bad for 18 months of work. And who knows? There's even a chance that Obama's Afghanistan escalation will work. If it does, what president since LBJ will have accomplished more in his first term?

1Except for the pesky "residual force," of course. Still, once the combat forces are gone, it's hard to see a scenario in which they're ever sent back in.

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Is Japan's Lost Decade Not Really Lost?

| Mon May 24, 2010 2:21 PM EDT

Whenever you hear people talk about comparative economic performance, you should always make sure to ask for figures about productivity per hour worked, not just overall GDP. The "productivity" part adjusts for differences in population and the "per hour" part adjusts for the fact that some countries choose to work less and have more leisure. Overall GDP is still a useful measure (for example, if you just want to know the international throw weight of one country vs. another), but if you're trying to compare the success of different economic systems you're better off with more granular measures.

That said, another measure is to look at GDP growth adjusted for the growth in the working-age population. If a country is experiencing the consequences of a baby boom, for example, you'd expect growth rates to be pretty high as the baby boomers all enter the workforce. But if a country is getting old and the workforce is retiring in large numbers, growth is likely to be low. Via Tyler Cowen, Tino Sanandaji runs the numbers for Europe, the U.S., and Japan:

In non-population adjusted figures, Japan's real GDP grew by 26% in total these years [1990-2007], the lowest in the OECD. In comparison the figures are 63% for the U.S and 44% for the EU.15.

But during this period the U.S saw its potential labor force (the number of people between 15-65) increase by 23% and the EU.15 by 11%, while Japan had a decrease of 4%.

Between 1990-2007, GDP per working age adult increased by 31.8% in the United States, by 29.6% in EU.15 and by 31.0% in Japan. The figures are nearly identical! Japan has simply not been growing slower than other advanced countries once we adjust for demographic change.

That's pretty interesting. Is Japan's "Lost Decade" (more like two decades now) just a statistical artifact caused by an aging workforce? It seems a little too simple. Is the date range cherry picked? Japan's productivity per hour worked, it's worth noting, is well below U.S. and European levels no matter how you measure it. But I'm throwing this out for discussion anyway. Any credentialed economist types care to weigh in?

What the Oil Spill Looks Like

| Mon May 24, 2010 1:51 PM EDT

I've been sadly negligent on the BP oil spill front, but if you're curious about whether oil has washed into shore yet, the answer is yes. It has. So why aren't we getting more coverage of this? Because BP is none too anxious to allow reporters to see it.  Check out Mac McClelland here to find out what it's really like once she finally got a look.

A Feeble Swipe at Identity Theft

| Mon May 24, 2010 1:02 PM EDT

The FTC has decided to lay down the law on identity theft:

The government says that businesses have the responsibility of making sure thieves don't use stolen information to buy goods or open phony accounts. And to that end, the Federal Trade Commission wants businesses that might be targets of identity thieves to develop written plans to spot "red flags" that fraud could be involved and prevent it.

...."Once the information is in the hands of identity thieves, there's not much more the consumer can do," said Naomi Lefkovitz, senior attorney for the FTC, which will oversee enforcement of the rule as it applies to many — though not all — businesses. "Now it's in the hands of the businesses."....A department store that issues its own credit cards, for example, would qualify as a creditor under the new rule, and would have to develop a plan, according to the FTC.

Ha ha. Just kidding. The FTC isn't laying down the law. What they're actually doing is requiring businesses to "develop a written plan for identifying signs of identity theft." That's almost as toughminded as, say, putting together a blue ribbon commission to write a report on the problem.

Here's a data point to ponder. In 1968 Congress passed the Truth in Lending Act. Among other things, it capped consumer liability for lost credit cards at $50. Guess what happened? Since credit card companies were responsible for all the losses above that amount, they got very aggressive and very creative at figuring out ways to minimize fraud. They made it as convenient as possible to report a lost card. They provided merchants with loads of tools to identify lost cards. They developed computer algorithms to detect usage patterns so they could proactively shut down fraudulent use. They worked really, really hard on this stuff.

