Kevin Drum - June 2011

Will Redistricting Save California? Part 2

| Sun Jun. 12, 2011 9:37 AM PDT

More analysis of California's new redistricting map, which was drawn, for the first time, by an independent commission:

Between now and next year's elections, Republicans must scramble to reinvent themselves, recruit more moderate candidates and find common ground with more Californians if they are to be at all relevant in Golden State politics, according to independent experts and partisan analysts alike.

....The GOP sought to maintain its numbers in the last redistricting, in 2001, when lawmakers controlled the maps. Republicans cut a deal with Democrats to protect incumbents by cushioning both parties in safe seats across the state. No seats switched party in the next two elections.

....Redistricting protection over the years had emboldened the party's conservative wing....In 2009, for example, after a cluster of Republicans joined Democrats to pass temporary tax increases in Sacramento, two members lost their leadership posts, another retired in the face of a recall and another lost a bid for statewide office. But the new maps, which will be further refined before they are ratified in August, seem to have changed the calculus, especially for Republicans such as state Sen. Tom Berryhill of Modesto. The district he now represents was drawn into a majority Democratic area.

Berryhill is one of five senators who have bucked party leadership — and the majority of his GOP colleagues — this year to negotiate with Gov. Jerry Brown on a proposal to renew billions of dollars in expiring tax hikes. The new districts' potential makeup could provide a final push for Republicans and Democrats alike to agree on the taxes and pass a budget as they face the deadline for doing so Wednesday.

Two points. First: if this actually happens — and it's still a big if — it would be a monster success for the commission. It was the hope of its sponsors that it would primarily do two things: reduce the number of super-safe seats and give challengers a better opportunity to unseat incumbents, and in so doing, force both parties to move a bit to toward the center. For the past decade, California's districts have been among the most lopsidedly partisan in the nation, safely electing a steady stream of extremely liberal Democrats and extremely conservative Republicans. Moderates became practically an endangered species. It will be a big win for the state if this changes. (And, as the story notes, there are some additional mechanisms now in place that might also help this transformation along.)

Second: last week I wrote a post about a friend who said that the Sacramento lobbyists he worked with were pretty confident that Gov. Jerry Brown would manage to peel off a few Republican votes for his plan to extend some tax increases in order to help balance the state budget. Their reasoning was that a bunch of Republicans would get redistricted out of their seats, and with no plausible reelection chances anyway they might be willing to commit political suicide in the service of the greater good by voting for Brown's plan.

But this story suggests a different mechanism: that at least a few of the moderate Republicans in the legislature will be faced not with certain death, but merely with districts that are a bit more centrist — or perhaps modestly Democratic leaning. Still winnable, but only if they demonstrate their moderate bona fides. And that, not a fatalism born of impending doom, will prompt a few of them to work with Brown.

I guess we'll see. The new district lines aren't set in stone yet (that happens in August), and as usual, there are almost certainly court fights to look forward to. But the shape of the river seems to be getting clearer: California's legislature is going to have a bigger moderate bloc after next year's elections, and at least a few incumbents are going to have to move to the center if they want to survive. That's going to be especially hard on the California GOP, which has been almost suicidal in its lurch to the far right at the same time that the state has grown increasingly liberal. In the end, though, it will probably be good for them. Democrats are likely to be the short-term winners from this redistricting, but in the long term life might actually get a little more difficult for them. I sure hope so, anyway. They could use a little shaking up too.

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Libya and Its Sweet, Sweet Crude

| Sat Jun. 11, 2011 6:40 PM PDT

Did we go to war in Libya over oil? Glenn Greenwald makes the case here. As usual, I'd say the right answer is "sorta." I doubt very much that President Obama and his trusted advisors sat around a table in March and talked about how the growing unrest in the Middle East was a great opportunity to seize a few oil fields in Libya. On the other hand, would we give a rat's ass about the rebels in Libya if there were no oil there — or if it were under the control of a friendly autocrat instead of an unreliable one like Muammar Gaddafi? The question pretty much answers itself.

But Glenn points out something else interesting: the Washington Post ran a story on A9 today under the soporific headline "Oil firms wait out Libya conflict" that spells out just how upset U.S. oil companies have been with Libya's increasingly truculent attitude over the past few years. And pretty much the entire source for the piece was the cache of diplomatic cables released last year by WikiLeaks. Here's a sample in the order they show up in the story:

In late February 2008, [ConocoPhillips chief executive Jim Mulva] was “summoned to Sirte for a half-hour ‘browbeating’ ” from Gaddafi, according to a U.S. State Department cable made available by WikiLeaks....A State Department cable in December 2004 said, “Conoco characterized the agreement as ‘not good,’ but said the company views it as ‘dues-paying’ in order to return to the Libyan market.”....By the time Secretary of State Condoleezza Rice visited in 2008, U.S. joint ventures accounted for 510,000 of Libya’s 1.7 million barrels a day of production, a State Department cable said.

