Kevin Drum - May 2011

Open Wide!

| Wed May 25, 2011 11:46 AM EDT

The American trend toward forced arbitration is bad for consumers. Basically, most commercial transactions you go through today — buying a house, buying a car, seeing a doctor, etc. — include contracts that demand resolution of all disputes not in a court of law, but via arbitration. And, unsurprisingly, the arbitrator is chosen by the business person, not the consumer. You can, of course, refuse to sign a contract with anyone who insists on arbitration, but there are whole industries where this has become so pervasive that you hardly have a choice. If you refuse to sign, you just don't get your teeth cleaned. See Stephanie Mencimer for chapter and verse on this.

Now, via Matt Yglesias, I see that things are going even further. Here's Tim Lee writing at Ars Technica:

When I walked into the offices of Dr. Ken Cirka, I was looking for cleaner teeth, not material for an Ars Technica story. I needed a new dentist, and Yelp says Dr. Cirka is one of the best in the Philadelphia area. The receptionist handed me a clipboard with forms to fill out. After the usual patient information form, there was a "mutual privacy agreement" that asked me to transfer ownership of any public commentary I might write in the future to Dr. Cirka. Surprised and a little outraged by this, I got into a lengthy discussion with Dr. Cirka's office manager that ended in me refusing to sign and her showing me the door.

....The growing use of censorious copyright assignments recently caught the attention of law professors Jason Schultz and Eric Goldman, who created a site called Doctored Reviews to educate doctors and patients about the phenomenon.

When Ars asked Schultz about medical professionals who ask their patients to sign these agreements, he was scathing. "It's completely unethical for doctors to force their patients to sign away their rights in order to get medical care," he said. He pointed out that patients seeking treatment can be particularly vulnerable to coercion. Patients might be in acute pain or facing a life-threatening illness. Such patients are in no position to haggle over the minutia of copyright law.

We bought a new car this weekend, and the sales contract included the usual arbitration clause. We signed it. What choice did we have? But if the car is a lemon or the dealership screws us over, at least I can write about it without worrying over whether I'm violating some kind of gag clause. The experts Lee interviewed said these clauses are probably unenforceable, but how many ordinary citizens are willing to bet on that if they get a threatening letter on legal letterhead threatening to ruin them? Not too many, probably.

As near as I can tell, businesses in the United States increasingly think that basic constitutional rights are mere annoyances to be swatted away. Before long they're going to demand the right to search your house without your permission anytime they think you've done something they don't like. And why not? The United States government increasingly seems to view the constitution the same way.

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Paul Ryan's Healthcare Boondoggle

| Wed May 25, 2011 10:49 AM EDT

Peter Orszag may be an ex-Obama aide, but his cost control bona fides are pretty widely acknowledged. And he says that last month's CBO is right: Paul Ryan's plan to voucherize Medicare wouldn't reduce healthcare spending, it would raise it:

On the critical metric of whether the Ryan plan would reduce total health-care costs [] the CBO conclusion is shocking: The plan would not only fail to decrease health-care costs per beneficiary, it would increase them — by an astonishingly large amount that grows over time. By 2030, health spending on the typical beneficiary would be more than 40 percent higher under the Ryan plan than under existing Medicare, according to the CBO report.

....How could this possibly be, when the point of reform is to reduce costs? The CBO points to two factors: Private plans have higher administrative costs than the federal Medicare program, and less negotiating leverage with providers.

Everything in life is relative. The CBO’s analysis of the health-reform act that was passed last year was, well, lukewarm on its potential to reduce costs. Compared with the Ryan plan, though, the health reform act comes across as an efficient cost- containment machine.

The main goal of Medicare reform isn't to reduce federal healthcare spending. That's only a side effect. The main goal is to reduce healthcare spending, full stop. If, instead, your plan increases the cost of healthcare but reduces the federal share of that spending, all you're doing is making things worse. The cost of healthcare goes up and more and more patients no longer have the means to pay for it. There's literally no upside to a plan that does this.

In other words, there's no upside to Paul Ryan's Medicare plan. It's bad news across the board. What we need isn't ideological nostrums, it's actual ideas for controlling costs. Paul Ryan is entirely silent on that.

Cornering the Oil Market is Easier Than You Think

| Wed May 25, 2011 1:36 AM EDT

On Tuesday, the CFTC accused a couple of obscure traders of trying to illegally manipulate the oil market in 2008. Here's the gist:

In a matter of a few weeks in January 2008, the defendants built up large positions in the oil futures market on exchanges in New York and London, according to the suit, filed in the Federal Court in the Southern District of New York.

