Kevin Drum - July 2010

Friday Cat Blogging - 30 July 2010

| Fri Jul. 30, 2010 2:37 PM EDT

Hey, did you know that a cat is about the same size as a computer keyboard? An old school keyboard, anyway. I'd never really thought about this before, but Domino certainly seems to fit quite nicely in this keyboard box I had out this week. Of course, by this standard, cats are about the same size as a lot of things, aren't they?

But no box for Inkblot. Over on the left he's doing his best impression of a Vermeer painting. He's a handsome devil, isn't he?

Advertise on MotherJones.com

New York Schools Doing About the Same as Always

| Fri Jul. 30, 2010 2:15 PM EDT

The New York Times reports that the passing rate on state English and math exams plummeted this year. Down in the 11th paragraph, here's the explanation:

New York State said the tests had become too easy, with some questions varying little from year to year, making it simple for teachers to prepare students because each test is made publicly available after it is given. So this year, the state made the questions less predictable and raised the number of correct answers needed to pass the tests, which are given to every student from the third through the eighth grades.

Last year, for example, a fourth grader had to get 37 out of 70 possible points on the math test to reach Level 3 (out of 4), or grade level. This year, a fourth grader needed to earn 51 out of 70 points to reach that level.

Well, that would do it, wouldn't it? I don't know how much impact the less predictable questions had, but if you change the passing grade from 53% to 73% you're going to have a whole lot fewer kids passing. So what about the raw scores? How did students actually do on the tests? Here's the state ed department report:

The average scale scores on the English Language Arts test this year were about the same as last year in all grades....The average scale scores on the Mathematics test this year were about the same as last year in all grades.

So....nothing much happened. How dull.

UPDATE: Just to be clear, when I say "nothing much happened" I mean only that test scores stayed about the same. Obviously the change in passing standards will have a big regulatory impact, as schools that were previously deemed OK are now deemed failures. This will, I presume, set off a long chain of reactions.

Majority Rule is Good for Liberals

| Fri Jul. 30, 2010 1:55 PM EDT

Oh well, let's talk more about the filibuster. News is slow today. Over at TalkLeft, BTD takes Chris Bowers to task for suggesting that ending the filibuster would be good for liberals:

Bowers [is] not imagining what a GOP President and GOP Congress would have achieved with the elimination of the filibuster. You thought the actual Bush tax cuts were bad? They would be TWICE as bad without the filibuster. And twice as hard to undo as they would have been passed in regular order, meaning that to undo them would require passage of new legislation.

You can be for eliminating the filibuster on principles of democracy, as Ezra Klein is. But you can not be against the filibuster, as Chris Bowers is, based on advantage to Democrats and progressives.

Actually, I don't think this is right. Obviously conservatives would be able to get more done if the filibuster didn't exist. This is a two-way street, after all. But conservative legislation, on average, tends to be easier to overturn than liberal legislation. Taxes, for example, go up and down all the time, and conservative tax cuts could be washed away easily by liberals if the filibuster didn't exist. But liberal programs tend to be more permanent. Once they get entrenched, even conservatives are loath to eliminate them. For all the big talk about Social Security in 2005, it wasn't the filibuster that kept George Bush from passing his privatization plan. In the end, he couldn't even get majority support for it.

As conservatives know pretty well, this is generally true. Liberal social welfare programs are objects of enormous legislative battles when they're enacted, but they tend to be pretty popular once they've been passed and had a chance to swing into action. Tea party rhetoric aside, most Americans like government bennies. Who wouldn't, after all?

Anything that prevents change is, almost by definition, helpful to conservatives, since preventing change is one of their core interests. Ending the filibuster wouldn't be a liberal panacea, but on net it would almost certainly be a benefit to progressive causes. 

Dissing the Volt

| Fri Jul. 30, 2010 12:54 PM EDT

Edward Niedermeyer goes to town on the Chevy Volt:

For starters, G.M.’s vision turned into a car that costs $41,000 before relevant tax breaks ... but after billions of dollars of government loans and grants for the Volt’s development and production. And instead of the sleek coupe of 2007, it looks suspiciously similar to a Toyota Prius. It also requires premium gasoline, seats only four people (the battery runs down the center of the car, preventing a rear bench) and has less head and leg room than the $17,000 Chevrolet Cruze, which is more or less the non-electric version of the Volt.

This is actually not as bad as I feared when Jack Shafer pointed me toward Niedermeyer's blast. Looks like a Prius? Meh. Requires premium gasoline? The whole point is that it doesn't use much gasoline in the first place (no one buys a Volt if they do a lot of long-distance driving), so meh again. Seats four people? That's a drawback, but not a big one for most people. And although headroom and legroom are indeed a bit less than the Cruze, reviewers mostly seem to think it's pretty adequate.

