Kevin Drum - June 2010

Employment Picture Still Struggling

| Fri Jun. 4, 2010 11:18 AM EDT

Today's employment news is pretty anemic:

The U.S. Labor Department said in its closely-watched jobs report Friday that nonfarm payrolls rose by 431,000 last month, the largest gain since March 2000. That followed an unrevised 290,000 increase in April....However, the May figure was boosted by the hiring of 411,000 temporary workers for the Census. Only 41,000 private-sector jobs were added.

....Employment in professional and business services rose by 22,000. Manufacturing continued to trend up, rising by 29,000. The industry, which has been leading the economy's recovery, has added 126,000 jobs over the past five months. Construction, a sector of the economy that remains soft, lost 35,000 jobs in May.

The construction sector number comes as no surprise. With the federal government's tax credit for first-time home buyers expiring, the housing market is losing what little steam it had earlier in the year, and that promises to continue. As CBPP's Chad Stone says, "Under these circumstances, policymakers should have no qualms about passing a robust jobs bill — indeed, they would be derelict not to." Preach it, brother.
 

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Left and Right in the Blogosphere

| Fri Jun. 4, 2010 10:54 AM EDT

It's now conventional wisdom that the political blogosphere has been pretty thoroughly professionalized, but James Joyner points out something I hadn't quite noticed:

These things are no doubt happening, especially on the left. Barbara O’Brien‘s observation that “The evil MSM seems to pick up 50 Erick Ericksons for every one Nate Silver” is just bizarre.1 I can’t think offhand of a truly conservative amateur blogger who has been bought out in the manner of Mickey Kaus, Kevin Drum, Matt Yglesias, Ezra Klein, Glenn Greenwald, Steve Benen, Dave Weigel and others who have had hobby blogs bought out by major media sites or ideological think tanks and gone full time. Megan McArdle is the closest I can think of but she was already a professional journalist, writing for the Economist, by the time anyone had heard of her.

So why is this? There are political magazines and political think tanks on the right. Why haven't they hired a bunch of successful hobby bloggers instead of developing their own in-house talent? Why is it that Glenn Reynolds, Erick Erickson, Michelle Malkin, Charles Johnson, and the Powerline folks haven't been hired as bloggers by a magazine or think tank? Is it because conservative magazines didn't want to hire outsiders, or because they made offers and conservative bloggers weren't interested?

1In fairness, I suspect that Barbara was thinking less here about bloggers and more about talking heads and columnists, where conservatives seem to get hired at a pretty good clip.

Cyber Charters and You

| Fri Jun. 4, 2010 12:47 AM EDT

The New York Times has a fascinating story today about "cyber charters," a phenomenon I probably should have heard about before but haven't. I'm still not exactly sure what they are, but as near as I can tell it's basically a way of home schooling your kids using online lessons instead of books. The Times piece is about CAVA, a virtual academy that's a subsidiary of K12 Inc., which provides the online curriculum. Unlike ordinary home schools, however, CAVA is certified by the state of California and therefore gets paid as much per student as an ordinary bricks-and-mortar school. So where does all this money go?

“A virtual education is expensive,” said Katrina Abston, the head of schools for CAVA, and a K12 employee. The nine K12 California schools share the cost of a 10,000-square-foot office and storage space in Simi Valley. “There’s back-end support and computers and the type of curriculum we use is expensive,” Ms. Abston said. “They make sure we’re cutting edge.”

Luis Huerta, an associate professor of education at Columbia University, is suspicious:

“Nationally, cyber charters on average receive the equivalent amount of funding as traditional schools,” Professor Huerta said. He added that there was minimal overhead and minimal accountability. If virtual charter school costs are lower, Professor Huerta said, “then where is the money going?”

“It doesn’t add up,” he said.

Well, maybe not. But K12 isn't wildly profitable, so they're spending it on something. More here.

Quote of the Day: The Shack

| Thu Jun. 3, 2010 7:35 PM EDT

From Nathan Heller, explaining William Paul Young's mega-bestselling religious allegory, The Shack:

Theologically speaking, there is something for everybody in The Shack, but mostly in the sense that there is something for everybody in a meatloaf.

After writing about The Shack a couple of months ago, I finally got around to reading it recently. And as Heller suggests, it's about a lot of things: sort of a weird stew of conventional Christian theology mixed with lots of new-agey spiritualism whose goal is to reconnect you with Christ. Among other things, Young rattles on about the Trinity, the nature of time, what it's like in heaven, the power of redemption, and a hundred other things. At its heart, though, The Shack is concerned with perhaps Christianity's most intractable question: why does an omnipotent God permit the existence of evil? In other words, it's a meditation on theodicy.

