Kevin Drum - June 2011

The Decline and Fall of the Wall Street Journal

| Wed Jun. 8, 2011 6:33 PM EDT

Ryan Chittum takes a look at two stories about delays in writing new financial regulations, and concludes that the Murdochization of the Wall Street Journal's news pages is proceeding apace:

The Journal’s frame is that Wall Street is upset over the delay of derivatives rules and that it’s causing “uncertainty.”....The Times, though, points out that it’s Wall Street that is delaying the rules.

....This is a prime example of the Times out-Journaling the Journal, giving us the context and background we need to get our arms around what’s really going on. The WSJ misleadingly presents the story almost as if it’s a natural disaster—delays that just happen for no reason or, if you read between the lines, government incompetence....Which just goes to show you, as we’ve seen before with the Journal, that “uncertainty” is a red flag that an argument is almost surely utterly bogus corporate PR.

The Journal's news pages used to be first rate. There's still plenty of good stuff there, but hackery has been advancing steadily ever since Rupert Murdoch bought the paper and started installing his own retainers in top positions. It's pretty sad.

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Why Trying Everything is Good for Healthcare

| Wed Jun. 8, 2011 3:36 PM EDT

Matt Steinglass:

David Brooks had an op-ed in the New York Times yesterday that proclaimed the near impossibility of restraining costs in health care through centralised government efficiency evaluations, which is being justly ridiculed by people (Jon Chait, Jonathan Cohn, Ezra Klein) who note that every single one of the world's centralised government-regulated health-care systems is far cheaper than America's relatively decentralised private-sector one. Mr Brooks has surely had this explained to him a thousand times by now, and his failure to process the fact or incorporate it into his worldview seems to me most likely to reflect an absence of the ideological furniture on which the fact could sit.

My post about Brooks's op-ed was a little lighter on the ridicule than many, and this might be a good chance to explain why. There are two things to be concerned about in the world of healthcare costs: levels and rates. That is, we want to know how much we spend on healthcare in America compared to other rich countries and we want to know how fast it's growing compared to other countries.

On the former, the evidence is clear: our spending is far higher than any other comparable country's. Adjusted for wealth (richer countries don't just spend more on healthcare, they spend a higher percentage of GDP on healthcare), America spends $2,500 more per person than any other country in the world. Aaron Carroll probably has the best single summary of this state of affairs here (or you can just read the conclusion here), and it turns out that we simply spend more on everything. More on doctors, more on insurance, and more on drugs. And we also provide more treatment. We love our diagnostic tests in America.

The fact that other countries do better on this score is almost certainly a testament to centralized planning. France and Japan and England mostly have overall healthcare budgets set by the state, and since those budgets depend on taxpayer dollars, there's a strong incentive to keep them pretty tight. And they do. As a result, they pay less for doctors, less for administration, less for drugs, less for everything. Individuals are mostly free to spend more on themselves if they want to, but the state itself has a pretty firm limit on what it will pay.

But that's only half the story. What about rates of growth? Here's a chart based on OECD data collected by the Kaiser Foundation, and it shows that spending is increasing everywhere. The U.S. growth rate is high, especially considering that we started from such a high point, but it's hardly an outlier. The problem of healthcare spending growth isn't something that centralized systems have been able to solve much better than we have.

So Brooks is wrong to be so dismissive of expert panels and top down budget control. They really do work. At the same time, they aren't panaceas, and various forms of competition — between hospitals and insurers, between healthcare organizations bidding for Medicare contracts, and between doctors competing for patients — is something worth trying too. You don't have to drink the tea party Kool-Aid to think that it's worth keeping an open mind on this stuff.

Why Do Lefties Hate Tax Cuts on the Rich?

| Wed Jun. 8, 2011 2:07 PM EDT

Reading Tim Pawlenty's paean to double plus supply-side-ism yesterday made me wonder, once again, why conservatives think we liberals are opposed to it. I mean, if it actually worked, why would we be? It's politically popular, and by their accounts it would generate trillions of dollars in extra revenue that we could use to finance our beloved lefty social programs. What's not to like?

The only answer I can come up with is that conservatives are now completely invested in their theory that we liberals loathe rich people so much that we don't care. We all want to screw the wealthy so badly that we're willing to forego the elections we'd win and the mountains of revenue we'd gain if we lowered their taxes. We hate them that much.

Or is there some other wacky theory that's popular in conservative circles but that I'm unaware of?

The Truth Will Out (And It Should)

| Wed Jun. 8, 2011 1:30 PM EDT

Karl Smith:

To my mind there are few things that tax intellectual ethics more profoundly than whether the psychotropic debate should be had in public. It is my general feeling that it should not.

My blog is not read by the general public but I will make no attempt to be transparent. Those in the know, know what I am talking about.

Hmmm. I don't know for sure what Karl is referring to, but I assume he's talking about the ongoing debate over whether or not psychoactive drugs like antidepressants actually work. There's a growing body of evidence that they don't — at least not the way we think they do. Rather, they're mostly very expensive placebos.

