Kevin Drum - March 2011

Nukes vs. Coal

| Wed Mar. 23, 2011 12:49 PM EDT

A couple of days ago George Monbiot wrote that the disaster at Japan's Fukushima nuclear plant had changed his mind about nuclear energy:

A crappy old plant with inadequate safety features was hit by a monster earthquake and a vast tsunami. The electricity supply failed, knocking out the cooling system. The reactors began to explode and melt down. The disaster exposed a familiar legacy of poor design and corner-cutting. Yet, as far as we know, no one has yet received a lethal dose of radiation....Atomic energy has just been subjected to one of the harshest of possible tests, and the impact on people and the planet has been small. The crisis at Fukushima has converted me to the cause of nuclear power.

There really is something to this. Then again, it's still early days, and today we got the news that drinking water in Tokyo is unsafe for infants:

Officials warned residents not to eat the vegetables produced in several prefectures near the badly damaged Fukushima Daiichi nuclear facility and recommended that infants not ingest tap water in Tokyo. Tokyo officials said they would distribute three 550-milliliter bottles of water to every household in the capital where an infant was living — some 80,000 households in all.

It's true, as Seth Godin dramatizes in the illustration on the right, that oil and coal kill a whole lot more people than nuclear ever has. At the same time, radiation in our drinking water is just a helluva lot scarier than particulates in our air or periodic cave-ins at coal mines. That may be unfair, but I'm not sure what to do about it. If the situation in Japan doesn't get any worse, Godin's chart will remain accurate. But more than likely, nuke plants still won't be able to get financing.

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Reporting Healthcare Wrong

| Wed Mar. 23, 2011 11:58 AM EDT

CNN reports on the public's view of healthcare reform one year after passage:

CNN Poll: Time doesn't change views on health care law

Thirty-seven percent of Americans support the measure, with 59 percent opposed. That's basically unchanged from last March, when 39 percent supported the law and 59 percent opposed the measure.

I know I'm a partisan hack who wants to put the best lefty spin on healthcare stories, but this is just plain wrong. Dave Weigel looks at the internals, which show that of the 59% who "oppose" ACA, 13% wish that it went further, and rewrites CNN's headline:

Poll: One Year On, Most Favor Health Care Law or Wish It Was More Liberal

Overall, [46] percent of people oppose the law because it's "too liberal," but 13 percent oppose it because it's "not liberal enough." So 50 percent of voters are either fine with the law or want a more liberal bill, to [46] percent who want it gone because it's too socialistic.

The CNN story does acknowledge this in a weird, roundabout way a few paragraphs down, but an awful lot of people don't read more than a few paragraphs and are going to come away with the impression that 59% of the population think national healthcare reform is a bad idea. And that's wrong: only about 46% do. Half of Americans want either ACA or something more.

My take on this is that healthcare pollsters simply need to do away with their obsession with "favor" and "oppose." You just can't report poll results on ACA this way. You should report them in the very first paragraph as split between people who think ACA went too far, is about right, or doesn't go far enough. Or something similar. It's really the only way to fairly report this stuff.

Our National Cat Problem

| Wed Mar. 23, 2011 12:59 AM EDT

From a New York Times article passing along the startling news that cats hunt and kill birds:

The American Bird Conservancy estimates that up to 500 million birds are killed each year by cats — about half by pets and half by feral felines. “I hope we can now stop minimizing and trivializing the impacts that outdoor cats have on the environment and start addressing the serious problem of cat predation,” said Darin Schroeder, the group’s vice president for conservation advocacy.

As it happens, I've been trivializing the impact of cats on birds my entire life. I mean, cats kill birds. Bears kill salmon. Birds kill worms. The strong survive and the adaptive fitness of the species is improved. Cycle of life and all that. Why are we supposed to be upset about this?