That leaves that $41,000 price tag. Which comes down to maybe $34,000 after the federal rebate and perhaps a bit less if your state also offers a rebate. Either way, it's still a whole lot more than $17,000, and you're not going to come close to making that up in fuel costs no matter how long you keep the thing. The rest of the Volt's drawbacks may be modest (and you can add limited trunk space to Niedermeyer's list), but they seem a lot worse when you're paying 15 grand for the privilege of suffering through them.

Not to worry, though. In the software biz we always say that nothing is ever right until v3.0. So by 2018 or so the Volt should be in good shape. Assuming that General Motors still exists by then, of course.

Republican Temper Tantrums, Part 873

| Fri Jul. 30, 2010 12:00 PM EDT

As a quick followup to my filibuster post this morning, here's a Center for American Progress chart on Republican use of holds against judicial nominees. Nickel summary: it's way up:

Judicial confirmations slowed to a trickle on the day President Barack Obama took office. Filibusters, anonymous holds, and other obstructionary tactics have become the rule. Uncontroversial nominees wait months for a floor vote, and even district court nominees—low-ranking judges whose confirmations have never been controversial in the past—are routinely filibustered into oblivion. Nominations grind to a halt in many cases even after the Senate Judiciary Committee has unanimously endorsed a nominee.

....There is a simple explanation for the sudden drop-off in confirmation rates—obstructionists in the Senate are using filibusters and holds at an unprecedented rate. And it is nearly impossible to break the filibusters and holds on Obama’s nominees.

For all practical purposes, holds and filibusters are the same thing. The Senate runs on unanimous consent, which means that a single person can bring things to a halt if he or she wants to. A filibuster in the modern era is basically just a threat to withhold unanimous consent if the majority attempts to hold a vote, and the same is true of a hold. They're two sides of the same coin.

Obama has come under a lot of criticism from the left for his slow pace in nominating judges. And he deserves it. But honestly, how much does it matter given the obstructionism from Republicans that's now become routine? As the CAP report says, even district court judges are being held up at unprecedented rates, even though they've enjoyed 90% confirmation rates pretty steadily all the way through the last administration. But today's Republicans haven't even allowed votes on half of Obama's nominees. If there's any aspect of the Senate rules that seems ripe for reform, this is it. But even this, I'd guess, has a pretty slim chance of getting it.

Who's Afraid of the Filibuster?

| Fri Jul. 30, 2010 6:00 AM EDT

As I've mentioned before, there's no serious question that Democrats can get rid of the filibuster if they want to. It's not even complicated. They can't do it right now, because it takes 67 votes to change Senate rules in the middle of a congressional session, but at the beginning of a congressional session they can write all the new rules they want and pass them with a simple majority. To simplify just slightly, all they have to do is wait until January when the 112th Congress meets for the first time, pass a rule that eliminates the filibuster, and then rely on the presiding officer—currently Vice President Joe Biden—to rule that this is kosher. Previous vice presidents from Richard Nixon forward have all agreed that this is legitimate, so there are no real disputes about precedent.

So that's no problem. The problem is that you still need 51 Democrats to sign on to this plan, and as The Hill reports, that ain't gonna happen:

Five Senate Democrats have said they will not support a lowering of the 60-vote bar necessary to pass legislation. Another four lawmakers say they are wary about such a change and would be hesitant to support it. A 10th Democrat, Sen. Carl Levin (D-Mich.), said he would support changing the rule on filibusters of motions to begin debate on legislation, but not necessarily the 60-vote threshold needed to bring up a final vote on bills.

No matter what anyone says, this has always been the reason the filibuster continues to exist: because both parties want it. They mostly don't want to admit it, but both Democrats and Republicans have always had an essentially defensive view of the power of government: They're more interested in stopping the other guys when they're in power than they are in getting their own things done when they're in power. In fact, for a lot of senators, the filibuster acts as a pretty convenient excuse for not doing things they don't want to do in the first place. It allows them to deliver partisan stemwinders to the faithful during campaign season without having to worry about actually delivering once they're safely back in Washington.

So despite the massive abuse of the filibuster that we've seen over the past few years, in which Republicans have made its use so universal that even Mother's Day resolutions now need 60 votes to pass the Senate, it's not going anywhere.