And to give Young credit, he doesn't shy away from asking God to account for a case of serious evil: a ten-year-old girl named Missy who's kidnapped, possibly sexually assaulted, and then murdered in a remote shack by a sadistic serial killer. Her father, Mack, quite understandably has his already tenuous faith shaken by the fact that a loving God could allow this to happen, so a couple of years after the murder God invites him to spend a weekend in the shack (along with Jesus and the Holy Ghost) where everything will be explained. 200 pages later, here's the payoff:

"Could I have prevented what happened to Missy? The answer is yes."

Mack looked at Papa [i.e., God], his eyes asking the question that didn't need voicing. Papa continued, "First, by not creating at all, these questions would be moot. Or second, I could have chosen to actively interfere in her circumstance. The first was never a consideration, and the latter was not an option for purposes that you cannot possibly understand now. At this point, all I have to offer as an answer are my love and goodness, and my relationship with you."

Italics mine. This is, needless to say, not exactly a cutting-edge contribution to the theodicy literature. In the end, God doesn't really have any answers at all for Mack, at least not in the usual sense of "answer." However, it does turn out that God and Jesus are really extremely charismatic folks, and that's enough. Mack finishes up the weekend feeling much better about things because he finally trusts God.1

I suppose it says something that this is enough to sell 7 million copies (or whatever it's up to now). I'm not sure what, but something. Here's Heller's crack at it: "[Young's] theories — how to believe in Adam while supporting particle-physics research; why the Lord is OK with your preference for lewd funk more than staid church music — accomplish what mainstream faiths tend to fail at: connecting recondite doctrine to the tastes, rhythms, and mores of modern life. The Shack's wild success doesn't reveal how Bible-thumpy this country is. It shows how alienated from religion we've become. And though the novel, as a novel, is a sinner's distance from perfection, it's an eloquent reminder that, for those who give some faith and effort to the writing craft, there is, even today, the chance to touch and heal enough strangers to work a little miracle." Maybe so.

1Plus God gives him a glimpse of Missy in heaven, and she's pretty happy there. So that helps too.

Basel III Update

| Thu Jun. 3, 2010 3:55 PM EDT

So how are the Basel III negotiations going? You know, the ones that would tighten bank capital requirements, reduce leverage, and, in the words of the Wall Street Journal, "have greater implications for banks and the global economy than the U.S. regulatory changes emerging in Washington"? Here's the latest:

International regulators are moving toward an agreement that would require banks to raise vast sums of new funds to cushion against future losses, but in a concession to the industry and some governments, the rules are likely to take effect later than expected, according to people familiar with the matter.

....France, Germany and Japan have pushed for as much as a 10-year window before the rules go fully into effect, and U.S. and U.K. officials recently have indicated that they would support a gradual time frame, according to people familiar with the matter. "I'm perfectly comfortable with us negotiating reasonable transition period to help make people more comfortable that they can live with those new standards," U.S. Treasury Secretary Timothy Geithner said Wednesday afternoon in Washington, before leaving for the G-20 meeting.

Hell, even I don't have any problem with this. And it sounds like no one else does either. If the new requirements are stiff enough to actually make a difference, we'd be nuts to demand that banks adopt them immediately in an environment where growth is already slow, lending is anemic, and raising risk capital is difficult. The real question isn't so much the timeframe for adopting the new rules, it's whether the rules are any good. Here's what we know about that:

Other crucial details remain unresolved, including disputes over the types of funds banks will be allowed to count toward toughened capital and liquidity requirements. Bank executives, sometimes with backing from their governments, have been waging an intense lobbying campaign to water down parts of the so-called Basel proposals, known for the Swiss city in which the accords traditionally have been negotiated.

This is the real battleground, but the Journal doesn't have anything to tell us about that. The best we have right now, via Felix Salmon, is an article from Global Risk Regulator a few days ago that suggests the Basel negotiators are likely to stick to their guns and issue tough new regulations in the very near future. Keep your fingers crossed.

