Kevin Drum - March 2011

The Next Big One

| Thu Mar. 17, 2011 1:30 AM EDT

If there's a bright side to the recent earthquake in Japan, it's the fact that it was a truly monster event. The damage has been appalling, but it's not something we should expect to see very frequently. In fact, there were only 11 of this class of "megathrust" earthquakes during the entire 20th century.

However, there have been five megathrust earthquakes in just the past five years, and Yale geophysicist Jeffrey Park says this kind of clustering is far from unprecedented. So we might be in store for a few more. And for Japan in particular, the news is even worse:

[Several years ago] Ross Stein and his USGS colleagues discovered that the stress increments of past large earthquakes were good predictors of where the next large earthquake would occur. Long after the aftershocks subsided — months, years, or decades after — another earthquake of similar size often broke within the next segment of the fault zone.

....An irregular series of large, damaging earthquakes shook the North Anatolian Fault in the twentieth century from east toward the west across modern-day Turkey, reaching the Sea of Marmara in 1999 with the Izmit earthquake....More germane to Japan, the 9.3 Sumatra-Andaman megathrust earthquake in December 2004 loaded the next subduction-zone segment to the south, and this segment generated an 8.6 megathrust event only three months later in March 2005.

No prediction can be made today for Japan, but it is safe to project a sharply increased probability for a major earthquake on the broad, simple subduction-zone segments both north and south of the Tohoku rupture zone. The segment to the south lies offshore the Tokyo metropolitan area.

I don't really have anything to say about this. It's just plain bad news. More at the link.

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The Effect of Politics on Income Inequality

| Wed Mar. 16, 2011 10:13 PM EDT

Ezra Klein reviews Winner-Take-All Politics in Democracy this month and provides an excellent summary of its core thesis, namely that income inequality isn't a result only of economic trends, it's also a result of deliberate political decisions. But I thought this criticism was odd:

The problem for Hacker and Pierson, in other words, is that just as the economists aren’t very convincing on the politics, they’re not sufficiently convincing on the economics. It’s true that the political system has shifted toward emphasizing the interests of the rich, and it’s true that that’s probably had a significant impact on both the rich and everyone else. But how much of an impact? And what would have happened if the distribution of political power had remained frozen at 1973 levels? That’s harder to say.

What their theory explains, in the end, is not so much why median wages stagnated and income inequality skyrocketed, but why the political system has been so feckless and haphazard about responding. A political system where unions held more clout and politicians weren’t so addicted to the money provided by rich donors would be a political system that would likely have taken some of these problems much more seriously.

Italics mine. Unless I'm reading something wrong, this isn't a criticism of Hacker and Pierson at all. Rather, it's exactly what they themselves say in the book. I don't think they claim that economic fundamentals have nothing at all to do with rising income inequality and wage stagnation, merely that politics is also involved and its influence is routinely underestimated. What's more, their "drift" theory, which Ezra describes earlier in the review, argues that a lot of this political impact on wage stagnation comes precisely from doing nothing in the face of changing economic norms. So everyone is on pretty much the same page here.

In any case, this reminds of another small point about this stuff that I've never made before. So I'll do it here. My piece about the decline of union power in the current issue of MoJo probably left the impression that I think union decline is responsible for most of the recent stagnation of middle-class wages. But that's not really the case. It just happened to be the piece of the puzzle I wanted to highlight.

Here's how I think about this. Income inequality and wage stagnation have roots in both economics and politics. For the sake of discussion, let's say that it's caused half by economic factors and half by political factors. So how big is the influence of unions here? On the economic side, a decent guess is that unions are responsible for perhaps 15-20% of rising income inequality, and since economic factors are half of the total, that comes to about 7-10% or so. But they also have an impact on the political side of things, and here I'd put their influence at more like 40-50% or so. In other words, 20-25% of the total.

Add up both their economic and political effects and union decline might be responsible for around 30% of rising income inequality.1 And the bulk of that — though not all of it — is because of their indirect effect on the political process. That's a fair amount, and well worth talking about, but it's still much less than half and it leaves lots of room for other factors. This is simply not an issue with a single simple answer.

1Obviously you can noodle around with these numbers and come up with a different total. Maybe it's really more like 20%. Or maybe 40%. I don't know. But I think this is a useful framework for thinking about this stuff.

Madison's Most Famous Bus Driver

| Wed Mar. 16, 2011 6:59 PM EDT

Have you heard about the bus driver in Madison who made $160,000 last year? Since he's now the poster child for public sector largesse in the state of Wisconsin, it's hard not to have heard of him. So what's up? Greg Sargent checked into this and found that the driver, John Nelson, actually earns about $50,000 in base pay. But:

Nelson was able to earn $160,000 in 2009 not because of his annual salary, but because he worked a huge amount of overtime hours. He was able to do this because of previous rules, negotiated by Teamsters local 695, that allowed drivers with most seniority — and the highest salaries — to rack up large amounts of overtime.