But how about something more modest? Even that would be hard. Dylan Matthews reports that a hearing this week on two proposals to make small changes to the filibustering rules didn't exactly light the world on fire:

Committee Chairman Chuck Schumer was enthusiastic about Lautenberg's plan, calling it "ingenious," but was more measured on Bennet's, saying only that it was "extremely interesting" and acknowledging that Bennet had "worked long and hard" on it. Robert Bennett, the committee's ranking Republican (and no relation to Michael Bennet), expressed concern that the proposals would turn the Senate into the House, and wreak havoc on the Senate calendar by effectively establishing a one-track legislative process.

Lautenberg's plan is modest indeed: Current rules include a three-day delay between the time cloture is invoked against a filibuster and the vote itself. All his proposal does is force filibusterers to actually talk during that time. If they stop, the majority leader can call the vote immediately. This is, truly, the most meager change imaginable: It would be no trouble for the filibustering party to tag team its way through three days of floor speeches, and even if they didn't the only result would be a slightly faster process. You'd still need 60 votes to pass anything.

Bennet's proposal, the one so outlandish that Schumer barely wanted to acknowledge its existence, would reform the practice of anonymous holds and lower the bar for ending a filibuster to 55 votes unless the minority party can find at least one member of the other party to join them. In other words, purely partisan filibusters would need 45 members to sustain them instead of 41. But that's apparently out of the question.

So are there any changes that are possible? Probably not, but my best guess for a rule change that has at least a chance of getting bipartisan support is something limited to the practice of holds. Like the filibuster, holds have gotten wildly out of control over the past couple of years, and it's conceivable that there might be bipartisan support for reining them in. There are two reasons to be optimistic on this score. First, even rabid partisans mostly agree that presidents ought to have the right to appoint their own people to executive branch positions (judges are a different story). Second, this is narrow enough that a deal is possible. In return for tightening up the rules on holds, the minority party might get, say, a better deal on committee staffing. There's scope for horsetrading here.

And the reason to feel pessimistic about even a deal on holds? Because holds are the perfect expression of senatorial privilege, the ability of any single senator to bring the entire chamber to a halt if he feels like it. It's what gives them bargaining power for all their little pet projects, and senators—whether in the minority or not—simply aren't willing to give that up.

Bottom line: Reform of anything related to filibusters or holds is pretty unlikely. No matter what Harry Reid says, he almost certainly doesn't have the votes to do anything serious.

Advertise on MotherJones.com

Phytoplankton Dammerung

| Fri Jul. 30, 2010 1:14 AM EDT

Today's global warming news is about phytoplankton. These are the little bitty plankton that get eaten by bigger plankton which in turn get eaten by fish and whales and other marine life. Bottom line: no phytoplankton, no marine life.

For now, our oceans are still teeming with phytoplankton. But according to a team of researchers from Dalhousie University, our oceans are teeming with a lot less phytoplankton than in the past. Their study, published this week in Nature, concludes that the worldwide supply of phytoplankton has been declining steadily for the past century and has dropped by about 40% since 1950. Various things drive the phytoplankton supply in the short term, but the long term trend is correlated with rising surface ocean temperatures. Here's the soothing version of the news from the BBC:

"Phytoplankton... produce half of the oxygen we breathe, draw down surface CO2, and ultimately support all of our fisheries," said Boris Worm, another member of the Dalhousie team. "An ocean with less phytoplankton will function differently."

The question is: how differently? If the planet continues to warm in line with projections of computer models of climate, the overall decline in phytoplankton might be expected to continue. But, said, Daniel Boyce, that was not certain. "It's tempting to say there will be further declines, but on the other hand there could be other drivers of change, so I don't think that saying 'temperature rise brings a phytoplankton decline' is the end of the picture," he said.

And here's the sirens blaring version from Michael O'Hare:

This finding — and I’m trying hard not to hyperventilate here — is not too far down the scary scale from discovering a small inbound asteroid. This is the whole ocean we’re talking about: the earth’s production of organic material is going down half a percent per year.

....We can’t live without the ocean, every time we look at climate change it’s worse than we thought....We are so f____ed.

So, anyway, as temperatures rise the plankton die. As plankton die, they suck up less carbon dioxide, thus warming the earth further. Which causes more plankton to die. Rinse and repeat. Oh, and along the way, all the fish die too.

Or maybe not. But this sure seems like a risk that we should all be taking a whole lot more seriously than we are. Unfortunately, conservatives are busy pretending that misbehavior at East Anglia means that global warming is a hoax, the Chinese are too busy catching up with the Americans to take any of this seriously, and you and I are convinced that we can't possibly afford a C-note increase in our electric bills as the price of taking action. As a result, maybe the oceans will die. Sorry about that, kids, but fixing it would have cost 2% of GDP and we decided you'd rather have that than have an ocean. You can thank us later.

