Kevin Drum - July 2011

Quote of the Day: John Boehner Shows His Cards

| Tue Jul. 12, 2011 1:21 PM EDT

From Republican Speaker John Boehner, on President Obama:

This debt limit increase is his problem.

OK then. Glad we got that straight. At least now we know how Boehner really feels.

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Who's Serious About Medicare?

| Tue Jul. 12, 2011 12:18 PM EDT

Yuval Levin says he listened goggle-eyed to President Obama yesterday saying that "it’s not an option for us to just sit by and do nothing" about Medicare:

This has to make us wonder why the president has been sitting around doing nothing about all of this for two years (that is, when he hasn’t been making it worse) and keeping others from doing anything about it. It should also make us wonder what it is that he proposes to do now, since so far the only concrete ideas he has laid out involve doubling down on the current system.

The rest of the post is an entertaining temper tantrum, but one that seems to exist in some kind of alternate universe. Far from "doing nothing," here's how I remember the last couple of years of action on Medicare:

  1. During the 2008 campaign, it was a complete non-issue. It was barely mentioned, and neither candidate made any big promises about it.
  2. As part of healthcare reform, Obama cut Medicare expenses by $500 billion over the next decade, putting it on a substantially more solid financial footing. This was passed, as you might recall, on a party-line vote with zero Republican support.
  3. During the 2010 campaign, Republicans hammered the daylights out of every Democrat who voted to do this. They were destroying Medicare!
  4. Today, with the campaign over, suddenly Republicans like Levin are claiming that Obama is reckless for not proposing even bigger cuts to Medicare.

Maybe Levin remembers things differently. But as this CBPP chart shows, the healthcare reform act has done a lot to shore up Medicare's finances, and Obama has repeatedly (and to the fury of his liberal base) endorsed a deal that would do even more. However, Republicans are resolutely refusing to even discuss this if the deal involves even the slightest amount of increased revenue.

Conversely, the only proposal on the table from Republicans is Paul Ryan's transparently specious plan to voucherize Medicare, a plan that most of his fellow Republicans have treated about the same way that vampires treat a silver cross. So far, the only serious action has come from Democrats, and the only serious proposals going forward have also come from Democrats. At least, in the universe that most of us live in.

Remind Me Again Why We Have a Debt Ceiling?

| Tue Jul. 12, 2011 11:41 AM EDT

About a million political analysts have reminded us lately that it's crazy for the United States to even have a debt ceiling. No other country does, after all. And it doesn't make any sense: Congress incurs the debt when it passes a budget. Why bother with an entirely separate restriction on the level of debt? It's just goofy.

So here's my question: Since this is almost universally acknowledged, why do we have a debt ceiling law? Why wasn't it repealed long ago by a majority party tired of the opposition using it to score political points? My seat-of-the-pants guess is that repeal could be passed as part of the budget reconciliation process, which means you wouldn't even have to worry about a filibuster. You just need to control Congress and the presidency, and both parties have done that on a number of occasions over the past few decades.

So what keeps it around?

Understanding Obama

| Tue Jul. 12, 2011 10:51 AM EDT

Josh Marshall asks a question that I've been asked via email a few times:

There are many things I do not understand about the progress of this so-called debt negotiation. But of many here's one that perplexes me the most. If Hill Republicans will not allow the government to continue borrowing money beyond the current statutory debt limit, I think there's probably a decent constitutional argument that the president must shut down parts of the government....And the most logical places to start are with Social Security payments and Medicare reimbursements. Stuff like cutting Social Security checks in half starting the following week.

There are plenty of ways you could piece it together. But I think it's fair to say that there's no way to do it without immediate and huge cuts to entitlements and the military. Discretionary spending just isn't a big enough piece of the pie. So why the adamant refusal to put this in front of the public?

I think that this fundamentally misjudges Obama. Eventually things may come to this, but the fact is that he genuinely wants a deal. If he can't get one, then obviously he wants to maneuver things so that Republicans get the blame. But that's a fallback position. His primary position is that he really, truly wants to make a significant deal that includes both large spending cuts and moderate (but still substantial) tax increases. Once you understand this, a lot of seemingly inexplicable things suddenly make sense.