....But wait, it gets better. It turns out that pointing to Nelson as an example of what’s wrong with public employee unions is thoroughly bogus in another way. According to Rusch, the city of Madison went to the bus drivers union last year and told them the rules allowing the highest-paid bus drivers to snap up the most overtime were a major problem for them. Turns out the union agreed, and renegotiated a deal to limit overtime in a way that has left Metro Transit happy. And guess what: That deal was negotiated through collective bargaining.

It's possible that Nelson is just a guy who doesn't have much of a social life and likes to work. And after all, if he didn't work the overtime, someone else would. But there's also this, from a report last year on the ongoing contract negotiations:

[City officials] declined comment on current contract negotiations, which are in binding arbitration. In May, Teamsters rank and file rejected a tentative agreement between the city and union leaders that would have changed rules that let senior drivers make tens of thousands in extra pay.

....The rules don't always mean more net overtime costs but concentrate extra pay in fewer hands. The extra pay also lets those employees boost their state retirement income, which is based on an average of the three highest earning years.

Italics mine. The whole story, then, is a familiar one. Bus drivers in Madison aren't, in general, living a cushy life. Starting drivers earn about $35,000 and Nelson, who's been on the job for 36 years, earns about $50,000. There's nothing outrageous about that.

But the rules are deliberately set up so that veteran drivers can goose their earnings for a few years at the exact time that their earnings are highest. It's no surprise that the union rank-and-file initially voted down a proposal to reform this system, since the rank-and-file understand that eventually they'll all have their own chance to goose their earnings just before retirement, thus providing them with a lavish pension. Only after arbitration and a lengthy public outcry did they finally accept changes to rein in this practice.

Not everyone takes advantage of the overtime rules to the extent Nelson has, but it's nonetheless a widely used gambit to boost retirement earnings far beyond what's fair. I don't begrudge the bus drivers their pay or their benefits or their retirement plans, but I do begrudge them this time-honored scam for putting taxpayers on the hook for excessive pensions. Nelson isn't a poster boy for overpaid bus drivers — that charge really is bogus — but he is a poster boy for this kind of pension abuse. It should stop.

Pissing Off Liberals

| Wed Mar. 16, 2011 3:36 PM EDT

Paul Waldman notes that only a few years ago most of today's crop of Republican presidential wannabes were willing to admit that global warming was a serious problem. But then:

Over the last couple of years, climate change went from something Republicans acknowledged was happening and were willing to do something about, to something they acknowledged was happening but weren't really willing to do anything about, to something that they refuse to acknowledge is happening. That has now become the orthodox Republican position.

The line in the story about Al Gore shows why this has happened. Hating liberals was always important to conservatives, but of late, it has become the central organizing principle of American conservatism. If Al Gore thinks climate change is a threat, you can't be a real Republican unless you deny it. If liberals like NPR, it must be destroyed. If liberals favor net neutrality, it must be a communist plot.

I've never bought this. Conservatives have opposed public broadcasting pretty much forever, right? As for climate change denialism and opposition to net neutrality, they basically belong in the category of "let corporations do anything they want." This has been a Republican totem for a long time too.

Modern conservatives have a few simple guiding principles. Keep taxes on rich people low. Let corporations do whatever they want. Toe the Christian right line on social issues and the NRA line on gun issues. Support military action overseas if a Republican president proposes it. Oppose spending on poor people.

This explains about 90% of what you need to know. Pissing off liberals is a nice side benefit, but you really don't need it to explain Republican positions.

My Crystal Ball Says.....

| Wed Mar. 16, 2011 3:03 PM EDT

Haley Barbour will not be the next president of the United States. Anybody who thinks otherwise, including Haley Barbour, is nuts. That is all. 

California, Gateway to the Future

| Wed Mar. 16, 2011 1:34 PM EDT

Do you wonder what the future looks like, with Congress effectively hamstrung forever by a small band of uncompromising, hard-right ideologues? Come to California and see! We're facing a massive, no-shit, this-time-we're-really-doomed deficit this year, and it's not because spending is out of control. California hasn't always been the most fiscally prudent state you could imagine, but over the last decade or so we've reined in spending pretty well on average. Federal funding aside, total outlays last year came to $127 billion, and adjusted for inflation and population growth this is actually less than it was ten years ago.