Is All Politics Local?

| Thu Jul. 29, 2010 8:40 PM EDT

"All politics is local," said Tip O'Neill. But he was referring to an election he lost in 1935 when he said that. Is it still true? The congressional election in 1994 was, famously, "nationalized" by Newt Gingrich's Contract with America, and supposedly the same was true in 2002 thanks to George Bush's campaign heroics. Today Jonathan Bernstein tackles the question of whether congressional elections are just routinely more nationalized now than in the past, and suggests the answer is "probably so":

1. The national parties have grown. The formal party organizations have more resources than they did in 1970....

2. I think Colby is correct that the media mix has tilted from local to national since 1970....

3. Related to #1 above, but worth separating out...national activist and donor networks are far more evolved than they were in 1970....

Put all of that together, and it certainly makes sense that there would be a lot more likely to find candidates taking positions on national issues than it was forty years ago. The demand for it is higher. The cost, however, is lower; it's very easy now for local candidates to cut and paste their national party's positions onto the "issues" section of their website; if you've hired one or more staff person with national experience, they are likely to know those positions and be able to generate the correct rhetoric without a lot of difficulty.

I don't have a PhD or even any special evidence to amass, but all of this sounds right to me. Congressional politics, at least, is just a lot less local than it used to be.

Chart of the Day #2: The Deflation Trap

| Thu Jul. 29, 2010 8:13 PM EDT

This chart comes from Seven Faces of “"The Peril," ”a paper by St. Louis Fed president James Bullard. Bullard has generally been considered an inflation hawk, but in this paper he describes a technical problem with inflation targeting. Most central banks follow something called the Taylor Rule, in which interest rates are raised when inflation gets too high and lowered when things cool off. But Bullard notes that a standard model of the Taylor Rule has two points where it's in equilibrium — in the chart below it's where the red line meets the black curve. The one on the right is fine: it corresponds to an interest rate of about 2.8% and inflation of 2.3%. This is roughly where the U.S. has been until recently. But the one on the left is trouble: it corresponds to an interest rate of zero and deflation of about -.5%. This is where Japan has been.

Bullard's conclusion is simple and direct:

The U.S. economy is susceptible to negative shocks which may dampen infl‡ation expectations. This could possibly push the economy into an unintended, low nominal interest rate steady state [i.e., deflation]. Escape from such an outcome is problematic. Of course, we can hope that we do not encounter such shocks, and that further recovery turns out to be robust— but hope is not a strategy. The U.S. is closer to a Japanese-style outcome today than at any time in recent history.

....To avoid this outcome for the U.S., policymakers can react differently to negative shocks going forward. Under current policy in the U.S., the reaction to a negative shock is perceived to be a promise to [keep interest rates] low for longer, which may be counterproductive because it may encourage a permanent, low nominal interest rate outcome. A better policy response to a negative shock is to expand the quantitative easing program through the purchase of Treasury securities.

The problem we have right now is that if you grind through the usual arithmetic of the Taylor rule, what pops out of the formula is a negative interest rate. But interest rates can't be negative. So for all practical purposes, monetary policy right now is quite tight even with interest rates at zero. What Bullard suggests is that if the economy suffers any further shocks, the Fed needs to respond even though it can't lower interest rates any further. And the way to do that is to fire up the printing presses.

Round 2 on Interchange Fees

| Thu Jul. 29, 2010 3:09 PM EDT

I tend to think that going back and forth with other bloggers on a particular issue has diminishing returns pretty quickly. I'd say that most of the time a single set of posts from each side exhausts the argument, and two posts does it 90% of the time. After that the argument usually just spirals downward along one of several increasingly predetermined paths, none of them good.

So I normally say my piece and then quit. Which I should probably do here. But I guess I'm feeling stupid this morning, because I'm going to push back yet again on the issue of credit card interchange fees. On Tuesday I linked to a Boston Fed article suggesting that the net result of interchange fees was a transfer of wealth from the poor (who pay higher prices generated by the fees even though they mostly use cash) to the middle class and the rich. I wasn't happy about this, but Matt Yglesias and Megan McArdle push back:

Matt: Once you keep in mind the fact that the median household income in 2008 was slightly above $52,000 it’s not at all obvious to me that this is any kind of scam. Instead, it appears to be a classic positive sum business interaction. Credit card companies use interchange fees to cut into retailers’ monopoly rents and then rebate a share of the fee to consumers via reward programs, and on net consumers benefit and the median household appears to benefit....Now it’s true that in this particular case my conscience is pricked by the fact that poor consumers end up losing out. At the same time, do we really think it’s feasible to conduct distributive analysis of every new business model and only accept the ones that are beneficial to poor consumers?

