Kevin Drum - July 2010

Chart of the Day #2: Small Business Fears

| Thu Jul. 22, 2010 2:21 PM EDT

Via Ezra Klein here's a survey of small businesses that's been conducted by the National Federation of Independent Businesses for the past few decades. The question is: What's your single most important problem? (It's broken up into two charts so you can see all the trends clearly.) In the early 90s it's taxes. In the mid-90s it's regulation. In the aughts it's insurance. And today? It's poor sales.

It's true that fear of the regulatory environment has gone up slightly over the past year, but the problem driving lack of hiring and investment is still crystal clear: lack of demand. If people were buying more stuff, businesses would be expanding.

This is just one data point, but it's a telling one. Even with the massive propaganda campaign that's been underway ever since Obama took office, small businesses still mostly don't seem very concerned about the changing regulatory environment. Mainly they're concerned about the economy sucking. If we want them to start expanding and hiring, that's what needs to be tackled.

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Quote of the Day: Spending Cuts and Elections

| Thu Jul. 22, 2010 1:50 PM EDT

From Rep. Paul Ryan (R–Wisc.), on why Republicans are so reluctant to endorse the spending cuts in his Roadmap for America:

They're talking to their pollsters and their pollsters are saying, "Stay away from this, we're going to win an election."

Points for honesty. But what really makes this reticence remarkable is that even Ryan doesn't really propose much in the way of spending cuts in his roadmap. He continues to get lots of praise for being one of the few conservatives to put his money where his mouth is, but the truth is that his plan mostly just sets spending caps. With some minor exceptions, it doesn't go the critical next step and propose the actual cuts that would allow us to meet his caps.

But most Republicans won't even endorse that. They figure that might endanger their election chances. I imagine they figure right.

Fixing California

| Thu Jul. 22, 2010 1:28 PM EDT

Conor Friedersdorf asks a tough one:

I’ve got a question for Kevin Drum. You and I presumably agree that California Republicans and Democrats are both exceptionally awful, so much so that it’s hard to even think about this state’s politics without despairing. Indeed, I’ll bet that despite our differences in political philosophy, we could hammer out some mutually agreed upon changes that would result in a 600 percent improvement in public policy.

But I also bet we’ll wind up voting differently come November. The last time Democrats controlled the statehouse and the governor’s mansion, Gray Davis and the legislature incurred some egregiously unsustainable costs related to state employees, whose unions are such a powerful interest group here. I’ll be the first to acknowledge the utter dysfunction of California Republicans, our current governor very much included, but I’m terrified to death that the end of divided government is going to maximize the chance that more catastrophic craziness passes into law. And I find it very hard to believe that unified government under Jerry Brown and the current legislature is going to bring about any significant reforms.

Am I wrong?

Wrong? The word hardly has any meaning in this context. A choice between imperious zillionaire Republican Meg Whitman and Democratic retread Jerry Brown is like being asked to choose between dog food and cat food for dinner tonight. Since I'm a cat person, I guess I'd choose cat food because I get to watch my cats lap it up adoringly every night. But that's not much of a reason, is it?

I have no idea what to do. California is broken and there's no political will to fix it. And by "political will," I don't mean that politicians are unwilling to fix it (though they are). I mean that the people of California are unwilling to fix it. Blaming things on our politicians feels good, but we the people are every bit as fractured.

And look: it's not just Sacramento. I live in Orange County, ground zero for conservatism in the Golden State. In 2001, right after 9/11, the county board of supervisors unanimously voted to increase pensions for public safety workers by over 50% in a single stroke. Sure, the authorization for the increase was contained in a bill passed by the legislature and signed by Gray Davis. But guess what? Everyone bellied up to the bar, including the supposed fiscal hawks of The OC.

So would things be any better if the former CEO of eBay became our governor? It's hard to see how. Whitman apparently doesn't have the leadership chops to even risk talking to the press, let alone the leadership chops to bring some semblance of order to a legislature that's (a) hopelessly divided and (b) governed by insane rules that practically guarantee deadlock. Would Jerry Brown do any better? I doubt it. But on non-budget issues at least he's more likely to be on my side of things. So there's that.

Bottom line: I don't know what to do. If Arnold is to be believed, our shiny new redistricting and open primary laws will change things starting in 2012. I can't wait.

Help Me Understand the Right. Really.

| Thu Jul. 22, 2010 12:33 PM EDT

The fantastic outpouring of conservative resentment following the Shirley Sherrod case (miscellaneous example, one of many, here) is remarkable. In one sense, it's nothing new. We all know that conservatives have felt for a long time that an omnipresent liberal media is stacked against them; that race hustlers have made an industry out of accusing them of bigotry; that coastal elites sneer at them; that Hollywood forces its liberal social agenda on them; that their kids are indoctrinated every day with liberal shibboleths by politically correct schoolteachers and university professors; that global warming is a hoax designed to give liberal technocrats control over the economy; that multicultural cabals hate heartland Christians; and that, just in general, liberals operate in a relentlessly bullying, thuggish manner and conservatives just sit there and take it.