So why isn't Obama making it clear that Social Security checks will dry up if Republicans refuse to do a deal? Because that would put pressure on Republicans to simply cave in and raise the debt ceiling. But that isn't what Obama wants. He wants a deal.

I don't know all the reasons for this. But my guesses are fairly conventional. (1) Obama truly believes that the long-term debt is a problem, and this is a good opportunity to do something about it with bipartisan cover. (2) He wants Republicans on record as supporting a tax increase. Why? Perhaps he believes that once he's forced Republicans away from an absolutist position, that position is gone for good and it will make future negotiations less hostile. (3) He's courting independents, and independents want a deal that gets concessions from both sides.

But the reasons don't matter much. Just do this: whenever you think Obama has done something dumb or weak-minded or inexplicable, remind yourself that he doesn't necessarily have the same goals as you. He sincerely wants a deal that involves concessions from both sides, and once you understand that his actions will suddenly seem a lot less dumb, weak-minded, and inexplicable. In fact, they'll seem pretty obvious.

The CIA Gets Back in the Game

| Mon Jul. 11, 2011 8:59 PM EDT

Back in the good old days, the CIA tried to assassinate Fidel Castro with an exploding cigar.1 The KGB successfully assassinated Georgi Markov with an umbrella gun.2 Today, the Guardian reports that the good old days are back. Earlier this year, in an effort to confirm the whereabouts of Osama bin Laden, the CIA organized a phony vaccination drive in Abbottabad in hopes of getting a DNA sample from one of his children:

DNA from any of the Bin Laden children in the compound could be compared with a sample from his sister, who died in Boston in 2010, to provide evidence that the family was present. So agents approached [Shakil] Afridi, the health official in charge of Khyber, part of the tribal area that runs along the Afghan border. The doctor went to Abbottabad in March, saying he had procured funds to give free vaccinations for hepatitis B.

....In March health workers administered the vaccine in a poor neighbourhood on the edge of Abbottabad called Nawa Sher. The hepatitis B vaccine is usually given in three doses, the second a month after the first. But in April, instead of administering the second dose in Nawa Sher, the doctor returned to Abbottabad and moved the nurses on to Bilal Town, the suburb where Bin Laden lived.

....A nurse known as Bakhto, whose full name is Mukhtar Bibi, managed to gain entry to the Bin Laden compound to administer the vaccines. According to several sources, the doctor, who waited outside, told her to take in a handbag that was fitted with an electronic device. It is not clear what the device was, or whether she left it behind. It is also not known whether the CIA managed to obtain any Bin Laden DNA, although one source suggested the operation did not succeed.

The ISI has since arrested Afridi for cooperating with foreign intelligence agents. "Wouldn't any country detain people for working for a foreign spy service?" a senior official told the Guardian.

I suppose so. On the bright side, it's good to see the CIA thinking creatively again. Too bad Osama didn't smoke cigars.

1Allegedly.

2Also allegedly.

Quote of the Day: Newt's Recipe for Success

| Mon Jul. 11, 2011 5:50 PM EDT

From Newt Gingrich on how to make the American economy thrive:

This is not magic. This is like a cookbook. Lower taxes. Fewer regulations. A focus on American energy.

It's not as if I think that a lack of bumper sticker mottos is the left's biggest problem, but still. This is a level of almost atavistic simplicity that you can't help but be jealous of. Newt will never be president, but he's still got no equal when it comes to crowd-pleasing sound bites.

And speaking of politicians and sound bites, does it strike anyone else that Sarah Palin has basically become a social media version of Ann Coulter? That is, they're both conservatives whose schtick mostly depends on generating liberal apoplexy over their periodic word bombs, and who are both fading away because they're having problems coming up with new material that's fresh enough for anyone to care about? I didn't even know Coulter had yet another book out until I saw it at the bookstore today (in almost self-parody fashion, it's called Demonic), and likewise nobody seems to care very much anymore about whatever Palin's latest plea for attention on Facebook says (though Tina Brown apparently hasn't gotten the message yet). Sic transit etc.

