Kevin Drum - August 2011

Graphic of the Day: Hospital Infections

| Wed Aug. 31, 2011 4:03 PM EDT

UPDATE: This chart appears to be completely wrong. Apologies. More details here.

Via Chris Bodenner, this graphic compares fatal hospital infections in the U.S. to those in Europe. This might disturb you at first, but remember: the free market is always right, so clearly we've collectively made a rational choice here. We've decided that although our healthcare costs are far higher than in Europe, this is worth it in return for far higher death rates from hospital infections. Best healthcare in the world, baby!

More graphic at the link.

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The Economy and World War II

| Wed Aug. 31, 2011 2:14 PM EDT

I'm curious about something. Conservatives are forever reminding us liberals that the New Deal didn't get us out of the Great Depression. It was World War II that got us out of the Great Depression. And roughly speaking, that's true enough.

So why, then, isn't that a good model for getting us out of our current slump? WWII featured five years with federal deficits above 10% of GDP, three of which were above 20% of GDP. And although WWII might have been a good thing for global freedom, all that spending was for war materiel that was completely useless to the U.S. economy. If we repeated this today, we could do better than that even if half the stimulus spending was meaningless makework.

So what's the deal? Did WWII rescue the American economy or not? And if it did, what's the argument for not trying it again, but without the war?

The AT&T Merger and Overseas Travelers

| Wed Aug. 31, 2011 1:24 PM EDT

My position on the proposed merger between AT&T and T-Mobile (which the Justice Department has decided to fight) is aggressively wishy-washy. On the one hand, maybe the mobile phone market is sort of a natural duopoly given the huge capital costs of building out a good nationwide network. Then again, maybe having three or four companies really does provide more competition, stronger price pressure, and increased innovation. I just haven't studied this enough to know. Still, Felix Salmon makes an interesting point here:

One thing which fascinates me is the way in which neither the complaint nor the press release makes any mention of the fact that the proposed deal would give the merged company substantially all of the market in GSM cellphones — the only ones which work in most of the rest of the world. Americans who travel internationally pretty much have to get their cellphone service from one of these two providers — and they’re highly sensitive to exorbitant international roaming fees. Which would almost certainly go up in the event of this merger.

Now, you could argue that this is actually a pretty small segment of the market. Maybe Felix cares about it, but the number of Americans who travel abroad frequently and need a universal phone isn't that large. So it's not something the Justice Department should be worrying about.

Still, it's an interesting observation — though I'd note that dual-mode phones are available from Verizon and others who use CDMA networks in the U.S., and current international roaming fees are so outrageously high from all U.S. carriers that it's hard to imagine them going up much more with or without a merger. But maybe that just shows a lack of imagination on my part. Those of you who travel overseas frequently and know more about this should feel free to school me in comments.

Why Do Conservatives Get a Pass?

| Wed Aug. 31, 2011 12:42 PM EDT

Rick Perry would like to repeal the 16th and 17th Amendments, hates the New Deal, thinks Social Security is a Ponzi scheme and global warming is a gigantic hoax, and would pretty much like to roll back America's entire social-welfare edifice "from housing to public television, from the environment to art, from education to medical care, from public transportation to food, and beyond." Ruth Marcus is appalled:

Whoa! These are not mainstream Republican views—at least, not any Republican mainstream post-Goldwater and pre-Tea Party. Even Ronald Reagan, who had once criticized Social Security and Medicare, was backing away from those positions by the 1980 presidential campaign.

…Perry’s ideas range from wrongheaded to terrifying.…The subtitle of Perry’s book is "Our Fight to Save America from Washington." Reading it summons the image of another, urgent fight: saving America from Rick Perry.

Here's what gets me. Perry's views are getting denounced by all the usual lefty suspects but not much by anyone else. And the reason for this is something very odd: In modern America, conservatives are largely given a pass for saying crazy things. They're just not taken seriously, in a boys-will-be-boys kind of way. It's almost like everyone accepts this kind of stuff as a kind of religious liturgy, repeated regularly with no real meaning behind it. They're just the words you use to prove to the base that you're really one of them.