On an intellectual level, I can sort of get this. If I were a conservative Christian I'd be unhappy with the increasing secularization of society and the 60s-era Supreme Court decisions that largely removed religion from the public square. If I were a white guy stuck in a sucky job and heard stories of blacks being given preference in promotions and school placements, I'd be pissed. If I were socially traditional and my school district insisted on a curriculum that endorsed tolerance of gay lifestyles, I'd be horrified. If I only heard the Fox News version of Climategate, it would seem like truly terrifying proof of a massive global conspiracy and fraud.

But on an emotional level, it just seems nuts. So I wish that I could figure out a way to feel it. To understand it. I wish I could somehow do the "Black Like Me" thing. (Explanation here if you're too young to remember this.) But how? What would it take to somehow enter this world and actually try to feel what so many conservatives apparently feel? Since I almost totally lack empathy I probably couldn't do it in any case, but could anyone? What would it take to truly understand what's going on here? Because, if anything, it seems to be getting even more virulent and I find myself increasingly unable to understand it.

I don't know why I'm writing this. I'm just feeling increasingly estranged from the political world these days, as if it's some kind of nightmare that's taken over our national psyche and refuses to let go — and I'm forced to participate and can't wake up no matter how hard I try.

I dunno. I'm burbling. Just getting something off my chest that I can't really explain. Sorry. Maybe I just need a vacation. Anyone know of any nice spots?

Bell Update

| Thu Jul. 22, 2010 10:51 AM EDT

I know you want to keep up with the latest news from the fabulous city of Bell, so here it is: 

[City manager Robert] Rizzo, whose forced-resignation could come as early as Thursday, would be entitled to a pension of at least $600,000 a year for the rest of his life, according to retirement calculations made by The Times and reviewed by pension experts....Not far behind would be Randy Adams, the man Rizzo hired as Bell police chief last July. If Adams steps down, his pension would be worth an estimated $411,300.

....Cristina Garcia, who grew up in Bell and is part of a newly formed citizen's group, said fat pensions are another insult to city residents. "It's unethical and immoral, that's obvious," she said. "What's amazing is that it is all legal."

Legal, baby, legal! Pensions, of course, depend heavily on just a small number of your highest paid years in the system, and Adams's pension, which was about $200,000 after serving in Glendale for 37 years, has doubled in just the single year he's been at Bell.

The Bell city council, which presumably set these salaries in the first place, and which pays itself outrageous salaries as well, will meet tonight in closed session to figure out what to do about this. Something tells me we can all guess the outcome.

How the Economy is Affecting Us

| Thu Jul. 22, 2010 10:21 AM EDT

Via Jon Cohn, a group of scholars at the Rockefeller Center, led by Jacob Hacker, have created a new measure called the Economic Security Index to complement the more traditional measures of poverty. Basically, it measures the number of people who have experienced a major loss in income (25% or more) — either due to a decline in income or large out-of-pocket medical expenses or both — and who lack adequate financial wealth to buffer the drop. By their projection, the number of Americans in this category is now over 20%, far higher than in any previous recession.

If you go to the ESI site, you can also play around with the index. How many people have lost a third of their income? Half? How are high school dropouts doing? How are different age groups doing? Different ethnic groups? It's grim reading.

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Gloomy Wednesday

| Wed Jul. 21, 2010 10:39 PM EDT

Scott Sumner is evidently in about the same mood as me today, but his motivation for doom and gloom isn't the apparently final collapse of the Enlightenment project after a pretty good run. No, his concerns are a little more prosaic: he's gobsmacked that Ben Bernanke continues to fiddle while the economy burns. After noting that current monetary policy is quite likely contractionary even with near-zero interest rates — and that Bernanke seems none too concerned about it — he surveys the Fed's possible responses:

There are three things the Fed could do with minimal price risk; lower the interest rate on reserves, set a price level target, and do several trillion in QE [quantitative easing] with T-bills and short term T-notes.

....Here’s how to tell if the Fed is serious, if and when it moves. If they take one of those three steps, it will merely be a desultory action aimed at mollifying the markets. If they are serious, and really want to turn around market sentiment, then they will use the multi-pronged approach I recommended last year; eliminate interest on reserves, major QE, and some sort of quasi-inflation targeting language. As Bernanke indicated, the best we could probably hope for regarding inflation targeting is a vague mention that rates would be left low until some collection of macro indicators rise much more substantially — i.e. no early exit. Those three steps might not be enough for a fast recovery, but it would almost certainly get things moving again.

....Today fills me with gloom. It will be interesting to hear what you commenters think. How about it JimP? Did Bernanke exhibit the sort of “Rooseveltian Resolve” that (in 1998) he insisted the Japanese needed in order to get out of their Great Recession? Did he show the “yes we can” spirit? The Rooseveltian/Kennedyesque/Reaganesque determination that we won’t put up with high unemployment for as far as the eye can see? Or did he blink? 