By November 2007, a State Department cable noted “growing evidence of Libyan resource nationalism.”....The Libyan leader was livid, evident in his scolding of Mulva. The equivalent of the deputy foreign minister told U.S. officials that the Lautenberg amendment was “destroying everything the two sides have built since 2003,” according to a State Department cable at the time....The U.S.-educated Libyan oil minister Shokri Ghanem — who recently left Libya and defected from the Gaddafi regime — in 2008 warned an Exxon Mobil executive that Libya might “significantly curtail” its oil production to “penalize the U.S.,” according to a State Department cable.

Was oil a significant factor in the eagerness of France, Britain, and the U.S. to go to war with Libya? It's impossible to say for sure. But thanks to WikiLeaks, we certainly know that Libyan oil had been on a lot of minds in the months and years beforehand.

Wall Street's Strange Allies

| Sat Jun. 11, 2011 11:05 AM PDT

Yesterday I wrote about financial industry demagoguery over new rules that will force issuers of mortgage securities to keep a 5% stake in the securities they create. The idea is simple: if they have to keep a small stake, they'll have an incentive to make sure their securities aren't loaded up with piles of crappy mortgages of the kind that helped supercharge the housing bubble. However, there's an exemption for securities that contain only ultra-safe mortgages, and now the mortgage industry is trying to scare everyone into thinking that this is a death knell for any mortgage that doesn't qualify for exemption.

In fact, there's little reason to believe this: the effect on normal mortgage rates is unlikely to be more than a tenth of a percentage point or so. But while Wall Street's kvetching about this is predictable, Harold Pollack points out they've teamed up with some strange bedfellows:

It turns out that the N.A.A.C.P. and the National Council of La Raza are important industry allies in this fight.

This is part of a concerning pattern, too. In many cases, respected civil rights organizations and advocacy groups become involved in the political process on behalf of firms whose practices within minority communities raise serious concerns. The Congressional Black Caucus Foundation exemplifies many of these concerns. As the New York Times reported last year, the Foundation’s backers include (among others) Altria, Coca-Cola, Heineken, Anheuser-Busch, and rent-to-own furniture enterprises. The accompanying problem speaks for itself.

The NAACP and La Raza make legitimate arguments in the current fight. Perhaps some adjustments should indeed be made in the proposed regulations....Still, I can’t be the only person concerned about what anonymous federal regulators label “the unholy alliance” between the financial industry and some consumer and civil rights groups. If our nation fails to establish strong and enforceable financial regulation, we know whose communities will be left holding the bag.

I'm not sure I'd go as far as Harold. I'm not going to swear that the proposed rules are sacrosanct and shouldn't be modified one bit. But they shouldn't be modified much, and I don't think the NAACP or La Raza do make legitimate arguments. It's simply not the case that anyone without a 20% down payment will no longer be able to buy a house, as they suggest. All the new rules mean is that the cost of loans that aren't ultra-safe will go up slightly — as they probably should, since recent history suggests they're riskier than we thought.

Alyssa Katz, arguing against the new rules, says:

In effect, the costs of managing financial risk that were once borne by the government are now moving to the private sector.

I'd rephrase that:

In effect, the costs of mismanaging financial risk, which were once borne by the government and have cost taxpayers hundreds of billions of dollars in bailouts to Fannie and Freddie, are now moving to the private sector.

These risks exist, whether we admit it or not, and consumers end up paying for them one way or another. That being the case, it's better for them to be accounted for in the loans themselves than to be hidden away in government accounts. Helping low-income home buyers is a worthwhile endeavor, but as Harold says, "This should be done explicitly and carefully, not implicitly by perpetuating industry practices that have proven so disastrous." Roger that.

California Set to Become Even More Democratic

| Sat Jun. 11, 2011 9:08 AM PDT

For the past few decades, Democrats have been in charge of the California state legislature when it came time draw up redistricting plans after the decennial census. In 2001 a Democrat was governor too. But in 2008 and 2010, voters (including me) approved initiatives that took redistricting out of the hands of the legislature and gave it to an independent commission charged with creating compact, nonpartisan district lines. Yesterday they released their map of California's new districts. So what happened now that Democrats are no longer in charge?