But despite the fact that my own cats contribute 0% toward this avian holocaust, I understand that I have biases in this area. Maybe I'm taking things too lightly. So here's my question: assuming that this 500 million number is correct, what percentage of the entire bird population does this represent? I did a bit of desultory googling but got bored before I found an answer. So I'll put my vast audience to work. How many birds are there in the United States? Do cats kill 10% of them each year? 1%? A tenth of a percent? Just how serious is this national scourge of cat predation?

The Future of Investing

| Tue Mar. 22, 2011 8:00 PM EDT

Felix Salmon:

American workers are facing a double whammy here: they’re losing access to private equity at exactly the point in time where private equity is becoming a very large and important part of the international capital markets. Meanwhile, it’s the rich foreign clients of Goldman Sachs — the global rentier class — who are getting that coveted access to equity in Facebook.

The two separate whammies here are:

  • The fact that fewer companies are going public, opting instead to finance themselves through private equity and trading their shares via investment banks who set up private exchanges to match well-heeled buyers and sellers. Ordinary schmoes like you and me don't have the opportunity to invest in companies that do this.
  • The steady decline of defined-benefit pension plans, which were managed by professionals who had access to a wide variety of investment opportunities, and the accompanying rise of defined-contribution plans like 401(k)s, which are managed by ordinary schmoes like you and me who have access to a very limited range of standard investment funds.

In other words, you and I don't get to invest in Facebook. Only rich people with access to the special private exchange set up by Goldman Sachs get to do that. And if this trend continues, you and I won't be able to invest in any of the hottest companies of the future. Only rich people and big fund managers will be able to do that, which means that the returns on their retirement portfolios will be a whole lot higher than yours and mine. And that's on top of the fact that their returns are already higher than ours, thanks to their access to a wider range of hedge funds and investment vehicles.

Felix isn't happy about this: "What we don’t want is a world where most companies are owned by a small group of global plutocrats, living off the labor of the rest of us. Much better that as many Americans as possible share in the prosperity of the country as a whole by being able to invest in the stock market." Agreed — but like Felix, I don't have any bright solutions to this. And who knows? Maybe this is just the flavor of the day on Wall Street and the public stock market will make a comeback shortly. But the overall story of the past couple of decades has been the steady funneling of all the richest investment opportunities to a smaller and smaller class of the super rich, and this trend fits right in. It's a problem worth thinking about.

Teachers and Credit Cards

| Tue Mar. 22, 2011 4:30 PM EDT

I'm basically a supporter of regulations limiting the amount that credit card companies can charge merchants in interchange fees. If there were real competition in the card market, I'd probably feel differently, but in reality there's an effective duopoly, and both members of that duopoly have conspired to require merchants to sign contracts that forbid them from engaging in price discrimination by charging more for credit card purchases if they want to. This has created a situation in which card companies and banks have an incentive to charge higher and higher fees, which are subsidized by everyone since everyone has to pay the same higher prices that merchants charge to cover the fees, and then rebate those fees to their most favored customers in the form of airline miles and other goodies. It's hardly the biggest outrage in the world, but it's still pretty ridiculous.

Now, I'm also a moderate supporter of teachers unions, and it turns out that the NEA is opposed to regulations limiting interchange fees. Matt Yglesias wonders if this changes my mind:

I don’t particularly think we should take the NEA’s word for it, but I wanted to call attention to this simply because I think confirmation bias is one of the biggest problems we have on the web. It occurs to me that several bloggers who I normally agree with but who had strong favorable views about the Durbin Amendment that contrasted with mine—Kevin Drum and Mike Konczal in particular—are also people who’ve really taken the lead in making the case that labor unions are a crucial “countervailing force” to advancing middle class economic interests. So I wonder if any of them are inclined to rethink their views of the swipe issue in light of this.

Hmmm. The NEA provides this explanation: "With educators and others of moderate income facing daily challenges to make ends meet, Congress and the Federal Reserve must tread lightly when considering proposals that could increase financial burdens on these families." And maybe so. But my first thought when I read this was, "Gee, I wonder if what they really care about are the interests of credit unions run for teachers?" Luckily, it turns out Mike Konczal had the exact same suspicion, which saves me the time of looking into it. You can read his thoughts here.