Is this dangerous to talk about in public? Sure, to some extent. After all, relief is relief, regardless of whether it's caused by a known biologic reaction or by a more mysterious placebo effect. If you had a friend who was taking, say, Prozac, and they reported feeling a lot better, would you take them aside and inform them that research suggests Prozac is nothing more than a complicated sugar pill and their response is probably just a placebo effect? Sure, if you're an asshole. After all, telling them this has a good chance of making their belief in the drug vanish, and they'll go back to feeling crappy. Nice work, alleged friend!

But that's quite a different thing from discussing this as a general topic in public forums. Here's the problem: there are enormous commercial forces pushing to make sure that we all continue to think these drugs work, and a non-public discussion is almost certain to be far less effective than a public discussion at applying pressure for change. Without public pressure, we'll get an endless faux-analytic debate in industry circles that's dominated far more than anyone wants to admit by the financial interests of the drug makers. Their ability to control these debates by selective release of data, financial incentives to researchers and doctors, and sophisticated industry marketing campaigns aimed at physicians, is hardly a secret.

My take on the historical record is that it usually takes public pressure — and plenty of it — to really move the needle on this stuff. There are just too many powerful industry interests fighting to maintain their financial stakes and willing to manufacture endless doubt about results they don't like. Examples of this are simply legion. So if we want to get to the truth of this — and in the long term, that's the most helpful thing we can do for everyone — we need to have this debate in public. It's messy, but the net result will be for the best.

Timewaster of the Day: Hollywood Trajectories

| Wed Jun. 8, 2011 12:20 PM EDT

Here's a great new timewaster. Slate managed to talk the folks at the movie review site Rotten Tomatoes into giving them access to their database so that you can create graphs of how well various Hollywood luminaries have been reviewed over the past couple of decades. Let's try it out. Last night I was watching Dangerous Liaisons on cable, so let's check out Michelle Pfeiffer's career. Here it is:

Interesting! Her role in Dangerous Liaisons is nearly her career high point (93% rating), second only to her star turn in The Fabulous Baker Boys (96%). After that her career takes a steep dive, bottoming out in 1996 with To Gillian on Her 37th Birthday (15%) and then steadily working its way back up.

Of course, this is pretty much what any film critic could have told you too. But this is much quicker and more quantitative, aggregating the preferences of thousands of reviewers over dozens of years. The graphing tool is here (scroll down). Have fun!

Via Doughnut Orbitals.

Dirty Tricks

| Wed Jun. 8, 2011 11:45 AM EDT

So I'm browsing through The Corner this morning to see if anyone has said something outrageous that's worth a bit of mockery, when I come across a post from Christian Schneider about the ongoing recall elections in Wisconsin. It starts off with some stuff about Republicans claiming that the elections are being handled unfairly, and then offers up an interesting bit about Randy Hopper, a recall target who's in hot water because when demonstrators came by his house a while back, they "were told by Hopper’s wife to buzz off because he lived down in Madison with his 25-year-old mistress." Ouch.

But then there was this odd bit about Hopper and another guy who's likely to lose his recall election:

In order to delay recall elections, the GOP has planned to run fake Democratic primary candidates against the GOP challengers, which would push the elections back another month. That would give Republicans an extra month’s worth of distance from the collective-bargaining imbroglio that got them in this situation, and would allow more time to campaign.

Yet this will almost certainly be seen as a “dirty trick” by media and some voters.

Well, yes, I suppose it would be "seen" as a dirty trick. In fact, it would be a dirty trick. It wouldn't be the first time in campaign history this has been done, but still, it's unquestionably a dirty trick. Schneider, in defense, suggests that "it can be argued that the recall elections in themselves are merely dirty tricks," and I suppose that can be argued. Pretty much anything can be argued, as Sarah Palin's fans have conclusively proven over the past few days. But the plain truth is that a recall election isn't a dirty trick, while running a fake candidate merely to artificially extend a campaign (and cost taxpayers a bunch of extra dough in the process) is a dirty trick. That's why these candidates are called "fake." I hope this clears things up for everyone.

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How the Game is Played, IPO Division

| Wed Jun. 8, 2011 12:02 AM EDT

Back when I used to work for a living, I often wondered why investment banks all charged 7% fees for managing IPOs. Why wasn't there more competition among bankers? Why didn't some sharp IPO operators at Goldman or Morgan Stanley head off to start up a boutique firm that snagged high-quality business with slightly lower fees? What happened to the free market?

Well, now we know the answer: because there's widespread collusion on Wall Street. Felix Salmon summarizes the damning evidence here.

Quote of the Day: Bernanke on Spending Folly

| Tue Jun. 7, 2011 11:29 PM EDT

From Ben Bernanke, speaking at the International Monetary Conference in Atlanta today:

If the nation is to have a healthy economic future, policymakers urgently need to put the federal government's finances on a sustainable trajectory. But, on the other hand, a sharp fiscal consolidation focused on the very near term could be self-defeating if it were to undercut the still-fragile recovery....By taking decisions today that lead to fiscal consolidation over a longer horizon, policymakers can avoid a sudden fiscal contraction that could put the recovery at risk.