Poll Wonkery Goes Big Time

| Thu Jun. 3, 2010 2:06 PM EDT

The New York Times announced today that it would begin hosting FiveThirtyEight.com, Nate Silver's stat-wonkery site that shot to fame dissecting poll data during the 2008 election. Henry Farrell comments:

Newspapers have traditionally been highly allergic to statistics, charts and the like, in the belief that they turned readers off. FiveThirtyEight has demonstrated that there is a sort-of-mass readership for this kind of material, if it is presented in the right way. That the New York Times has bought the site — and is seeking to integrate Silver into its broader operations — suggests that it wants to tap into that market.

Hmmm. I guess "sort-of-mass" covers a lot of territory, but I have my doubts that the readership for heavy duty number crunching is any bigger than it's ever been. Instead, I'd guess that "presented in the right way" is really the operative phrase here. And that doesn't so much refer to the way Nate displays his results (though he does a very good job of it), but the fact that he's pretty clearly a liberal partisan. I don't mean that in the sense that he distorts his results to favor a liberal point of view — as far as I can tell, he doesn't — just that he's very good at addressing the topics that liberal readers are most interested in hearing about.

To a certain extent I think this is the future of political journalism. Readers of political reporting pretty clearly prefer a point of view, but in its more rarefied precincts that doesn't mean they want the obvious agit-prop of a Fox News or conservative talk radio. They want their facts more or less straight, which is what Nate provides, but they don't want to wade through thousands of words of junk to find the bits and pieces they're interested in. Rather, they want a guide who already knows what's important to them and puts it front and center. That's what FiveThirty-Eight.com provides. The fact that it's all number-centric is secondary.

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The Virtue of Competition

| Thu Jun. 3, 2010 11:55 AM EDT

Back home from China, Ezra Klein writes about the common sentiment that America needs to do better on [fill in the blank] because otherwise China will surge ahead of us:

Polls and focus groups show that people go nuts for this sort of rhetoric. If you want the country to get behind your policy initiative, just tell them that China is beating us to the punch. But.....

Wait a second. "But" what? If the rhetoric works, why not use it? If competition with the Soviet Union could get us to the moon in less than a decade, why not let competition with China help jumpstart green energy development? Ezra again:

Competitive language is used in service of worthy goals, but it's also dangerous stuff. We're telling Americans to fear the economic development of other countries, when what they should actually fear is the reverse. If China or India stagnate, that means they won't become huge markets for our exports, it means they won't develop new technologies that can better our lives, it means that they won't be geopolitical anchors in the way that only rich, stable countries can be. The global economy isn't a race so much as it's a relay.

Well, maybe. If the competition trope turns into China bashing, and if it takes a turn toward actively trying to impede China's development instead of improving ours, then sure. It's a bad thing. But I'd argue that for the most part, it (a) hasn't and (b) probably won't. We will, I think, shortly end up in some pretty serious competition with China over resources — mostly oil, but possibly other commodities as well — but if anything, that should just reinforce the message that we need to get more serious about renewable energy.

Competitive fervor can be a great motivator. Granted, there's sometimes a thin line between a bit of healthy motivational anxiety and outright populist fearmongering, but I'd say this is a risk worth taking in this case. The American public could use a little motivation right now.

The Times Takes on Dartmouth

| Thu Jun. 3, 2010 11:23 AM EDT

As you may recall, one of the best known studies of healthcare costs, and one that got a lot of attention over the past year, is the Dartmouth Atlas of Health Care, which shows, for example, that although patients in Miami get a lot more healthcare than people in Minnesota, and they get it a lot more expensively, their health outcomes aren't any better. This suggests that there are lots of possibilities out there for cutting back on healthcare costs without impacting the quality of care.

Last night I came across a New York Times article that questioned whether the Dartmouth folks had really proven anything at all. But lazy bastard that I am, I got this far and then just gave up:

But the real difference in costs between, say, Houston and Bismarck, N.D., may result less from how doctors work than from how patients live. Houstonians may simply be sicker and poorer than their Bismarck counterparts. Also, nurses in Houston tend to be paid more than those in North Dakota because the cost of living is higher in Houston. Neither patients’ health nor differences in prices are fully considered by the Dartmouth Atlas.

WTF? This stuff has been controlled for endlessly, and the Dartmouth data still holds up. But I was tired, so I went to bed instead of posting about this. However, other, more energetic people have now taken the trouble to lay out the evidence, so let's review. Here's one of the co-authors of the Dartmouth study explaining their work a year ago in the New York Times (!):

It is true that some regions of the country experience more illness than others, and of course sick people spend more on health care. To deal with this bias, the Dartmouth group has compared expenditures and frequency of treatment across regions for people with similar diseases. The most extensive study compared spending across regions using a variety of cohorts such as people who had suffered a hip fracture or heart-attack patients. This study examined people who were equally sick, whether they lived in Louisiana or Colorado. The researchers further adjusted for any differences in patient income, race, and prior health. They still found gaps of up to 60 percent in spending among regions.

