Kevin Drum - March 2011

Deficit Views Remain Stubbornly Boring

| Wed Mar. 9, 2011 2:44 AM EST

As usual, Americans don't want to cut spending on programs they benefit from and don't want to raise taxes except on other people. Bloomberg reports on their latest poll, which pretty much reprises the results of every other recent poll taken on the subject:

Almost 8 in 10 people say Republicans and Democrats should reach a compromise on a plan to reduce the federal budget deficit to keep the government running, a Bloomberg National Poll shows. At the same time, lopsided margins oppose cuts to Medicare, education, environmental protection, medical research and community-renewal programs.

While Americans say it’s important to improve the government’s fiscal situation, among the few deficit-reducing moves they back are cutting foreign aid, pulling U.S. troops out of Afghanistan and Iraq, and repealing the Bush-era tax cuts for households earning more than $250,000 a year.

In the long term, this won't work. We'll need to raise taxes on everyone and rein in healthcare spending even more than PPACA has done. In the short term, though, it sounds pretty good to me. Getting out of Afghanistan and Iraq would save noticeable amounts of money, and so would killing the Bush tax cuts for the rich. It's a good start.

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Our Uncertain Oil Future

| Wed Mar. 9, 2011 2:32 AM EST

Jeff Currie of Goldman Sachs is pessimistic about world oil supplies. Ambrose Evans-Pritchard of the Telegraph reports:

Assumptions that OPEC has added 1.9m bpd over the last two years are wishful thinking. These new fields have been "largely offset" by attrition in old fields.

"We believe that OPEC spare capacity has already dropped below 2m bpd. The question therefore arises how much spare capacity is left to absorb potential supply disruptions in other countries," he said. If this picture is broadly correct, spare capacity is already close to the wafer-thin levels that led to wild price moves in mid-2008.

....Chris Skrebowski, editor of Petroleum Review, said the long-denied oil crunch is starting to bite. "We cling to the comfort blanket that spare capacity exists, but it is mostly fictional, or inoperable. If you take 2m bpd off the figure, the whole dynamic of global oil supply changes," he said.

World oil prices are largely driven by spare capacity these days. When it gets down to around a million barrels a day, where it seems to be now, prices can gyrate wildly based on very small supply shocks. Libya isn't a huge supplier of oil on the global market, but the loss of their production probably removes whatever small cushion we've been operating with. Even a very modest disruption in another OPEC country could send oil prices skyrocketing.

Then again, maybe not. Maybe demand in China will slow down a bit as authorities there try to cool down their economy slightly. You never know. But spare capacity is key, and right now there's hardly any left. For more, see here, here, and here.

Pension Spiking

| Tue Mar. 8, 2011 6:10 PM EST

Karen Tumulty writes in the Washington Post today that most public sector workers get fairly modest pensions:

What makes headlines, however, are the stories of workers who exploit the loopholes....Some public employees end up getting paid more in retirement than they did during their working years, thanks to pension-benefit formulas that encourage practices such as "spiking," the inflation of salary and overtime payments in the final years before retirement.

"I've never understood why public employees themselves haven't policed these abuses, because it hurts everyone when they come to light," said Alicia Munnell, the director of Boston College's Center for Retirement Research.

Last year, New York's then-Attorney General Andrew Cuomo — now the governor — investigated pension-padding and found cases where government employees who had never worked overtime in the early years of their career clocked more than 1,000 hours of it as their retirement neared. Cuomo said the abuse transcended "occupation, region or job title."

New York City Mayor Michael Bloomberg in January proposed banning the practice, but only for new employees. Unlike private employers, state and local governments are generally prohibited from changing the retirement benefits that they have already promised current workers.

Anyone who's serious about pension abuse should focus like a laser on spiking. Unions are wrong to defend it, and if Democratic politicians back them up on it, then they deserve all the public abuse that Republicans are able to hang on them. It's a bad practice and an indefensible one, and it ought to be an easy bipartisan target.