Translation: Don't cut federal spending, idiots. Cut it in the future.

Further translation: The economy is fragile, but we at the Fed aren't going to do anything about it. And I guess Congress isn't going to do anything about it either. But for God's sake, at least limit yourselves to doing nothing. Actively slashing spending is almost too stupid to bear thinking about.

Alan Greenspan and Ben Bernanke, the conservative Republicans who have run the Fed for the past 24 years, have now both gone on record telling their fellow conservative Republicans to back away from the cliff and stop being idiots. It's a sign of what's happened to the GOP that these warnings have had no visible effect other than to make them apostates to be maligned in stump speeches.

Tim Pawlenty and That Old-Time Supply Side Black Magic

| Tue Jun. 7, 2011 6:38 PM EDT

Tim Pawlenty today:

I promised to level with the American people. To look them in the eye. And tell them the truth.

OK, Tim. Hit me with it. I'm ready to be leveled with and told hard truths that I might not like:

I propose just two rates, 10% and 25%.....A one-third cut in the bottom rate....And a 28% cut in the top rate to spur investment and job creation. In addition, we should eliminate all together the capital gains tax, interest income tax, dividends tax and the death tax.

....Once we unleash the creative energy of America’s businesses, families and individuals as we did in the eighties and nineties, a booming job market will reduce demand for government assistance. And rising incomes will increase federal revenues....5% economic growth over 10 years would generate 3.8 trillion dollars in new tax revenues.

So that's Tim Pawlenty's hard truth? That if I suck it up and accept lower taxes, federal revenues will magically go up and our deficit problem will already be half solved without anyone having to do anything? That's some tough talkin', governor. You'll probably take a real hit in the polls for this kind of truthtelling.

It's hard to know what to say about this. The pander quotient in Pawlenty's speech is just off the charts. It's less a speech than a series of Reagan-era applause lines bulked up on steroids and then stitched together for public consumption. Reduce taxes on the rich (plus a little bit on the middle class so it's not too obvious what's going on). Cut corporate taxes. Pass a balanced budget amendment. Raise the Social Security retirement age. Eliminate the post office, the government printing office, Amtrak, and Fannie and Freddie. Apply "Lean Six Sigma" to generate 20% spending reductions.1 Slash regulations that cost us $1.75 trillion per year. Repeal Dodd-Frank. Repeal healthcare reform. Gut the EPA. Keep the dollar strong. No more "printing money."

I dunno. It feels like Pawlenty is auditioning for the lead role in a campaign remake of "Heart of Darkness" or something. A couple of miscellaneous comments, though. First, after a few years of skirting dangerously close to reality, I guess it's once again official Republican dogma that tax cuts pay for themselves and then some. Glad to see they can still kick it old school. Second, it looks like the battle of the GOP "adults" — Romney and Pawlenty — is taking shape. Romney lately seems to be hedging a bit toward non-insanity, hoping that there's still a majority in the Republican Party that isn't quite willing to sail completely over the Palin/Beck/Limbaugh cliff into fairyland. Pawlenty, conversely, is going all in. If you believe in faith, freedom, and that old-time supply-side black magic, he's your man.

Which will Republican voters choose? I don't know, but the battle lines seem fairly well drawn now.

1No, I have no idea what this bit of corporate consultant babble means either, and I refuse to Google it to find out.

How Did We Manage to Kill Ilyas Kashmiri?

| Tue Jun. 7, 2011 3:30 PM EDT

A friend emails to alert me to the following interesting timeline:

May 27: Secretary of State Hillary Clinton visits Islamabad with a list of five top militant leaders that Washington would like to see dead. One of them is Ilyas Kashmiri, a terrorist leader who is close to al-Qaeda and suspected of playing a role in both the Mumbai massacre of 2008 and several attacks within Pakistan, including last month's attack on a naval base in Karachi.

May 29: Syed Saleem Shahzad, the Pakistan Bureau Chief for Asia Times Online, disappears. Shahzad, who has been critical of Pakistan's ISI and has exposed its cooperation with al-Qaeda elements, is known to have had contacts with Kashmiri and other jihadists.

May 31: Shahzad is found in a canal 80 miles outside of Islamabad, tortured and beaten. His cell phone is wiped clean from the previous 18 days.

June 3: Kashmiri is reportedly killed in a U.S. drone attack.

My friend asks: did the ISI simply kill a journalist who embarrassed the government and the military? Or did they torture his contacts out of him, as they've done to journalists before, on our behalf?

There are other alternatives, of course, including the possibility that the ISI had nothing to do with either Shahzad's death or the drone attack on Kashmiri. They just aren't very plausible. There's probably a pretty good story here for an enterprising reporter who's not afraid of ISI reprisals.