Why is this? I'm not quite sure what the left-wing equivalent of this would be, but it would be something along the lines of Hillary Clinton writing a book that proposed repealing the 2nd Amendment and adding one that banned hate speech; limiting defense spending to 2 percent of GDP; raising the top marginal tax rate back to 90 percent on millionaires and 100 percent on anything above, say, $10 million; instituting British-style national health care; and spending half a trillion dollars on new programs for universal preschool, two-year paid leaves for new parents, and an increase in the minimum wage to $15 per hour. But in real life, Dennis Kucinich wouldn't support a platform like this, let alone a front-runner for the presidential nomination. And if one did, he or she would be instantly tarred as an insane nutball and would never see the business end of a TV camera again.

But when Republicans say the mirror image of stuff like this, it just gets a shrug. Sure, Perry apparently wants to roll things back to about 1900 or so. But hey—it's just a way of firing up the troops. Nothing to be taken seriously.

But why not?

A Quick Look at How Our Kids Are Doing

| Wed Aug. 31, 2011 11:41 AM EDT

I'm pretty sure I've posted this before in one form or another, and I'm not sure what prompted me to do it again, but every once in a while I feel the urge to present some raw data about how our kids are doing in school. The charts below are taken directly from the most recent NAEP report card, generally viewed as the "gold standard" among measures of student achievement. Here are the results among eighth-graders over the past 20 years in reading:

  • Overall scores are up.
  • White scores are up.
  • Black scores are up.
  • Hispanic scores are up.

And for math:

  • Overall scores are way up.
  • White scores are way up.
  • Black scores are way up.
  • Hispanic scores are way up.

Obviously it would be nice to be doing even better. It would be nice if black and Hispanic scores were catching up faster. We still have plenty of lousy schools that we should be working hard to improve. And achievement results among twelfth-graders are more ambiguous. School reform is an important topic and worth spending a lot of time on.

Still, keep these basic results in the back of your minds. Contrary to widespread opinion, our children are doing better today than they were 20 years ago. We're making progress, not falling ever further behind.

Stimulus Spending and the Unemployed

| Wed Aug. 31, 2011 10:25 AM EDT

Tyler Cowen links to a pair of papers that conclude that only 42 percent of the workers hired using stimulus funds came from the ranks of the unemployed. The rest came from other organizations or were hired straight out of school. Tyler concludes that this means the stimulus worked poorly:

One major problem with ARRA was not the crowding out of financial capital but rather the crowding out of labor.…You can tell a story about how hiring the already employed opened up other jobs for the unemployed, but it's just that—a story. I don't think it is what happened in most cases, rather firms ended up getting by with fewer workers.

There's also evidence of government funds chasing after the same set of skilled and already busy firms. For at least a third of the surveyed firms receiving stimulus funds, their experience failed to fit important aspects of the Keynesian model.

This paper goes a long way toward explaining why fiscal stimulus usually doesn’t have such a great "bang for the buck." It raises the question of whether as "twice as big" stimulus really would have been enough. Must it now be four times as big?

Maybe this is just my priors speaking, but I'd draw the exact opposite conclusion from this. First of all, a lot of stimulus spending went to states, where it was explicitly used to avoid laying off workers. That doesn't take anyone off the unemployment rolls, but it certainly keeps unemployment from getting worse. Second, no one expected ARRA to hire solely from the ranks of the unemployed. That's just not feasible, so these results hardly seem like a surprise to me. In fact, they seem pretty good. Third, yes, it's "just a story" that firms whose workers were hired away filled some of those new openings with the unemployed. But far from being some kind of weird fairy tale, it seems almost inevitable that this is partly true. And if even a third of those jobs were filled this way, it means nearly two-thirds of ARRA's total hiring (direct and indirect) was among the unemployed. And that's not even counting the effect of the increased spending from these newly hired workers that drives hiring in other firms