So for now, anyway, I haven't changed my mind. It's not as if I have to agree with every single stance ever taken by a labor union, after all. And as before, I stand ready to abandon regulations on interchange fees if card companies allow merchants to freely charge extra for card purchases if they want to. That would be the free market at work. Oddly enough, they don't seem very excited by that prospect.

The "One-Time" Trap

| Tue Mar. 22, 2011 1:58 PM EDT

Should we institute a tax holiday on foreign earnings, a one-time deal that allows U.S. companies to bring home profits from their overseas operations at a low rate? Peter Coy and Jesse Drucker argue that it's a bad idea: we did it before in 2004, and companies all figured out that if it happened once, it would happen again. So they started piling up even more earnings overseas than before. Ezra Klein comments:

But if you read the piece, you’ll also realize that all the good arguments in the world might not be able to stop this bad idea from happening. There’s a lot of money riding on it, so there’s a lot of money behind it. “The pro-holiday coalition has quietly assembled an all-star lobbying and communications team,” report Coy and Drucker. The communications strategist is Anita Dunn, “who served as President Barack Obama’s interim communications director during his first year in office.” [Etc.]

Tax cuts for corporations and the rich always have a pretty good chance of passing, so this is hardly a surprise. But I have a question: I've read some seemingly persuasive arguments that taxing foreign earnings is a bad idea in the first place, and it's something that virtually no other rich country does. Here's a typical version of this argument from the CEO of Cisco:

The U.S. government's treatment of repatriated foreign earnings stands in marked contrast to the tax practices of almost every major developed economy, including Germany, Japan, the United Kingdom, France, Spain, Italy, Russia, Australia and Canada, to name a few. Companies headquartered in any of these countries can repatriate foreign earnings to their home countries at a tax rate of 0%-2%. That's because those countries realize that choking off foreign capital from their economies is decidedly against their national interests.

So how about it? Is there something to this, or is something important being left out? What's the liberal conventional wisdom here?

(Of course, in a more blue-sky vein, I'm in favor of phasing out the corporate income tax completely and replacing it with a carbon tax. That would be almost 100% beneficial to everyone, and yet, it will never happen. Strange, isn't it?)

UPDATE: Turns out Coy and Drucker addressed this issue in their piece. I shoulda clicked the link. Ezra sums it up here.

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Cui Bono?

| Tue Mar. 22, 2011 12:37 PM EDT

AT&T's proposed acquisition of T-Mobile would make AT&T about a third bigger than it is now. Here's my prediction about how this will play out if the deal goes through: within five years, the compensation of AT&T's CEO will grow to be about a third bigger than it is now.

There's no especially compelling reason this should happen, but it will regardless. Keep that in mind in the midst of the coming blizzard of explanations for why this particular consolidation is good for the industry, good for the consumer, good for shareholders, and, well, just plain good for America, dammit. Industry consolidation over the past 30 years has produced a smaller but much higher paid class of corporate executives, and this one will too.

Chart of the Day: Why the Stimulus Didn't Work

| Tue Mar. 22, 2011 12:13 PM EDT

Why did the 2009 stimulus package produce such meager results? Partly because the recession turned out to be worse than Obama's team thought, and partly because they didn't press for a big enough package even for the recession they thought we had. But another reason is that at the same time the feds were spending more money, state governments were cutting back. The chart below from CBPP tells the story. They have data for all but six states, and on average for 2012, "those 44 states plan to spend 9.4 percent less than their states spent before the recession, adjusted for inflation." That's not just less than last year, it's less than 2008. That wiped out nearly the entire effect of the federal stimulus package.

Griping About Libya

| Tue Mar. 22, 2011 11:50 AM EDT

I'm not likely to blog very much about Libya, but I have to say there's an air of unreality surrounding a lot of the commentary that's starting to get on my nerves. Criticizing Obama for not consulting Congress is one thing. It's not as if this is some kind of unprecedented break with past practice or anything, but still. I get it.