And here, via Brad DeLong, is David Cutler, who was quoted in support of the writers' point that "failing to make basic data adjustments undermines the geographic variations the atlas purports to show":

[T]he reporter asked ‘what do you make of the fact that the price adjustment changes the ranking of communities?’ I said something to the effect of ‘why do I care about the non-price adjusted data.’... [T]he Dartmouth people have done the price adjustment, so we don’t have to fight about what such an adjustment would do. Hard to tell why my comments are beating up on anything (except a mythical version of the Dartmouth data in which they had never done price adjustment)...

Bottom line: all the "data adjustments" the Times reporters talk about have, in fact, been done. Researchers at Dartmouth and elsewhere have controlled for price levels, for demographics, and for differing rates of sickness, and their results largely hold up. There are big variations in cost that have very little impact on quality of outcome. In the end, then, the authors of the Times piece end up with almost nothing. By the time their piece is done, they've basically only got two things left. First, the Dartmouth researchers admit that, on occasion, they might discuss their findings more broadly than they should when they're talking to a lay audience. Second, there are individual bits and pieces of their dataset that other researchers have disputed. Just as there are with any large, complex dataset.

In other words, there's no there there. The Dartmouth research is not the be-all-end-all of healthcare research, but its basic conclusions are extremely robust and have been confirmed over and over. Why the Times chose to pretend otherwise is a mystery.

POSTSCRIPT: The Dartmouth researchers respond to the Times here.

Quote of the Day: Obama on Republicans

| Thu Jun. 3, 2010 10:17 AM EDT

From Barack Obama, explaining the Republican attitude toward governing:

It’s a belief that government has little or no role to play in helping this nation meet our collective challenges. It’s an agenda that basically offers two answers to every problem we face: more tax breaks for the wealthy and fewer rules for corporations.

....As November approaches, leaders in the other party will campaign furiously on the same economic arguments they’ve been making for decades. Fortunately, we don't have to look back too many years to see how their agenda turns out. For much of the last 10 years we've tried it their way. They gave us tax cuts that weren’t paid for to millionaires who didn’t need them. They gutted regulations and put industry insiders in charge of industry oversight. They shortchanged investments in clean energy and education, in research and technology. And despite all their current moralizing about the need to curb spending, this is the same crowd who took the record $237 billion surplus that President Clinton left them and turned it into a record $1.3 trillion deficit.

Feisty! But will he keep it up? One speech won't have much of an impact, but if he takes to the campaign trail and starts making this argument repeatedly, it might start to sink in a bit. It's worth a try.

New Life for the Volcker Rule?

| Thu Jun. 3, 2010 12:23 AM EDT

The conference committee for financial reform legislation won't start meeting until next week, but the Financial Times reports that one provision in the bill is already on target to get tightened up:

Congressional negotiators are moving to toughen financial reform legislation, raising the chances that banks will face a strict ban on proprietary trading and a new conflict of interest rule, people involved in the deliberations say....The provision, sponsored by Jeff Merkley and Carl Levin, two Democratic senators, would toughen the “Volcker rule”, which bans banks from trading for their own account or owning hedge funds and private equity firms, but gives regulators time to study the rule and modify it. “That is a very wishy-washy way to approach the issue,” Mr Merkley said.

Mr Levin said even though the Treasury would “probably...want as much power as they can get to...modify [the bill]”, he thought Congress should write a strong final version.

The Wall Street Journal reports that traders are genuinely unnerved:

Since political momentum began building earlier this year to limit trading for profit at Wall Street firms, traders have been exploring their options, and some have already left. Outside the banks, private investment funds looking for skilled traders have been gearing up for a hot talent market.

...."With Volcker, you've got everyone shaking in their boots, so these traders all have an ear to the ground," says John Pierson, a Manhattan-based headhunter for financial firms.

I guess I can live with this. I'd rather have trading being done in hedge funds, where it belongs, than in banks, where it risks blowing up the plumbing of the financial system. One caveat, though: that trading income should be taxed as ordinary income, not capital gains, as it is now. Other people's money, you know. The House has already done its part to change this, and now it's the Senate's turn.