Anyway, Gov. Jerry Brown has proposed that we cover half our $25 billion deficit with further spending cuts and half by extending some tax hikes that were originally put in place by Arnold Schwarzenegger. He wants to give voters a chance to accept or reject this deal, but since California requires a two-thirds vote to put an initiative on the ballot, he needs a few Republicans to go along with this plan. So far they've flatly refused, but today they finally named their terms for allowing voters to decide for themselves if they want to extend taxes or not:

The handful of Republican lawmakers most likely to provide crucial votes for Gov. Jerry Brown's budget plan are threatening to withhold their support without a dramatic rewriting of state environmental law.

....The proposal would sharply limit Californians' ability to go to court to challenge a construction project's environmental impact report....telecommunications companies seeking to expand their broadband networks would receive exemptions from environmental rules for related construction....The GOP proposal also would broaden the kinds of projects allowed to skip certain steps in the environmental review process....Environmental activists say the proposed change would exempt nearly all urban and suburban development from rigorous review....The plan also would ease some restrictions relating to greenhouse gas emissions caused by development.

Welcome to the future, where tiny bands of Republican legislators can hold an entire state hostage, using a budget crisis caused by a Wall Street implosion to force a corporate-friendly gutting of environmental policies that has nothing at all to do with the budget. You almost have to admire the beauty of it: Deregulation of one industry helps cause the crisis in the first place, and this presents conservatives with an opportunity to deregulate yet another industry. It's almost like a perpetual motion machine.

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Boehner Agonistes

| Wed Mar. 16, 2011 12:38 PM EDT

Suzy Khimm on the dilemma facing House Speaker John Boehner:

The House passed yet another short-term extension of the budget on Tuesday. But John Boehner faced a revolt by 54 Republicans who voted against the bill for not going far enough to slash spending, effectively forcing the GOP Speaker to rely on Democratic votes for the stop-gap measure to pass. As Talking Points Memo's Brian Beutler explains, the vote now puts Boehner between a rock and a hard place: either he makes concessions to Democrats to pass a final budget, risking provoking greater fury from the tea party right, or he gives in to the GOP's right flank—risking a government shutdown, as the Democratic Senate is unlikely to pass any bill that guts spending to satisfy hard-line conservatives.

I think Boehner's problem here is pretty obvious, so there's no point in belaboring it. The more interesting question is: which way does he jump?

My guess is that he sides with the tea partiers and forces a government shutdown. I don't have any special insight here, just a feeling that, in the end, the hardcore right holds the whip hand in the Republican Party these days. If this is correct, though, it leads to a second question: how does this end? Obviously Republicans can't keep the government shut down forever, and eventually this means that Obama will win some kind of compromise and it will get passed by a coalition of Democrats and moderate Republicans. The tea partiers will lose.

Given that this almost has to be the case, wouldn't it make more sense for Boehner to compromise in the first place and avoid the humiliation of giving in down the road? In a rational world, sure. But in the tea party universe, he can't. The forces working here will force Boehner into the worst of both worlds: he won't assert control over the tea party faction from the start, which is bad, and then he'll end up caving in to Democrats a few weeks or months down the road, which is worse.

But maybe I'm missing something here. Is there some other scenario for Boehner that works out better for him?

Wall Street and the Earthquake

| Wed Mar. 16, 2011 11:41 AM EDT

Doug Merrill argues that last week's earthquake in Japan shouldn't spark any serious global economic problems. Why?

Because Tokyo Earthquake is probably the most widely used wildcard in any sort of future/scenario planning. Sure, it was a low-probability event at any given time, but over longer terms it had a non-trivial likelihood of coming to pass. From financial markets to supply-chain managers, they all should have a file at hand marked Tokyo Earthquake, and the work — for people far away — now involves dealing with how reality diverges from what was planned. Maybe some international actors will be exposed as having neglected to answer this most obvious of what-ifs, but most will have worked through the possibilities.

Roughly speaking, I'll buy this. On the other hand, my confidence in the ability of global financial actors to properly identify and plan for big but low-probability catastrophes has been pretty shaken over the past couple of years. I mean, how surprised would you be if it turned out that a bunch of big financial players, weakened by the 2008 collapse, knew perfectly well that "Tokyo Earthquake" would put them out of business but just decided to cross their fingers and hope it didn't happen for a while?

In my case, not very. Still, as Doug says, this is the kind of catastrophe that insurance companies really do know how to account for, so he's most likely right.

From the Mailbag: Building Up New York City

| Tue Mar. 15, 2011 11:18 PM EDT

Earlier today, I linked to a Ryan Avent post complaining that although dense cities like New York are much greener than towns and suburbs, his lefty, environmentally-aware neighbors fight against new high-density developments in the city anyway. A little later, I had an email exchange with HW, a lefty, environmentally-aware New Yorker who thinks Ryan has it all wrong. Here's the exchange:

HW: It is true that people living in NY have much much lower carbon footprints than those who live in lower density areas. It's also true that it is a highly desirable place to live. So wouldn't the way to accomplish more people living in high density areas like NY be to replicate it elsewhere? Or should we insist on cramming more people into NY against NYers' will and make it a less desirable place to live?