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The Invisible Jobless

| Mon Jul. 11, 2011 5:16 PM EDT

Why is it that chronic, sky-high unemployment has produced so little political backlash? On Sunday, Catherine Rampell wrote a piece suggesting two big reasons: the unemployed don't vote in big numbers, so politicians can safely ignore them; and there are fewer institutions left these days to mobilize them the way labor unions used to. Today David Leonhardt adds a third: today's unemployment affects a relatively smaller number of people than in the past: "joblessness is concentrated among a subset of the population, rather than affecting a larger group of people for shorter periods of time."

All probably true. But Paul Krugman wrote today that the press plays a role too: "Turn on your TV and you'll see some self-satisfied pundit declaring that nothing much can be done about the economy's short-run problems." Bob Somerby takes it from there:

As he closes, he again suggests that the “supposedly serious people” you see on TV are too well-off, too self-satisfied, to give a fig—to care.

Could it be true that our High Pundit Class is simply above such concerns? Could it be that those Millionaire Pundit Values have wiped away such concerns? Could it be that they’re too well-off—too isolated, too uncaring—to worry about our ongoing economic disaster? Our possible debt ceiling debacle?

....Yesterday, in the Sunday Times, three regular columnists published columns. None of the three showed any sign of knowing that their nation’s in trouble, especially so as the deadline for possible default looms....Given the new lay-out of the Sunday Review, quite a few other columns and analysis pieces appeared in yesterday’s section. But no one seemed to have any idea that our nation is in bad trouble.

....There was nothing “wrong” with any of these columns; you may feel that some of them were quite good. But something was grossly wrong with the editor who picked these columns while picking no others. Reading yesterday’s Sunday Review, you would have no idea that anything is wrong with our economy—that millions of people are out of work, that we are facing a possible debt ceiling disaster.

....This has been going on roughly forever. Columnist Krugman to the side, why haven’t career liberal leaders ever complained about this upper-class culture?

Obviously there are lots of differences between the Great Depression and our current economic morass. But one of them was indeed the press: in the 30s, the typical newspaper writer was a modestly paid high school graduate, closer to being a blue-collar worker than a member of the middle class. Big syndicated columnists like Walter Lippman were pretty well off, but they were the exception more than the rule.

Today it's just the opposite. Punditry is dominated almost exclusively, both in print and on the air, by the rich and the upper middle class. And there's just no way around it: even if you're trying hard, it's close to impossible for someone living a comfortable life to really feel the desolation and helplessness of unemployment and economic distress when they've never really experienced it themselves and live in a social circle where it's rarely a serious problem either.

The long-term unemployed don't vote much, they aren't organized, and in electoral numbers there aren't that many of them. All true. But thanks to a political and media class that's mostly pretty well off, they're also largely invisible. Writing about them is more like an anthropological exercise than a simple description of your friends and neighbors. And it's one reason that we're doing so little to help them.

Fighting Voodoo Economics

| Mon Jul. 11, 2011 1:37 PM EDT

Paul Waldman:

Watching the Sunday blabbers, I was impressed with the facility with which the Republicans switched back and forth between two entirely different, and contradictory, rationales for their position on the budget and the debt ceiling. On one hand, they'd say, we simply have to cut the deficit, which is why we need to slash spending. OK, someone would say, why won't you accept some increase in taxes? You know, to cut the deficit? Absolutely not, they'd say -- you can't raise taxes when the economy is bad! That's the last thing you want to do!

Paul thinks that President Obama should point out how contradictory this is. Either we need to stimulate the economy (tax cuts, spending increases) or we need to cut the deficit (tax increases, spending cuts), but it makes no sense to do half of one and half of the other.

Well, sure, if you're a garden variety Keynesian. But if you're a conservative, then you consider tax cuts good for growth, which helps reduce the deficit. Ditto for spending cuts, which not only reduce the deficit in the obvious way, but also result in a smaller, more growth-friendly public sector. There's no contradiction at all in supporting both.

So the question isn't whether Republicans are contradicting themselves. They have a theory in which they aren't. Instead, the question is this: Can Barack Obama persuade the American public that Keynesian economics is basically correct and that Republican economics is therefore crazy? Good luck with that. Everyone loves paying less in taxes, and there's a very big chunk of the public that also loves spending cuts as long as they're aimed at poor people. So they have every personal incentive to buy into the GOP's high-minded justifications for stuff they want to do anyway. And they do.