But I'm curious about the fact that "state and local governments are generally prohibited from changing the retirement benefits that they have already promised current workers." It certainly makes sense that basic benefit levels can't be changed once they've been agreed to and workers are counting on them, but can it really be the case that even something like spiking can't be changed when contracts are up for renegotiation? Or at least limited? Is this due to state law, or is it something mandated by the courts? I'll try to check into this.

In any case, surely states and local governments can crack down on this if they want to by simply not approving overtime for workers who are close to retirement? Or approving it only in limited amounts and with the approval of someone fairly high up the food chain? I'm not sure what would stop them from doing this. It's a collective action problem, to be sure, but not an impossible one to address.

Map of the Day: Preventing Students From Voting

| Tue Mar. 8, 2011 5:12 PM EST

This comes from Campus Progress and shows the spread of laws designed to make it harder for college students to vote. Why? Because college students tend to vote for Democrats. The group behind this push, you'll be unsurprised to learn, is funded by all the usual conservative suspects, including everyone's villain du jour, the Koch brothers.

The New 1099 Scam

| Tue Mar. 8, 2011 3:04 PM EST

Do you remember the great 1099 controversy? No matter. Details are here if you're interested, but all that matters is that (a) it raised tax collections on small businesses a bit to fund the healthcare reform act, (b) everybody hates it, and (c) there's a bipartisan consensus to get rid of it.

Fine. With Republicans in charge of the House, they can now write a bill to repeal it, which amounts to passing a tax cut. But guess what? For the first time in living memory, they're insisting that a tax reduction has to be paid for with higher revenue from somewhere else. In particular, they're taking aim at a provision of PPACA that says if you lose your job and get subsidized insurance via the exchange, but then you find a job six months later, you'll get hit with a hefty year-end bill for the months you didn't qualify for a subsidy. This is already bad enough, but at least the maximum payback is fairly modest. The Republican bill would make it much worse, upping the potential payback to multiple thousands of dollars. This is especially punitive for two reasons. First, because the incomes of the poor are highly volatile, which means they're highly likely to get hit with year-end bills. And second, because the total amount of money this raises is minuscule.

Jon Cohn and Ezra Klein have more details, but it's not the details that matter here, it's the principle. Republicans obviously don't believe that tax reductions require offsetting spending cuts, a stand they've made clear time and time again. Nor have they suddenly changed their minds about this. Rather, they're trying to use the 1099 fix as an excuse to undermine the effectiveness of healthcare reform. As Austin Frakt puts it, "ACA's subsidies are starting to function as a cash cow, paying for changes to the law."

Tea party Republicans, now that they're away from the campaign trail and have to face the real world, have discovered that they really don't have any leverage to either repeal or seriously defund PPACA. So now they're trying to find backdoor ways to chip away at it. This one is unusually shameless.

The Education Beat

| Tue Mar. 8, 2011 2:37 PM EST

In the Columbia Journalism Review today, LynNell Hancock writes about the way the media covers the education beat — often flitting from one silver bullet to the next, driven largely by the agendas of a familiar core of reformers with similar worldviews:

By far the most influential of all are the Big-Three venture philanthropies, The Bill & Melinda Gates Foundation, The Walton Family Foundation, and Eli Broad’s Broad Foundation, which often work in concert on issues like school choice and teacher effectiveness.

....An important story in the Winter 2011 edition of Dissent magazine by Joanne Barkan detailed their influence—amplified by the media—over urban school policy. In it, she quotes conservative education expert Frederick Hess, the nation’s most vocal critic of the media’s “gentle treatment” of the foundations. In the 2005 book, With the Best of Intentions: How Philanthropy Is Reshaping K-12 Education, he describes a credulous press that treats philanthropies like royalty.