You're looking at three to five Republican members of Congress that just kind of vanish," said Matt Rexroad, a Republican political consultant in Sacramento who advises clients on redistricting. The prospect of Democrats securing two-thirds of both state legislative houses is "very much in play," he said. No single party has held a supermajority in both the Assembly and Senate in many decades.

....In Washington, some GOP strategists expressed confidence that Republicans would be able to compete in some of the proposed new districts that appear to favor Democrats, possibly limiting the loss of seats to just one or two. But analysts were predicting otherwise.

"At minimum, [Democrats] should pick up two to three seats, but that could go as high as four to five," said David Wasserman, House editor of the Washington-based Cook Political Report, which monitors redistricting.

Welcome to California. After decades of gerrymandering warfare that usually ended up in the courts, Democrats in the Golden State took a different tack in 2001. Instead of gerrymandering for maximum partisan advantage, they made a nice, cozy arrangement with their GOP rivals: gerrymandering with the primary goal of protecting incumbents of both parties. It made everyone happy. Especially incumbents.

Democrats largely opposed the initiatives that created the new redistricting commission. (So did Republicans.) The new map shows just how self-destructive that was. Their districts aren't quite as safe as they used to be, and they may have to work a little harder to hold onto them. But as my mother always said, hard work never killed anyone. In this case, despite their best efforts to avoid it, hard work will likely make California even more solidly Democratic than it is now.

Yes, the ISI is Still the ISI

| Fri Jun. 10, 2011 9:06 PM PDT

From the Washington Post:

Twice in recent weeks, the United States provided Pakistan with the specific locations of insurgent bomb-making factories, only to see the militants learn their cover had been blown and vacate the sites before military action could be taken, according to U.S. and Pakistani officials.

....U.S. officials say they do not know how the operation was compromised. But they are concerned that either the information was inadvertently leaked inside Pakistan or insurgents were warned directly by Pakistan’s Inter-Services Intelligence directorate, or ISI.

Right. It might have been inadvertently leaked. You betcha. I think I'll take door #2, thankyouverymuch.

Note to Corporate America: Stop Whining

| Fri Jun. 10, 2011 2:47 PM PDT

Michael Linden has made me feel guilty for highlighting the only one of CAP's tax charts that I disliked, rather than the nine I thought were fine. So here's one of the good ones. Keep this in mind the next time you hear some hack from the Heritage Foundation whining that we have the highest corporate tax rate in the world. It's a glib debating point, but in reality the effective tax rate on American corporations is one of the lowest in the world. The full set of charts is here.

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Friday Cat Blogging - 10 June 2011

| Fri Jun. 10, 2011 11:57 AM PDT

Today we have cats in a state of nature. Of course, "state of nature" for a housecat means endless brushing, pampering, soft beds to sleep on, and a bottomless food dish. So this is as close as we get. On the left, Inkblot is trying to figure out why there's a pair of ducks in his backyard. Answer: they waddled over from the lake and are probably looking for suitable nesting grounds. Having a pair of cats around isn't likely to be on their "must have" checklist, but I think they could do worse. In fact, our cats are not only too dumb to pose any real danger, Inkblot in particular is dumb enough that they might be able to fool him into incubating their eggs for them, Horton-like. The eggs might come out a little the worse for wear, though.

On the right, Domino is surrounded by wild foliage in the dark interior of our front yard garden. That's nature red in tooth and claw, folks.

UPDATE: More MoJo catblogging here!

Tax Loopholes and the Federal Budget

| Fri Jun. 10, 2011 11:37 AM PDT

Matt Yglesias points to a chart from his CAP colleagues showing a dramatic increase in tax credits and deductions since 1982 and comments, "It’s not a good trend. Simpler taxes and efforts to do a more straightforward consideration of what is and isn’t worth spending money on are a much better idea." Here's the chart:

I'm not here to defend tax complification, and I'd like to see some of these tax expenditures cut back too. Still, I call foul. The usual way to measure this stuff is as a percent of GDP, and real GDP has increased from roughly $6.5 trillion in 1982 to $14.7 trillion in 2010. This means that as a percentage of GDP, tax expenditures have fallen from 8.1% to 7.0%. It would be nice for them to fall even further, but not because there's been an explosion in tax expenditure revenue over the past three decades. There hasn't been.1

However, CAP's presentation has ten charts in it, and charts 1-9 are pretty good. It's worth a click.