And fourth, my intuition says this result is an excellent argument that the stimulus should have been twice as big. Think of it this way. If the stimulus had been very small—say, $50,000—what would have happened? Well, if you could hire only one person, you'd almost certainly hire someone who was already working. There'd be lots of people to choose from, and it's a safer bet. At some point, though, you start to run out of good choices, and the currently employed are too expensive. So as the stimulus gets bigger you start to hire some of the best of the unemployed. Now make the stimulus super big, and cherry picking from the ranks of workers has played out almost completely. If 40 percent of the direct hires from the original ARRA spending were unemployed, I'd expect that something like 70 to 80 percent of the hires from a second trillion dollars of ARRA to be unemployed. What's more, all the newly employed people from that extra trillion would have created enough additional demand to benefit the rest of the economy as well.

Obviously, my intuition could be wrong. But overall, these results actually seem pretty positive to me. Probably at least half of ARRA's spending ended up in the hands of the unemployed, and if it had been bigger the vast bulk would have ended up in the hands of the unemployed. It's too bad we're not willing to try this out in real life to find out who's right.

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Egghead Predicts: Obama a Shoo-in For 2012

| Tue Aug. 30, 2011 10:26 PM EDT

Remember all those models that say presidential elections are won or lost based on the economy? The ones that increasingly make Barack Obama look like a doomed one-termer? Well, here's some good news for the Obama camp: a different model, from American University professor Allan Lichtman, "whose election formula has correctly called every president since Ronald Reagan’s 1984 re-election," says Obama is a shoo-in.

So how does that work? Well, Lichtman's model is based on 13 binary keys, and although Obama loses both of the keys that are based on economic performance, he wins nine others. Since any score of seven or more means the incumbent party wins reelection, Obama should prevail easily no matter who the Republicans nominate.

Is this right? Beats me. But you can't argue with seven successful predictions in a row, can you? Here are the nine keys that go in Obama's favor: (1) no primary challenge, (2) he's a sitting president, (3) no third-party challenge, (4) major policy changes enacted (healthcare and stimulus), (5) no social unrest, (6) no scandal, (7) no foreign policy debacles, (8) at least one big foreign policy success (killing bin Laden), and (9) no opponent with lots of charisma.

For what it's worth, you might plausibly argue with #4 on the grounds that both of these policy changes have been unpopular; possibly with #8 on the grounds that this isn't a big, lasting success (something that Lichtman has apparently changed his mind about over the past month); and possibly with #9 on the grounds that Rick Perry could turn out to be a pretty charismatic candidate. And you might argue that the economy is now looking so bad that it deserves more than one point.

Still, Lichtman is the expert, and he says, "Even if I am being conservative, I don’t see how Obama can lose." So there you go.

POSTSCRIPT: A bit of googling shows that Lichtman has been forecasting an Obama win since March of last year. So I guess this is nothing new. Still interesting, though.

The Hypocrisy Trope, Yet Again

| Tue Aug. 30, 2011 7:25 PM EDT

Earlier today, after noting that the federal government can borrow money at negative interest rates, I wrote that only an idiot turns down free money. The Washington Examiner's Kevin Glass tweets a response:

That reminds me: the hypocrisy allegations lobbed at Republican governors who accept money from federal programs they oppose are pretty shoddy. As I said last year about the stimulus act, "Once the bill has been passed and the money is going to be spent whether you like it or not, there's nothing wrong with getting your fair share of the pie." And then, again, a few months ago:

The point of laws is to provide a level playing field, and no one is a hypocrite for following existing law even if they think it should be changed. That goes for congressmen who accept earmarks even though they think earmarks should be banned, it goes for drivers who park for free on city streets even though they think parking meters should be installed, and it goes for rich people who pay taxes at the current rate even though they think that rate is too low.