What draws these venture philanthropists and Wall Street financiers to urban school reform, and to top-flight charter schools like Uncommon Schools and the Knowledge is Power Program (KIPP) network? One is the businesslike way the schools in those systems are run. They value standardized curricula and measures, incentives, as well as a young, flexible, nonunion teaching force. As a group, these reformers tend to believe that America’s growing child-poverty rate and shrinking social services are used as excuses by educators. Results in schools like those in the KIPP network, they say, prove that poverty does not have to be an obstacle. They see themselves as warriors against the status quo, with leverage. “It’s the most important cause in the nation, obviously,” the manager of hedge fund T2 Partners, Whitney Tilson, told The New York Times in December 2009. “And with the state providing so much of the money, outside contributions are insanely well leveraged.”

The whole thing is worth a read.

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Love at First Sight

| Tue Mar. 8, 2011 1:29 PM EST

And now for something completely different. Last night I saw The Adjustment Bureau, and it reminded me of a common problem with modern movies. I'm curious to know if others agree. Don't worry; no spoilers ahead.

The basic premise of the movie is that Matt Damon meets Emily Blunt, falls immediately in love, loses her, and then spends the next several years fighting desperately against the massive and mysterious forces trying to keep them apart. Fine. That's as good a premise for a movie as any. But for it to work, the audience has to believe that Damon's character is really, truly, irrevocably in love with Blunt's. And they have to believe this based on a first meeting that lasts three or four minutes.

You can guess what's coming next: I didn't believe it. Maybe Damon and Blunt just didn't do a good job. Maybe the dialogue in the scene where they first met was unusually clumsy. Maybe it's close to impossible to pull this off in just a few minutes of screen time, and it's one of those things you have to accept as a premise without really believing it, like light sabers, or the notion that Katherine Heigl has a hard time attracting men.

But anyway, I'm curious: anyone else feel that movies routinely fail to pull off this kind of first act chemistry these days? Did they really do it better in the past? It seems like they did, but I'm not enough of a movie buff to say so with any conviction. What say ye, commentariat?

UPDATE: And the movie overall? Meh. I've seen worse. But you can wait for it on Netflix.

UPDATE 2: And how many movies have now been made from Philip K. Dick novels or short stories? According to his Wikipedia entry, nine. Is that some kind of record?

UPDATE 3: What's more, according to Wikipedia, there's a French film based on my favorite Dick novel, Confessions of a Crap Artist. I had no idea. It's called Barjo in its English-language release. Doesn't seem to be available from Netflix, though.

All About Oil

| Tue Mar. 8, 2011 12:52 PM EST

Chris Hayes offers up two propositions today. First: High gasoline prices are bad for incumbent presidents. Second: Speculators play a big role in driving up the price of crude oil, and therefore the price of gasoline as well. His conclusion: The CFTC should impose "position limits" that restrict the size of the bets speculators can make on oil futures, and to do that three out of five CFTC commissioners need to vote for these limits:

Not surprisingly, the big Wall Street banks like Goldman Sachs don't want this, and the two Republican members of the commission don't favor any position limits rules with real teeth. To his great credit, CFTC Chairman Gary Gensler (a former Goldman banker I was quite critical of when nominated to the position) has taken a strong leadership position in advocating strong limits, and Democratic commissioner Bart Chilton has been supportive as well. That leaves the deciding vote in the hand of Democratic Commissioner Michael Dunn, who's expressed misgivings.

Now, it just so happens Dunn's term is up in June and last night MSNBC's Ed Show reported that the White House has begun vetting his replacement. This may seem obscure and technical, but given the precariousness of the recovery and political explosiveness of gas prices, nominating a replacement enthusiastic about reigning in excessive speculation may be the single most important decision the White House makes between now and Election Day.

This should make for great cocktail party chatter if you want to sound super plugged in to the inside minutiae of campaign politics. Hey, who do you think Obama is going to replace Mike Dunn with? You know, the CFTC guy. Jeez: Commodity Futures Trading Commission, dude. Try to keep up!