At the same time, they bought millions of barrels of physical crude oil at Cushing, Okla., one of the main delivery sites for West Texas Intermediate, the benchmark for American oil, the suit says. They bought the oil even though they had no commercial need for it, giving the market the impression of a shortage, the complaint says.

At one point they had such a dominant position that they owned about 4.6 million barrels of crude oil, estimating that this represented two-thirds of the seven million barrels of excess oil then available at Cushing, according to lawsuits.

That's it? The excess capacity at Cushing is only 7 million barrels? So all you have to do to corner the market is use a bunch of subsidiaries to buy up about 5 million barrels of crude? That's nothing. It's $500 million or so. There must be thousands of hedge funds, investment banks, PE funds, or private investors who could pull off something like that. And the operation itself wasn't exactly rocket science. I had no idea that manipulation of something the size of the oil market was so easy.

Watching Benjamin Netanyahu

| Tue May 24, 2011 8:44 PM EDT

This is from Benjamin Netanyahu's speech before Congress today:

Two years ago I publicly committed to a solution of two states for two peoples: A Palestinian state alongside a Jewish state.

I am willing to make painful compromises to achieve this historic peace. As the leader of Israel, it's my responsibility to lead my people to peace. Now, this is not easy for me. It's not easy. Because I recognize that in a genuine peace, we'll be required to give up parts of the ancestral Jewish homeland. And you have to understand this, in Judea and Samaria, the Jewish people are not foreign occupiers.

So that's it? The "painful compromise" Netanyahu is willing to make is an agreement not to keep the entire West Bank forever? Wow.

(For those not in the know, to Likud politicians "Judea and Samaria" = Israel plus the entire West Bank, aka "Greater Israel.")

I really don't follow Middle East politics closely enough to say this with any confidence, but things feel very different to me today than they have in the past. The Israeli prime minister, for the first time ever, now feels free to publicly dress down an American president in the secure knowledge that Republicans consider him a firm partisan ally and Democrats will go along uncomplainingly. Then he goes in front of Congress and says he won't negotiate the right of return, he won't negotiate Jerusalem, he insists on a permanent military presence all the way to the Jordan River, and his only concession is that he won't annex the entire West Bank. And he gets 20 standing ovations for it. Netanyahu's visit has been practically a triumphal procession.

It's hard to know what to think of this. My instinctive reaction is revulsion over being treated this way, and that's despite the fact that I've always fundamentally blamed Arabs for the lack of a peace agreement. They've started and lost three wars against Israel, they've turned down every peace agreement offered to them, and they've adopted terrorist tactics against Israel that no country in the world would tolerate. Israel, obviously, bears a considerable share of blame for this state of affairs too, but it's a distinctly minority share.

At least, that's how I've always seen it. But now? After watching Netanyahu in action; after watching his orchestrated attack on an American president who quite plainly is on Israel's side and proposed nothing new in the way of negotiating parameters; after watching the almost fawning reception he got from Congress; after watching him make it belligerently clear that he will concede nothing for peace; and after watching his almost smug recognition that he can singlehandedly direct American foreign policy — after watching all that, I just don't know anymore. Rationally, I still think that Palestinians are the ones who need the bigger reality check, but in my gut it's now a much closer call than it's been in the past. The last few days have been pretty sobering ones.

The Failure of Cynicism

| Tue May 24, 2011 1:56 PM EDT

Welcome to the United States of America:

It’s been less than three years since the fall of Lehman. The financial crisis remains lodged in our minds, and in our jobless rate. And yet, as ProPublica’s Jesse Eisinger has pointed out, the Federal Reserve lacks a vice chairman for banking supervision. There’s no one officially in charge of the Treasury Department’s Office of Financial Research. The seat marked “insurance” on Financial Stability Oversight Council is empty. The Consumer Financial Protection Bureau has a leader but not a director. No one has been confirmed to head the Office of the Comptroller of the Currency. And Republicans are still saying Nobel Prize-winning economist Peter Diamond is underqualified to serve on the Federal Reserve’s Board of Governors.