But I guess you can't say this too often! So today I'll go even further. You can fight tooth and nail against legislation that provides some benefit or another, but once the bill is passed and taxpayers from your state are funding it whether they like it or not, it would be serious malfeasance not to make sure your state gets its share of the goodies. What's more, this remains true even if you continue to oppose the program. Republican governors who refuse to set up healthcare exchanges because they oppose the Affordable Care Act, for example, aren't being principled, they're being negligent. They owe it to their state's residents to provide them with the services they're paying taxes for, even if they didn't want those services created in the first place.

There are exceptions, of course. If you believe that some federal program isn't just a bad idea, but a moral wrong, or that it imposes unreasonable requirements on your state, then you might be justified in turning down a few specific kinds of federal handout. But those are pretty rare occurrences.

The Death of Watermelon

| Tue Aug. 30, 2011 4:21 PM EDT

My mother was just on the phone complaining that it's impossible to find anything other than seedless watermelons these days. Is this true? As a summertime public service to her and all the rest of my melon-loving readers, here is Jane Black's investigative reporting on this vital issue in the Washington Post last year:

According to the National Watermelon Promotion Board, only 16 percent of watermelons sold in grocery stores have seeds, down from 42 percent in 2003. In California and the mid-South, home to the country's biggest watermelon farms, the latest figures are 8 and 13 percent, respectively. The numbers seem destined to tumble. Recently developed hybrids do not need seeded melons for pollination — more on that later — which liberates farmers from growing melons with spit-worthy seeds.

....I decided to do a side-by-side comparison of seeded, seedless, yellow and the newly popular "personal" watermelons from Melissa's Produce and one seeded melon from a local farmers market. The local melon was the runaway favorite....The runner-up was a seedless personal melon, which was sweet and refreshing but lacked the concentrated flavor of the local melon. Next came the seedless red and yellow melons, which were inoffensive but whose primary asset was being cold on an August afternoon. Bringing up the rear was the California seeded melon, which was mealy and tasteless with more seeds than flesh, though in this case that wasn't a bad thing.

So there you have it. Not only is seeded watermelon hard to find, but it's hardest to find here in California. My mother is right. On the other hand, if the California seeded melons are as bad as Black says, maybe that's not such a bad thing. Still, that just leads to another question: why are California seeded watermelons so terrible?

I don't know, and since I don't like watermelon in the first place, I don't have much incentive to find out. But my mother will thank you if you provide an answer in comments.

Public Works Are a Better Idea Than a Payroll Tax Holiday

| Tue Aug. 30, 2011 1:48 PM EDT

Bruce Bartlett lists several reasons why a payroll tax holiday might not be such a great idea. Here are the first two:

First, the tax cut only helps those with jobs. While many have low wages and undoubtedly are spending all their additional cash flow, those with the greatest need and most likely to spend any additional income are the unemployed.

Second, the payroll tax cut helps many workers who have no need for it and will only pocket the tax savings.

Yep. I've never had a problem with payroll tax cuts being used to pay off debt instead of being used to buy more stuff. After all, weak demand isn't our only economic problem. Debt overhang is a big problem too, and reducing it is helpful for our long-term recovery. The problem is that a payroll tax cut is weakly targeted for both spending and debt reduction. Poor people, who are the most likely to spend the money, pay little or no payroll tax in the first place. And richer people, who are the most likely to save it, don't usually have any big debt problems. Most of the benefit of a payroll tax cut, therefore, is limited to a smallish segment of the public that's (a) rich enough to get a significant amount from a payroll tax holiday but (b) poor enough to either spend it all or use it to pay down debt. I don't know how big that segment is, but probably not more than a quarter or a third of the population. Much the same is true of other tax cuts.

So what to do? Bartlett again:

In my view, the $110 billion cost of the one-year Social Security tax cut would have been far better spent on measures that would actively raise spending in the economy. Public works would be the best way of doing that. Under current economic conditions, all tax cuts are essentially passive and do almost nothing to increase aggregate demand or economic output.

Sign me up! The only question is, can we get any Republicans to sign up too?