On a more serious note, there's still considerable question about whether the 2008 spike in oil prices was driven by speculation, though I'm friendlier to that thought today than I was at the time. This time around there are the same problems trying to figure out what's going on (the WTI-Brent price spread remains a bit mysterious, for example), but beyond that there's also the obvious fact that there are pretty compelling supply explanations for recent price increases. Saudi Arabia may still be pretty stable, but plenty of other oil producers in the Mideast, with Libya in first place, aren't. It would be strange if the events of the past couple of months didn't produce a natural price spike.

Still, reasonable position limits might do some good and are unlikely to do much harm. For reasons both prudent and political, Obama might be well advised to find a CFTC commissioner who agrees.

A Defense of Mitt

| Tue Mar. 8, 2011 12:15 PM EST

Is Mitt Romney really a chameleon willing to change his colors endlessly and without shame in his quest to become president? Brendan Nyhan isn't so sure. He's been reading recent press coverage of Romney (He's wearing Gap skinny jeans! He's hanging out at NASCAR races! It's Romney 3.0!) and feels vibes from the media's treatment of Al Gore in 1999-2000:

In both cases, of course, detractors of Romney or Gore will argue that the candidate really is especially phony or inauthentic. Even if this is true, the problem is that the perception that a politician is phony encourages reporters to manufacture misleading narratives to reinforce that frame (as we saw with Gore in 1999-2000). In reality, almost every politician is calculating in the clothing they wear, the images they present, and the events they stage. Any reporter can deconstruct this stagecraft or write stories about how candidates are reinventing themselves (indeed, this is one of the few sorts of criticism allowed under what NYU's Jay Rosen calls the view from nowhere). But they tend to only write these stories about candidates for whom the narrative of phoniness seems to apply. For instance, Fred Thompson, the former Tennessee senator who briefly ran for president in 2008, had a homespun manner. As a result, the story that Thompson pretended to drive away from a public event in his signature red pickup truck before transferring to a luxury car got little attention.

OK, point taken. But Brendan is right: I would say that Romney is unusually willing to say and do anything to make himself more acceptable to the tea party crowd that now controls the Republican nomination process. It's not so much his new jeans or his love for NASCAR as it is his all-too-transparent effort to scurry shamelessly to the far right and pretend that he's anything other than the moderate conservative technocrat that he really is. I suppose Brendan might say that all politicians are calculating in the positions they take during primaries too, and that's true. But unless I'm way off base, Romney sure does it a lot more — and a lot more clumsily — than most.

What is Mitt Romney's Problem?

| Mon Mar. 7, 2011 7:03 PM EST

Jon Cohn sends us to Joe Klein's latest head scratching over Mitt Romney:

Romney remains a mystery to me: He's smart, he was a good governor, he's essentially a responsible moderate-conservative...but he has made an utter fool of himself flip-flopping and fudging--and taking wildly stupid positions (against the START treaty, for example) on issues about which he knows little or nothing. It almost seems a personality disorder. In this case, his efforts to distance himself from his own, essentially successful program, are particularly pathetic. If the man had the tiniest smidgeon of courage, he would make a conservative argument in favor of universal health care--it liberates a great deal of potential economic energy (all those would-be entrepreneurs now stuck in stultifying corporate jobs because they don't want to leave their health plans). Or he would simply plead humanity: it's inhumane for an industrial giant not provide health care for all its citizens.

But no. Instead we get the embarrassing spectacle of an intelligent man acting like a semi-coherent jerk.

This isn't really a mystery, is it? Romney's a moderate conservative who figured out sometime between 2006 and 2008 that it was no longer possible for a moderate conservative to win the Republican nomination for president. The events of the past two years have made this even clearer than before, but Romney really, really wants to be president. His only option, then, is to pretend to be a tea party conservative, but both his past record and his weak acting skills make this really hard to pull off. So he ends up sounding like a semi-coherent jerk.

This is common knowledge, isn't it?