But the "dithering" complaint? Give me a break. When did it suddenly become a personality defect to decline to intervene in a foreign rebellion the instant it broke out? Isn't there anyone left who appreciates the fact that Obama still retains a few shreds of anti-interventionist instinct and moves in a deliberate fashion?

Then there's the "why did he change his mind?" nonsense. Answer: because when events on the ground are moving fast, presidents change their minds. How? Usually by first holding a meeting and getting lots of input. Obama changed his mind last Tuesday in exactly the same way that every president since George Washington has changed his mind.

And then the "following, not leading" complaint. Look: if the only thing you actually care about is showing just how manly the United States can be, this makes sense. But that's a pretty stupid justification. There's just no reason why America should be required to take the leadership role in every military action around the globe.

Finally, there's all the handwringing over why we're intervening in Libya but not Bahrain or the Congo or Yemen. Please. Muammar Qaddafi is a terrorist and thug who's been on practically everyone's shit list around the world for decades. He has no allies, no friends, and not much firepower. Getting rid of him looks like a doable mission, and there's no one really opposed. Other places either don't look very doable or else their autocrats happen to be U.S. allies. Maybe that's not the most honorable reason in the world for leaving them alone, but it's a reason followed by pretty much every national leader since the first nomad planted a wheat field in Ur and settled down. We shouldn't act quite so wide-eyed and shocked that the United States does too.

Look: I'm not really happy about the intervention in Libya. Like a lot of people, I'd like to know what our actual goals are. What's more, I'm not sure it'll be the cakewalk that Hillary Clinton and Nicolas Sarkozy seem to think, and I believe that for a variety of reasons the United States is best served by not giving anyone an excuse for thinking that the current round of rebellions in the Middle East are backed by American power and interests. It's better for us to keep a pretty low profile right now.

But an awful lot of the criticism is just so unremittingly juvenile that I can hardly stand listening to it anymore. Time to grow up, people.

Who You Calling Progressive?

| Mon Mar. 21, 2011 7:22 PM EDT

Greg Mankiw has a post up today linking to data from the Tax Foundation showing that the United States has a pretty progressive tax structure compared to other rich countries. Karl Smith has turned it into a chart and comments that "the US is more or less right on target." Rich people here are richer than in most other countries, but they also pay a bigger share of taxes than they do in most other countries. I have a few comments about this:

  • Using the "richest 10%" as your benchmark is misleading. America features not just lots of ordinary income inequality, it features lots of income inequality at the very tippy top of the income distribution. The real scandal of our tax system is that the top 1% and the top 0.1% make wildly more money than the top 10%, but they pay effective taxes at about the same rate. This chart doesn't capture that.
  • The chart includes only income and payroll taxes. But state and local taxes tend to be pretty regressive in the U.S. If you calculate the entire tax burden, you'll find that the American tax system is less progressive than this chart suggests. (See Figure 3 from the Tax Foundation here.)
  • That said, it's absolutely true that lots of other countries have only moderately progressive tax systems too. Most European countries raise far more in taxes than we do and fund a much greater range of social services, but they mostly do it with a combination of progressive income taxes, moderate taxes on capital, and fairly hefty VATs that are either regressive or flattish. Add it all up and the shape of their tax systems turns out to be fairly moderate.

If you put all this together and then reconstructed the chart, I think you'd find that most European countries do, in fact, have a somewhat more progressive tax structure than the U.S. But not by a lot. Roughly speaking, the social contract in Europe requires everyone who's non-poor to pay fairly heavy taxes, and then uses that money to fund broad social programs that are, themselves, quite progressive (a bus driver gets the same value from the French national healthcare system as a millionaire does). There is, it turns out, more than one way to skin the progressive cat, and you can do it on the spending side just as well as on the taxing side.