Kevin Drum - March 2011

Building Better Kids

| Fri Mar. 4, 2011 3:01 AM EST

We are obsessed with education in America. We are obsessed, in particular, with the notion that our schools are failing and have to be fixed. We need to test kids. We need to identify and fire bad teachers. We need merit pay. We need charter schools. We are all waiting for Superman. Philanthropists and the federal government spend billions of dollars per year on programs to promote better schools.

James Heckman doesn't quite say that this is all a waste of money. But he comes close. In a new essay summarizing his recent work on skill formation in children, he says the chart below tells you most of what you need to know about educating our kids:

The chart shows achievement test scores for children of mothers with different levels of education. Children of college graduates score about one standard deviation above the mean by the time they're three, and that never changes. Children of mothers with less than a high school education score about half a standard deviation below the mean by the time they're three, and that never changes either. Roughly speaking, nothing we do after age three has much effect:

[These] gaps arise early and persist. Schools do little to budge these gaps even though the quality of schooling attended varies greatly across social classes. Much evidence tells the same story as Figure 1. Gaps in test scores classified by social and economic status of the family emerge at early ages, before schooling starts, and they persist. Similar gaps emerge and persist in indices of soft skills classified by social and economic status. Again, schooling does little to widen or narrow these gaps.

Heckman argues that these achievement gaps—between black and white, between rich and poor—are today less the result of overt discrimination than they are of skill gaps that open up very early in life and persist in the face of a wide variety of both good and bad schools. What's more, these gaps aren't purely, or even mainly, the result of differences in cognitive ability. At least equally important are soft skills: "motivation, sociability (the ability to work with and cooperate with others), attention, self regulation, self esteem, the ability to defer gratification and the like."

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Why No One Cares About Unemployment

| Thu Mar. 3, 2011 3:18 PM EST

Chris Hayes explains why Washington elites don't seem to see high unemployment as an urgent problem:

There are two numbers that go a long way toward explaining it. The first is 4.2. That’s the percentage of Americans with a four-year college degree who are unemployed....So while the overall economy continues to suffer through the worst labor market since the Great Depression, the elite centers of power have recovered. For those of us fortunate enough to have graduated from college—and to have escaped foreclosure or an underwater mortgage—normalcy has returned.

The other number is 5.7 percent. That’s the unemployment rate for the Washington/Arlington/Alexandria metro area and just so happens to be lowest among large metropolitan areas in the entire country.

....What these two numbers add up to is a governing elite that is profoundly alienated from the lived experiences of the millions of Americans who are barely surviving the ravages of the Great Recession. As much as the pernicious influence of big money and the plutocrats’ pseudo-obsession with budget deficits, it is this social distance between decision-makers and citizens that explains the almost surreal detachment of the current Washington political conversation from the economic realities working-class, middle-class and poor people face.

I'm pretty sure I've made a similar argument from time to time, and I think there's a lot to this. Hell, I'm an employed college grad who lives in an area with a relatively good economy, and I certainly don't fool myself into thinking that I have the same sense of urgency about unemployment as someone in Los Angeles or Detroit.

But I think there's another factor at work here: deep in their hearts, nobody in Washington really believes they can do anything about unemployment these days. Republicans don't truly believe in their "growth agenda," they just want to cut taxes and slash spending on social programs. Democrats would like to believe that fiscal stimulus works, but I suspect the reality is that most of them are pretty skeptical. Ditto for jobs programs, training programs, mortgage cramdown legislation, and much more.

What's worse, even if you do believe these things work, it's pretty plain that no one's figured out a way to convince the public they work. Democrats barely even tried to persuade voters that the 2009 stimulus worked, and ended up getting completely hammered on the subject by Republicans. A few would occasionally mutter on camera that things would have been even worse without the stimulus, but that's a pretty tough sell even if you say it with conviction, and very few said it that way.

In some sense, this is the ultimate triumph of conservatism: no one in Congress, and no one in the electorate, really believes any longer that Washington can do much about the economy. And even if you think otherwise, what's the point of putting your career on the line over further stimulus if you know you won't get any credit for economic improvement regardless of how it turns out?