Meanwhile, the House GOP is fighting to starve financial regulators of the resources they need to do their work. Both the Securities and Exchange Commission and the Commodity Futures Trading Commission needed extra money to scale up to their expanded roles under the Dodd-Frank law, but the Republicans’ 2011 budget proposal whacked them with sharp cuts — and then their 2012 proposal repealed most of Dodd-Frank, with no vision for what should go in its place. The irony? All this is being pursued under the guise of deficit reduction. And why do we have such a gaping deficit? The . . . financial crisis.

That's Ezra Klein. And yes, this is stunning almost beyond belief. It's this, more than anything else, that has convinced me over the past couple of years that America's wealthy class is simply morally bankrupt and that the leadership of the Republican Party is politically bankrupt. Five years ago I would have been embarrassed to write a blog post suggesting that this might be the reaction of the moneyed class to an economic collapse. Then we had one and this was the reaction. Once again, events have outrun my best efforts to be cynical.

French Justice, American Justice

| Tue May 24, 2011 1:32 PM EDT

Sophie Meunier reports that after an initial stage of anger and America-bashing, French reaction to the arrest of Dominique Strauss-Kahn has started to turn:

With a few days hindsight, however, what is most surprising about the fallout of the DSK scandal in France is not how much, but rather how little displays of anti-Americanism it has provoked. To the contrary, the scandal is now turning into a teachable moment....What if the American justice system actually had some features that could be replicated, such as the equality of treatment? A flurry of accusatory articles popped up in the French press denouncing how a defendant of DSK's stature would never have gone through the same legal troubles in France -unlike a random "Benoit" or "Karim." As socialist and DSK friend Manuel Valls publicly confessed, criticizing the American justice system also puts the spotlight on the weaknesses of French justice. This realization that perhaps the Americans might have components in their justice system that should be replicated in France might have left many with the depressing thought — "maybe we are not as wonderful and superior as we thought: so what is now our place in the world?"

Many analysts, mostly women but not only, seized on the scandal to praise an American society where it is easy (read, easier than in France) to denounce sex crimes and violence against women.

As for the French media, they, too, quickly went into soul-searching mode. By refusing to report beyond the "bedroom door", had they been complicit? Why doesn't France have a tradition of investigative journalism? Should French reporters be importing best practices from their American counterparts? Ahhhh, acceptance.

I'd actually like to read an article about how DSK would likely have been treated in France if the accusations had been made there by a French housekeeper. Reading pieces like this one, I've gotten the consistent impression that the French judicial system would have treated him with kid gloves. But what exactly does that mean? Inquiring minds would like to know. Perhaps some enterprising French journalist could do us all a service and sketch out the way this would probably have unfolded if it had happened in Paris instead of New York.

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Biology and Liberalism

| Tue May 24, 2011 12:06 PM EDT

Karl Smith explains part of the way his views have changed over the years:

15 years ago I was a hardcore Tabula Rasa supporter. There was no way I could imagined myself waking up, believing anything different.

Today, I frequently say: crime and poverty in the first world are biological diseases and one day they will have a biological cure. Our purpose right now is to ease the pain of all those afflicted. Ironically, I think liberals tend to be less accepting of biological determinism, but it was my acceptance of it that led me to be increasingly in favor of efforts to help the first world poor.

I've never been either a hardcore blank slater or a hardcore biological determinist, but there's no question that I have a pretty healthy belief in the power of genes and biology. As Karl says, this belief tends to be associated with conservatives more than liberals, but that's really very odd. After all, it's pretty easy to fool ourselves into dismissing the benefits of being raised in a rich, stable culture and assuming that everything we've accomplished has actually been the result of hard work and personal rectitude. But what if you believe, say, that (a) IQ has a strong biological component and (b) high IQ is really important for getting ahead in the world? If you believe this and also happen to be blessed with a high IQ, how can you possibly convince yourself that this is anything other than the blind luck of the genetic lottery?

Well, I suppose people can convince themselves of just about anything. And certainly a smart person who works hard is likely to do better than a smart person who sits on the couch all day playing videogames. Still, to the extent that you really do believe that cognitive abilities are (a) important, and (b) strongly biologically determined, shouldn't you also believe that the poor are more unlucky than anything else, and haven't done anything to deserve hunger, lousy housing, poor medical care, or crappy educations? If genetic luck plays a big role in making us who we are, then support for income redistribution from the rich to the poor is almost a logical necessity for anyone with a moral sense more highly developed than a five-year-old's.

Long story short, belief in biological determinism should make you into a liberal. And yet, here in the real world it mostly does just the opposite. Go figure.