1Actually, this is kind of odd. The three biggest tax expenditures are the exclusion of employer contributions to employee healthcare plans, the mortgage interest deduction, and the exclusion of pension contributions. These are all pretty fast growing areas, and in addition lots of smaller tax expenditures have been added to the tax code since 1982. Given all this, I'm surprised tax expenditure revenue hasn't grown faster.

UPDATE: I've revised the GDP numbers in the text. I used the real GDP series from the BEA, but forgot that it's in 2005 dollars. I've adjusted it to 2010 dollars so it's in the same units CAP uses for tax expenditures.

You could also do this as a percentage of federal revenue rather than a percentage of GDP. If you do it this way the relative size of tax expenditures has indeed gone up (from about 40% to 48%), though some of that is an artifact of the plunge in tax revenue following the 2008 recession.

Addressing Medicare the Wrong Way

| Fri Jun. 10, 2011 10:33 AM PDT

Joe Lieberman has a plan for saving Medicare:

First, I will propose raising the Medicare eligibility age every year starting in 2014 by two months until it reaches 67 in 2025. So if you turn 65 in 2014, you will have to wait an additional 60 days before you become eligible for Medicare. That’s a small sacrifice to ask for the benefits you will receive from a healthy Medicare program for the rest of your life.

Etc.

I'm not a fan of raising retirement ages, and I'm really not a fan of raising the Medicare eligibility age. If you raise the Social Security retirement age, many seniors still have the option of leaving work at 65 and living off their own savings for a couple of years. But if you raise the Medicare eligibility age, they're stuck. It's flatly impossible for anyone that age to get private insurance, so they either keep working or they go without health insurance. Especially given the regressive structure of the life expectancy tables (poor people die at a younger age than rich people), this is just an egregiously punitive policy.

But there's another problem here. As I mentioned the other day, there are two problems with healthcare costs: levels and growth rates. Lieberman's plan reduces the level of Medicare spending, but it does nothing to address growth rates. That's backwards. If healthcare costs keep growing at the same rate they're growing now, it swamps everything else. If you cut spending a bit without controlling cost growth, all it means is that you've pushed your bankruptcy forward a couple of years.

Of course, the problem is that controlling spending and revenue levels is a lot easier than controlling cost growth. So, like the proverbial drunk looking under the lamppost for his car keys because the light is better there, that's where Lieberman is looking. But in the end, it won't work. It's true that we're likely to need ways to cut Medicare's spending levels and increase its revenue levels, but 80% of our energy should be spent on reining in cost growth. Lieberman's plan doesn't.

UPDATE: Actually, it's even worse than this. Raising the Medicare eligibility age would probably be bad for health outcomes and, in the end, might raise Medicare costs, not lower them. Austin Frakt and Aaron Carroll have the data and the charts here.

Gurgaon, the Libertarian Paradise

| Fri Jun. 10, 2011 9:25 AM PDT

This is a fascinating story:

In 1979, the state of Haryana created Gurgaon by dividing a longstanding political district on the outskirts of New Delhi. One half would revolve around the city of Faridabad, which had an active municipal government, direct rail access to the capital, fertile farmland and a strong industrial base. The other half, Gurgaon, had rocky soil, no local government, no railway link and almost no industrial base.

As an economic competition, it seemed an unfair fight. And it has been: Gurgaon has won, easily. Faridabad has struggled to catch India’s modernization wave, while Gurgaon’s disadvantages turned out to be advantages, none more important, initially, than the absence of a districtwide government, which meant less red tape capable of choking development.

Basically, Gurgaon has turned into something from a dystopian science fiction novel: an archipelago of self-contained corporate mini-cities that provide their own power, water, sewage, transit, postal service, schools, medical care, and security force. Meanwhile, everything in between is no man's land. And growth has been spectacular.

In a sense, it's not surprising that this works relatively well. Given a free hand, corporations have successfully built plenty of company towns in the past that thrived because they had to take care of only their own needs and never had to chip in to provide for the wider common welfare too. Taking care of the poor is always a pain in the ass, after all. It's also true that Indian municipal government is so legendarily corrupt and inefficient that this is something of a destruction test of the idea of bypassing central government regulation of infrastructure. Whether you're liberal or conservative, you'd be wise not to try to draw too many lessons for the United States from Gurgaon.

Still: pretty fascinating, and on a pure planning level there probably are some interesting lessons to be learned. Urbanists should all feel free to chime in.

Via Alex Tabarrok, who has some interesting comments.