The public believes that Washington can control inflation. They believe that Washington can control the deficit. And they believe that Washington can control taxes. But they no longer believe that Washington can control unemployment. And neither does Washington.

Where's the Conservative Healthcare Plan?

| Thu Mar. 3, 2011 1:31 PM EST

The Wall Street Journal is unhappy with President Obama's support for allowing states to opt out of his healthcare reform law in 2014 rather than 2017. Why? Because to do so, states would have to come up with a plan that offered similar coverage and benefits to PPACA:

So perhaps states could opt out of some consumer or employer mandates, which is a minor release valve. But they would still need to find other mechanisms to achieve the same liberal priorities, which in practice leaves little room to innovate—especially for a straight tax deduction or credit to purchase individual coverage or alternative insurance designs like high-deductible or value-based plans. That's why Democrats had nothing to fear from adding such a provision originally. The Wyden-Brown bill merely moves it forward by three years, to 2014.

The reality is that the liberals who wrote this bill really do think they have a monopoly on good ideas, and they do not include markets. Democrats are more than happy to give the states more freedom, as long as the states use it to impose comparable government control.

Italics mine. If this is the state of the art in conservative thinking, then yes: apparently liberals really do have a monopoly on good ideas in the healthcare arena. As Jon Cohn points out, PPACA does, in fact, allow states to offer high-deductible plans. The table on the right is from the Lewin Group, and it outlines the typical coverage offered by a "Bronze" level plan under PPACA. It's pretty stingy! The deductible for a family is $5,000, the maximum out-of-pocket expense is $11,900, and the "actuarial value" — i.e., the percentage of total medical costs covered by the plan — is only 60%. If conservatives can't come up with a plan that competes with those targets, it means conservatives don't have a plan.

Of course, states would also be required to offer subsidies to low-income residents, and the amount of those subsidies is based on the price of "Silver" level plans. But that's only slightly better, offering an actuarial value of 70%. These just aren't high bars to meet.

If conservatives don't want to make health coverage widely available, they should just say so without the shilly-shallying. But if they do want to make it available — and in public, anyway, that's what they claim — the requirements of PPACA represent the bare minimum of what you can call "coverage" and still keep a straight face. If conservatives really believe they have a better way, PPACA provides both the funding and the minimal requirements to allow them to prove it. They should get busy doing so instead of spending their time inventing feeble excuses. 

A Day Without a Mexican

| Thu Mar. 3, 2011 12:17 PM EST

Texas state Rep. Debbie "Terror Babies" Riddle has introduced a new bill that would make it a serious crime to hire an illegal immigrant. But her bill allows one exception:

Under the House Bill 2012 introduced by a tea party favorite state Rep. Debbie Riddle — who's been saying for some time that she'd like to see Texas institute an Arizona-style immigration law — hiring an undocumented maid, caretaker, lawnworker or any type of houseworker would be allowed. Why? As Texas state Rep. Aaron Pena, also a Republican, told CNN, without the exemption, "a large segment of the Texas population" would wind up in prison if the bill became law.

"When it comes to household employees or yard workers it is extremely common for Texans to hire people who are likely undocumented workers," Pena told the news giant. "It is so common it is overlooked."

No, this is not from the Onion. It's from a Texas Republican. Though it's getting harder and harder to tell the difference these days.

Defending the Indefensible

| Thu Mar. 3, 2011 11:42 AM EST

Good for Joe Klein for pointing out the lunacy of the Republican effort to defund the financial regulation reform bill passed last year:

The Dodd-Frank law was an imperfect remedy....But it did boost the power of the SEC and CFTC to regulate derivatives trading, and it set up a new agency, the Consumer Financial Protection Bureau (CFPB), to protect consumers from the shyster army peddling tricky mortgages, usurious credit-card rates and unscrupulous payday-check-cashing shops. The agencies need larger payrolls to perform those functions, and the Republican House has now stripped much of that money from the federal budget. "It's a back-alley maneuver," says Representative Barney Frank, whose name is on the law. "Unlike health care or environmental regulation, the Republicans didn't try a frontal assault. They hid behind the budget, which means that they're embarrassed by this. They don't want people to know that they're letting Wall Street off the hook."