In a nutshell, we made banks responsible for the losses, and banks figured out ways to prevent losses. It was the wonder of free market capitalism at work.

Now then, suppose credit issuers were responsible for the costs of identity theft? That is, if you're responsible for issuing a card or extending credit of any kind under false pretenses, you're responsible for the losses and you're responsible for cleaning up the mess. Period. No excuses, no safe harbors, no nothing. If you extend credit to someone named Kevin Drum with my Social Security number, and it turns out that it wasn't actually me you extended credit to, then it's your problem. You pay the charges, you cancel the cards, you clean up my credit report, you contact my bank, you do everything. The basic premise should be: it's your responsibility to make sure you're extending credit to the person you think you are. If you don't, it's your responsibility to fix the mess. And if you don't fix the mess, you'll be liable in court for substantial damages.

What do you think would happen if that was the rule? Easy: banks and credit issuers would miraculously discover that there are lots of ways to tighten things up. Instant credit might become less popular, replaced by having to apply for a card and wait a few days for approval. Credit reporting bureaus would offer their credit protection services for free. (In fact, they'd beg you to sign up.) Credit locking — in which you have to actively allow access to your credit report on a case-by-case basis — would become the default, instead of a hassle that few people take advantage of. And those nifty computer algorithms that have helped with credit card fraud would turn their gimlet eyes on identity theft as well.

Right now, the reason identity theft is such a pain isn't usually the money involved. Quite often, in fact, the amount of lost money is fairly modest. What makes it a pain is that, basically, nobody except you cares about it. You're responsible for contacting your bank, your credit card company, the credit reporting bureaus, and a dozen other firms, none of whom really care about your problem and wants only to pass you along to someone else as quickly as possible.

There's no reason we should put up with this. Responsibility should lie with those who are at fault. If you extend credit carelessly, you should clean up the mess. And it wouldn't even be that hard. Hell, if we merely mandated credit locking instead of making it optional, it would probably eliminate about 95% of all identity theft. Applying for credit might take a day or two longer than it does now, but is that really such a bad thing? Or, perhaps we could mandate credit locking by default, and allow you to unlock your account only if you agree to accept full personal responsibility for any identity theft that might ensue.

Instead we're getting "written plans." Blecch. Perhaps our shiny new Consumer Finance Protection bureau will be able to do a bit better once financial reform is passed and it gets up and running.

Taking Sarah Seriously

| Mon May 24, 2010 11:39 AM EDT

Sarah Palin and White House Press Secretary Robert Gibbs dueled it out this weekend:

Pointing to what she termed the White House's relationship with "the oil companies who have so supported President Obama in his campaign and are supportive of him now," Palin questioned whether "there's any connection there to President Obama taking so doggone long to get in there, to dive in there, and grasp the complexity and the potential tragedy that we are seeing here in the Gulf of Mexico."

Gibbs, on CBS News' "Face the Nation," suggested Palin do some homework...."My suggestion to Sarah Palin would be to get slightly more informed as to what's going on in and around oil drilling in this country."

OK, I guess that's not bad. And since I read Jon Alter's The Promise last week, I'm still sort of stuck in Alter's universe, where Obama is the adult who insists on always taking the high road against his opponents and always turns out to be right about that. And hey, maybe so. Maybe he's right to be exasperated with people who are endlessly advising him to get more partisan and more fiery. And maybe he's right to insist that his staff act the same way he does.

Maybe, maybe, maybe. But honestly. Isn't it time for guys like Gibbs to finally just say something like, "Bob, we're not still treating anything Sarah Palin says as actual news, are we? Let's move on." After all, even Bob Schieffer can't possibly take it seriously when Sarah Palin — Sarah Palin! — suggests that Barack Obama has failed to "grasp the complexity" of the oil spill.