I dunno. I wish I had something smart to say, but it's all been said a thousand times before. The economy is in the doldrums; it's not likely to get out of the doldrums any time soon; there's a marked risk that an economy in the doldrums might fall back into recession; millions of people are going to suffer needlessly because of this; and an unholy alliance of partisan Republicans, cowardly Democrats, and Fed members in hock to ancient superstitions is preventing us from doing anything about it. So I'm full of gloom too.

Last Call for Home Star

| Wed Jul. 21, 2010 5:32 PM EDT

Dave Roberts says not to call it "cash for caulkers," so I won't. It's officially Home Star, and it provides incentives for home energy retrofits. It's a great idea, providing jobs and stimulus dollars and providing them in the right place. Unfortunately, it's in trouble:

The House passed the bill back in May and it's been sitting in the Senate ever since. Homeowners are putting off retrofits, waiting to see if it will pass. Construction trades are holding off on hiring, waiting to see if it will pass. Members of the Home Star coalition now populate all 50 states and they are holding their breath, waiting.

Now the bill's on the knife's edge. There's been talk of including Home Star in the Small Business Jobs Bill that's pending in the Senate Finance Committee. A final decision about whether to do so will be made on Wednesday.

....This bill is as close to a no-brainer as will ever grace Capitol Hill, supported by left and right and of benefit to every single Congressional district. Surely if the Senate can do anything any more, it can do this.

If you have a senator — and most of us have two — give 'em a call. A little extra push might make the difference here.

Food Fight at the RNC

| Wed Jul. 21, 2010 1:00 PM EDT

The treasurer of the Republican National Committee says that RNC chairman Michael Steele conspired to cover up their financial woes:

The Republican National Committee failed to report more than $7 million in debt to the Federal Election Commission in recent months — a move that made its bottom line appear healthier than it is heading into the midterm elections and that also raises the prospect of a hefty fine. In a memo to RNC budget committee members, RNC Treasurer Randy Pullen on Tuesday accused Chairman Michael S. Steele and his chief of staff, Michael Leavitt, of trying to conceal the information from him by ordering staff not to communicate with the treasurer — a charge RNC officials deny.

Mr. Pullen told the members that he had discovered $3.3 million in debt from April and $3.8 million from May, which he said had led him to file erroneous reports with the FEC. He amended the FEC filings Tuesday.

I love the smell of napalm in the morning.

The Free Market Blues

| Wed Jul. 21, 2010 12:27 PM EDT

James Pethokoukis makes a good argument and a bad one today. Let's start with the bad one:

To hear many U.S. CEOs tell it the nation’s free enterprise system, as they call it, is faltering....The cranky guys in the suits make some good points. As the U.S. Chamber of Commerce pointed out in an open letter to the White House and Congress last week, the U.S. corporate tax rate is the second-highest among advanced economies, Congress has failed to push through key trade agreements and federal spending is on a worrying trajectory.

Actually, the cranky guys in the suits don't make any good points here. Effective U.S. corporate tax rates, which are all that matter, are pretty average. The "key" trade agreements in question are with Panama and Colombia and are virtually unnoticeable. And federal spending in the long term depends almost entirely on healthcare spending, which the cranky guys in suits seem just as unwilling to address as anyone else.

But enough kvetching. Here's Pethokoukis's good argument:

While a pro-business agenda may intersect at points with a pro-market one, they are not the same thing. Pro-market public policies make markets function fairer and more efficiently for everyone. They encourage competition and “creative destruction” and entrepreneurial capitalism. Pro-business policies often shift taxpayer money and other government goodies to favored companies, raise barriers to entry and otherwise defend the status quo.

For instance, the Chamber wants the government to cut spending by reforming the social insurance system. That sounds good — but how about also reducing the $90 billion a year in subsidies and tax breaks that the Cato Institute reckons businesses get every year? The oil and gas industries alone benefit to the tune of $4 billion annually. It would be better to eliminate such distorting political blessings and then lower the corporate tax rate for everyone.

....Or take financial reform. While big banks may complain about the tidal wave of new regulation, they also know they got off easy in some respects. They weren’t broken up, nor were size limits put in place. In fact, the biggest banks have gotten bigger since the financial crisis and have every incentive to keep doing so since the bigger they are, the more likely Uncle Sam will see them as too big to fail.

The Republican Party has long been pro-business, not pro-free-market, and the same is largely true for the Democratic Party these days. And while liberals are unlikely to ever team up with conservatives on a pro-business agenda, which generally just means handing out goodies to favored patrons, I think a pretty sizeable number would be willing to team up on some aspects of a pro-market agenda if that were actually on the table. There would still be plenty of areas of disagreement (we liberals remain sort of attached to the idea of helping the poor and the middle class), but some areas of constructive correspondence as well. So if there are some non-wild-eyed pro-market conservatives still left alive out there, let's hear your agenda. It might be interesting.