....And then there's the question of Elizabeth Warren, the Harvard law professor who invented the idea of the Consumer Financial Protection Bureau and should be its first director. The Administration seems undecided on whether to appoint her, fearing a Senate confirmation battle that could last for months. "The banks are scared to death of her," one Senator told me. "She speaks in clear, simple sentences. That terrifies them."

Which means this is a fight worth having — and a way to dramatize the complicated issues at the heart of regulatory reform. The President should appoint Warren. The Senate should be forced to vote on her, so the public will know who really wants to clean up Wall Street and who doesn't.

No, Dodd-Frank wasn't perfect. In fact, that's being rather too nice about the whole thing. But it was at least a step in the right direction following an unprecedented meltdown of the global economy caused almost entirely by the misbehavior of the American financial industry.

One of the themes of Jacob Hacker and Paul Pierson's Winner Take All Politicsavailable soon in paperback! — is that income distribution is far more influenced by politics than most economists think. One of the reasons I was so enthusiastic about the book is that it mirrors my own views, which have become rather more radicalized over the past three years. Think about it: during the aughts the financial industry was so wildly out of control that Wall Street touched off the biggest financial collapse and biggest global recession since World War II — a recession that's required unprecedented government intervention to stabilize; featured massive bailouts of the banking industry; and has caused widespread misery among the working and middle classes, including an epidemic of home foreclosures, plummeting state-level services, and an unemployment rate that's still near double digits more than two years later. And yet, Republicans were not only united in trying to prevent any action whatsoever to re-regulate Wall Street last year, they're making it one of their top priorities this year to defund the very modest bit of regulation that was passed over their near-unanimous opposition.

I don't know how you can watch all this unfold and not conclude that the super rich and their interests are all but politically invulnerable in America these days. It's both wrong and dangerous, and more of us should be pushing the public's nose in it. The whole thing is obscene.

What the People Want

| Thu Mar. 3, 2011 2:04 AM EST

A new NBC/WSJ poll tells us that Democrats, if they could manage to agree on a halfway coherent message, most likely hold all the cards in a budget showdown:

The survey [...] listed 26 different ways to reduce the federal budget deficit. The most popular: placing a surtax on federal income taxes for those who make more than $1 million per year (81 percent said that was acceptable), eliminating spending on earmarks (78 percent), eliminating funding for weapons systems the Defense Department says aren’t necessary (76 percent) and eliminating tax credits for the oil and gas industries (74 percent).

The least popular: cutting funding for Medicaid, the federal government health-care program for the poor (32 percent said that was acceptable); cutting funding for Medicare, the federal government health-care program for seniors (23 percent); cutting funding for K-12 education (22 percent); and cutting funding for Social Security (22 percent).

Those numbers, GOP pollster McInturff says, “serve as a huge flashing yellow sign to Republicans ... if they are going to start to talk about changes to Medicare and Social Security.”

Roger that. The tea party might have different priorities, but the tea party is still a pretty small part of America no matter how loudly they yell or how much attention the media pays to them. Out in real America, people want to tax the rich, cut stupid weapons programs, and stop subsidizing prosperous oil companies. They don't want to cut Medicare, Medicaid, Social Security, or education.

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Quote of the Day: Huckabee on Healthcare

| Wed Mar. 2, 2011 9:05 PM EST

From Mike Huckabee, explaining why he's putting off a decision to run for president:

If I run, I walk away from a pretty good income. I don’t want to walk away any sooner than I have to because frankly, I don’t have a lot of reserve built up....One thing I committed to myself, to my wife and God, was that if I do this I’m hopefully going to be in a position that I’m not so completely destitute at the end of it, that I have no idea what to do if I get sick.

Yep, it's a drag that destitute people in America have big problems if they get sick. Perhaps this is something Huckabee should have an interest in fixing?