After three decades, we still haven't figured out how to effectively fight voodoo economics. It would be nice if Obama started talking sense instead of caving in to conservative nonsense, but the problem goes way beyond just him. Suggestions welcome.

The Murdoch Media Empire Slowly Crumbles

| Mon Jul. 11, 2011 12:55 PM EDT

The Guardian reports on yet more douchebaggery from various pieces of Rupert Murdoch's media empire:

Journalists from across News International repeatedly targeted the former prime minister Gordon Brown, attempting to access his voicemail and obtaining information from his bank account, his legal file as well as his family's medical records.....

  • Abbey National bank found evidence suggesting that a "blagger" acting for the Sunday Times on six occasions posed as Brown and gained details from his account;
  • London lawyers, Allen & Overy, were tricked into handing over details from his file by a conman working for the Sunday Times
  • Details from his infant son's medical records were obtained by the Sun, who published a story about the child's serious illness.

....The sheer scale of the data assault on Brown is unusual, with evidence of attempts to obtain his legal, financial, tax, medical and police records as well as to listen to his voicemail. All of these incidents are linked to media organisations. In many cases, there is evidence of a link to News International.

Oh lovely: they hacked into the medical records of his infant son. What's more, this story suggests that this kind of thing wasn't limited just to News of the World, nor just to the tabloids. Even the Sunday Times was in on the fun. So here's the question: how long will it be before we learn that some of Murdoch's properties in the United States were engaged in the same kind of behavior? Tick tick tick.....

Our Economic Woes Didn't Start in 2008

| Mon Jul. 11, 2011 11:50 AM EDT

For the past couple of years economists have been arguing about whether our high unemployment level is cyclical or structural. The best evidence, I think, suggests that it's some of both: perhaps two-thirds cyclical and one-third structural. But even if it were more like 50-50, who cares? It still means that we have a huge amount of cyclical unemployment on our hands, and we ought to be doing something about it.

However, there's an aspect of this debate that I've never really taken the time to flesh out on the blog: if we are suffering partly from a structural unemployment problem, when did it begin? One of the most persuasive arguments against a significant role for structural unemployment is that it simply doesn't make much sense to think that, in the fall of 2008, American workers (and Greek workers, Irish workers, Italian workers, etc.) suddenly became ill suited in mass numbers to the rigors of the modern world. It just doesn't make much sense.

But if you look at an array of economic indicators, something a bit less sudden has always seemed to be lurking in the data: a structural change that started around 2000 but was masked first by the dotcom bubble and then by the housing bubble. So when the 2008 banking crisis touched off the Great Recession, a decade's worth of structural change suddenly became apparent all at once. No more masks.

I don't know for sure how much there is to this, but it's definitely been rolling around in the back of my mind for some time. The economy of the aughts was just too lousy to explain without something going on. Bush's economic policies may have been misguided in the long term, after all, but in the short term a bunch of big tax cuts, a housing bubble, and lots of war spending should have been fairly stimulative.

Which leads to the chart below, from a study released by the Kauffman Foundation. It shows that using two different measures, new businesses have been creating fewer jobs than usual over the past decade:

"While the recession certainly deepened the jobs deficit, the U.S. economy stopped producing enough new jobs well before the downturn," said Robert Litan, Kauffman Foundation vice president of research and policy and study co-author.

....The study [...] found that historically, new firms in the United States have generated about 3 million new jobs every year, but that recent cohorts have performed much worse, creating only 2.3 million jobs in 2009...."Not only are these businesses starting out smaller than their predecessors, they are staying smaller," said E.J. Reedy, Kauffman Research Fellow and study co-author. "Cohorts of businesses rarely add jobs in the aggregate as they age. A cohort’s initial level of employment is likely the maximum number of jobs it will provide over its lifetime. Thus, falling contributions of jobs at new businesses will be felt in the U.S. economy for years."

This is just one data point, and it doesn't (or shouldn't) diminish the need for monetary and fiscal action to reduce the cyclical chunk of our current unemployment problem. At the same time, it does suggest that there are structural issues at work too, and they've been at work for a while. We just didn't notice them so much when the good times were rolling.