Megan: I never understood why the progressive consumer finance types got so worked up about interchange fees, which are essentially a knock-down fight between two very powerful business lobbies, not a cosmic injustice perpetrated against the American consumer....To be sure, the current system benefits the wealthy most. But that is broadly true of many business models; shall we outlaw Costco because the poor cannot afford lavish pantries and large chest freezers in which to store their warehouse-club bounty?

First off: I'm mystified by the "retailers’ monopoly rents" that Matt talks about. I have no idea what this is supposed to mean. So maybe I'm genuinely missing something here.

But barreling ahead regardless, I'm pretty sure the issue is more on the other side: it's the card networks (Visa and Mastercard control the vast majority of the credit card market) that are effective monopolies. So the question is: are they using their monopoly position to charge interchange fees that are too high? To put it another way: who actually pays these fees, anyway?

I did a bit of desultory research to see if anyone knows the incidence of interchange fees, and the answer appears to be no. There's been some theoretical work, but not much in the way of empirical studies. This is important, because if the net effect of the fees is merely to reduce merchant profits a bit, or to balance the costs between merchant and purchaser banks, then Megan is right: who cares? Let the giants fight it out on their own. But if merchants pass along most of the fees directly to consumers, then it matters.

However, although there's no definitive evidence on this score, there are some reasons for thinking that fees are too high and that consumers do end up paying at least part of them. There's the Boston Fed study, of course. And here's an ECB report suggesting (unsurprisingly) that in a monopoly environment interchange fees will always be set too high. And there's this New York Times piece about swipe fees in the debit card market, which makes it pretty clear that Visa's fees are simply egregious abuses of its monopoly power. And if they're abusive in the debit card market, they're probably abusive in the credit card market too. Finally, there's the fact that current fees are so high that card issuing banks can afford to rebate a big chunk of them in rewards programs, something that flatly makes no sense in a sane world.

Now, even if this is all true, it's also true that on the list of ways in which the poor are screwed, this doesn't make the top ten. It probably doesn't even make the top 100. But I hate the idea of dismissing it anyway. The problem is that this is practically a paradigm example of how all this screwing works throughout the financial industry: most of it is small stuff. It's a few dollars here and there, and banks have a huge incentive to keep it that way. That way nobody really thinks it's worthwhile to bother addressing even though those dollars add up to billions if you screw enough poor and vulnerable people at a time. And Wall Street does. That's why this kind of thing deserves attention even if it's not, by itself, all that big a deal: because there's a lot of it, and it basically all benefits the haves at the expense of have-nots. We lose our humanity when this becomes merely a shrug of the shoulders and a "to be sure."

Beyond that, let's make it clear what I'm proposing. I don't want to eliminate interchange fees. Card payment networks cost money to operate and there's nothing wrong in theory with using interchange fees as a way of offsetting those costs. In fact, I'm not sure I even want to limit interchange fees. What I'm opposed to is their invisibility. All I want to do for now is bring them into the open.

There are two ways this could happen. The first would be to eliminate the merchant charge and have card companies simply add the interchange fee directly onto consumers' bills. So every month you'd get your Visa bill, and at the bottom there'd be a charge of a few dollars that represents the interchange fee. This way consumers know just how much their cards actually cost them

However, this assumes that consumers are already paying 100% of these fees, and they probably aren't. It's probably a mix of consumers, merchants, and banks. So a better, more modest idea is to keep interchange fees intact as a merchant charge but allow merchants to pass that charge along to customers if they want to. Right now, Visa and Mastercard prohibit this, something they can get away with because they're monopolies and merchants have little choice but to accept their terms. I'd like to do away with this prohibition and let merchants raise the price for credit card purchases if they want to. If they don't, that's pretty good evidence that card networks are charging a fair price for the service merchants get from them (increased sales, less handling of cash, etc.). And there's no harm done. But if they do tack on the charge, it's pretty good evidence the networks aren't charging a fair, market-clearing price. I say: let's find out. Interchange fees are hardly the biggest injustice in the world, but then again, this is hardly the most intrusive remedy in the world either. Everyone ought to be in favor of transparency, and everyone ought to be opposed to allowing monopolies to set abusive terms in their contracts. Sometimes God is in the details, and this is one detail I'd like to expose to a little sunshine.