Run, Paul, Run!

| Tue May 24, 2011 11:43 AM EDT

Writing in the LA Times today, Jonah Goldberg is unhappy that none of the big-name GOP presidential candidates are full-throated defenders of Paul Ryan's budget plan:

So the question many are asking is, should Ryan ride to the rescue? If the election is going to be a referendum on his plan, maybe the one guy who can sell it should get in the race. On Monday, House Majority Leader Eric Cantor called for Ryan to get in the race, saying, "Paul's about real leadership."

If Ryan ran, he would probably drive the other candidates further away from his own plan while forcing them to come up with serious alternatives of their own. If he got the nomination, many think he would clean Obama's clock in the debates.

It's a lot to ask. He has three young kids and would have to get organized and funded from a cold start for a long-shot run. But politics is about moments, and this one is calling him. Unless someone suddenly rises to the challenge, the cries of "Help us, Paul Ryan, you're our only hope!" will only get louder.

Let me get this straight. The Ryan plan is wildly unpopular and is ripping the Republican Party apart. In fact, it's so unpopular that even Newt Gingrich won't endorse it. So the answer is for Ryan to run because somehow the great man himself will make gutting Medicare into a national movement. And Ryan's vision of vouchers for all, tax cuts for the rich, and reducing defense and domestic spending to 3% of GDP is so compelling that President Obama will be like putty in his hands when debate time rolls around. Hell, maybe Obama will be so scared he'll simply refuse to debate at all.

Well, I'm all for it. I mean, if Michele Bachmann were to run and lose, there's always the chance that the true believers would just chalk it up to inexperience or bad organization or backstabbing or some kind of campaign meltdown (there's bound to be one). But if Ryan runs and loses, maybe Republicans really would have to face up to reality. Maybe Paul Ryan really is our only hope.

Lead is Bad for You

| Tue May 24, 2011 10:57 AM EDT

Crime continues to drop:

The number of violent crimes in the United States dropped significantly last year, to what appeared to be the lowest rate in nearly 40 years, a development that was considered puzzling partly because it ran counter to the prevailing expectation that crime would increase during a recession.

....Criminology experts said they were surprised and impressed by the national numbers, issued on Monday by the Federal Bureau of Investigation and based on data from more than 13,000 law-enforcement agencies....“Striking,” said Alfred Blumstein, a professor and a criminologist at the Heinz College at Carnegie Mellon University, because it came “at a time when everyone anticipated it could be going up because of the recession.”

Actually, my recollection of the evidence is that recessions have a mixed effect on crime rates. On the other hand, the cohort effects from lead abatement efforts and the introduction of unleaded gasoline probably continue to make themselves felt, so this might not be as mysterious as it seems. More here and here. And while you're at it, this too.

The Global Economy as Slow Motion Train Wreck

| Tue May 24, 2011 10:13 AM EDT

The Wall Street Journal reports that investors have turned distinctly bearish on the global economy:

The negative news began late Friday, after the outlook on Italy's $1.9 trillion of government debt was lowered to negative by credit-ratings firm Standard & Poor's, which cited weak growth prospects and a slipping economic reform agenda. Then on Sunday, Spain's ruling party suffered a crushing defeat in weekend elections. The heavier-than-expected losses for the Socialist Party of Spanish Prime Minister José Luis Rodríguez Zapatero raise questions about his government's ability to pursue plans to overhaul the euro zone's fourth-largest economy and thereby ward off an international bailout.

This follows a growing political backlash elsewhere in Europe over the bailouts of Greece, Ireland and Portugal that is seen as making any additional support for those countries even harder to galvanize than in the past.

....By late Sunday in New York, the focus had shifted to the other side of the globe as fresh economic data raised concerns about the pace of economic growth in China, with whom the fortunes of other Asian economies are closely linked.

Once the housing bubble collapsed, a recession was inevitable. But the severity and length of the ensuing slump wasn't inevitable, and a second slump certainly isn't either. And yet, either a second recession or its near equivalent now seems more likely than not thanks to our increasingly 18th century approach to economic management over the past year. It's as if we've deliberately gone back to leeches and bleeding as cures for what ails us, and now we're surprised that the patient is getting worse instead of better.

This didn't have to happen. It still doesn't have to happen. It's a manmade catastrophe born of reactionary stupidity and political cowardice. We might still get out of this with our skins barely intact, but if we do it will be thanks only to dumb luck. Buckle up.