Wouldn't it be better for 8 million people to live in NY and have it serve as a beacon for a great, lower carbon footprint lifestyle? If you cram an extra million people in, sure, you lower their carbon footprints, but you may also make high density urban living far less attractive and less likely to be replicated around the country.

Avent mentions problems with parking and traffic as a throw-away, but I can tell you, the 4-5-6 running up from midtown to the Upper East Side is quite literally crammed wall-to-wall with people every morning. Parking is unlikely to be an option for anyone unwilling to spend several hundred dollars a month. And yes, another ten skyscrapers will result in the city becoming a darker and more depressing place. Not to mention the fact that the last ten high rises that went up on the Upper East Side were creatures of the housing bubble, resulting in massive losses and lots of empty units.

So would it be so terrible if we built up the downtown areas of Jersey City, White Plains and Stamford instead?

My reply: Well, that's the funny thing. Building new high-density areas is the obvious answer here, but no one ever does it. Why? I assume it's because it's next to impossible to get people to move to new high-density developments. You get all the bad aspects of density without any of the good aspects of living in a big, well-established city.

It's a conundrum. We could use more well established cities, but no one wants to live in the intermediate stages that it takes to build one. And of course, in well-established smaller towns and cities, the residents fight like crazed weasels to prevent the kind of development that they associate with crime and gangs.

I don't really know what the answer is.

HW again: I'm not sure that's entirely true. What about all the downtown redevelopment projects that have happened around the country? Or the urban centers that sprout up around the core of big cities like NY. Next time you are in NY, look across the East River and take a gander at Long Island City. It's as close to midtown as the Upper East Side, easy to build there, far less expensive, and just as dense. And every single one of those luxury high rises went up in the past 12 years; it's literally a skyline that didn't exist 12 years ago. Jersey City is a similar story, both for residential and financial (every big bank has moved their IT back office out there). Or look at the gentrification of Brooklyn!

So why obsess on cramming a couple hundred thousand more people on the island of Manhattan, which will push it past the bursting point? It's just not a smart premise. In fact, I'll go further: it bears no relationship to reality. No one would stop a luxury high rise in any of the other four boroughs or right across the river in NJ and it's just as dense and low-carbon to live in those spots. It's just that Ryan Avent doesn't WANT to live in those spots. He wants to live in a cheaper high rise in Manhattan (which, by the way, has seen tons of them go up already in the past decade — in the Financial District, Hell's Kitchen, the Upper East Side). Avent should ride the 4/5/6 at 8 am every morning for a week, come back, and tell us if his article makes any sense. As a 4th generation NYer, I don't think it even begins to.

I don't really have a dog in this fight since I've lived in the leafy suburbs of Orange County all my life. But I thought this was an instructive response that was worth sharing. Back to you, Ryan.

Death by Wi-Fi

| Tue Mar. 15, 2011 7:07 PM EDT

The Wall Street Journal writes today about the latest in pseudo trends: finding a place to work that's internet free:

Gone are the days when a café with good enough coffee, a lax policy on lingering and an open Wi-Fi signal made it the perfect spot for writers to work. With infinite temptations just a mouse click away, many writers are seeking out an increasingly scarce amenity in a wired city: disconnected workspaces.

For the past eight years, Joanna Smith Rakoff has worked at the Writers’ Room, an office on Astor Place where creative types pay monthly fee to keep a desk. In an effort to stay productive, she never asked for the Wi-Fi password. But a recent deadline crush forced her to get online, and in the process she learned a password she couldn’t forget:12345678.

“I’ve not worked as well since,” said Smith Rakoff, 38, who published her first novel, “A Fortunate Age,” last year. “The pull of the Internet, of correspondence, is just too distracting.” She’s now contemplating a move to Paragraph, another workspace on 14th Street, in a bid to recapture her Internet innocence.

Etc. etc., with several other examples offered of writers desperately seeking out coffee shops that don't have Wi-Fi. Like this: "After much searching, West Village novelist Daphne Uviller happened upon her “second office.” The author, whose novel “Hotel No Tell” will be published next month, refused to divulge too many details. She did admit that her workspace without Wi-Fi required her to purchase a lot of $10 quinoa salads."

Look, I get that being online is distracting. But seriously, what's up with these people? You can turn off the Wi-Fi on your laptop, can't you? (I can on mine.) You can turn off your cell phone, can't you? (I can turn mine off.) So what's the deal here? I know all about internet addiction, since I have at least a mild case of it myself, but just how little self-control do you have to have to be unable to simply turn off your connection when you don't want to be disturbed? This is nuts.