Yawning Along With the GAO

| Wed Mar. 2, 2011 8:44 PM EST

One of the problems with the GAO's report on government inefficiency is that the vast bulk of it is just eye-glazing stuff. It's all about coordinating this, doing better data collection on that, calculating ROI for something else, and performing better oversight on yet another thing. Yawn. What's more, some of the most interesting big ticket items are already being addressed. Take improper payments. GAO estimates that the federal government pays out a whopping $125 billion per year that it shouldn't. Here's a chart:

There's no question this is real money. But President Obama has already issued a series of orders aimed at reducing improper payments, and last year Congress passed the Improper Payments Elimination and Recovery Act, designed to "to enhance reporting and recouping of improper payments." The goal is to reduce that $125 billion figure by $50 billion over the next two years.

So that's already on the docket. Among other big ticket items that I've picked out of the report, tax expenditures are probably off the table because Republicans won't vote for anything that Grover Norquist defines as a tax increase; ethanol subsidies are probably off the table because small farm states control the U.S. Senate; IRS efficiencies are probably off the table because Republicans don't want the IRS to be more efficient at collecting taxes from rich people; and negotiating better prices for VA/DOD prescription drugs probably won't go anywhere because Republicans are already on record as believing that it's unfair for the U.S. government to reduce pharmaceutical industry profits.

There's other stuff in the report that I haven't gotten to yet. The entire Pentagon procurement section, for example. But aside from that, it's mostly small-ticket stuff that depends on better reporting/coordination/oversight and might or might not produce any benefits. I'll let you know if anything further catches my eye.

BREAKING: Danish CEOs on Verge of Collapse

| Wed Mar. 2, 2011 6:13 PM EST

This comes from Politiken, but it sure sounds familiar, doesn't it?

Since 2008 when the crisis hit, outlays for directors [i.e., CEOs] at the 16 largest Danish companies have increased by 23 percent....This compared to general labour market wage rises of just over nine per cent in the same period.

....Carlsberg Chairman Povl Krogsgaard-Larsen defends the fact that his two directors shared DKK 39 million last year — 30 percent more than in 2008.  “If we are to ensure the most motivated and talented executives, who are willing to work 25 hours per day and risk their health, we should be able to offer salaries close to those paid abroad,” Krogsgaard-Larsen says.

Actually, I take that back. Even in America, I don't think anyone would quite have the balls to claim that their executives deserved outsize pay packages because they were "risking their health" by working so hard. In the BS department, apparently Wall Street has met its match.

My First and Only Stamp Collecting Post

| Wed Mar. 2, 2011 4:56 PM EST

Ryan Avent links to a report that the market for rare stamps is heating up:

The wave of Chinese money that has crashed through the markets for fine wine, art and antiques is now flooding into the altogether sleepier world of stamp collecting. At an auction in Hong Kong this week, a rare block of four stamps from the Cultural Revolution sold for HK$8,970,000 (US$1.1m) — an all-time record for a Chinese stamp or multiple. Including a 15 per cent buyer’s fee, the anonymous buyer paid over US$1.3m for the stamps.

This reminds me of something totally unrelated to Ryan's point, namely that it's surprising how inexpensive lots of old stamps are. A couple of weeks ago I noticed a dusty stamp album sitting in one of my bookshelves and realized that I'd never actually opened it up. I don't know where it came from, but it's dated 1940 and I assume it must have been my father's.

Anyway, I took a look inside, and on the very first page there was a stamp from 1851. This was part of the second series of stamps ever released in the United States — issued before the perforated stamp revolution of 1857 — and you'd think it might be worth something, even in used condition. But no. According to this site, it's worth at most either $70 or $7 depending on whether it's orange-brown or dull red. What do you think? Looks like orange-brown to me, which makes it worth $70. Maybe.

Cheap! And that's for one of the earliest stamps ever issued in America. I guess stamp collecting must be a pretty accessible hobby — though they make up for the low prices with a fantastic array of varieties and special issues. Still, a bargain compared to coin collecting.