Kevin Drum - August 2011

Gambling on Armageddon: Final Results

| Tue Aug. 2, 2011 12:22 PM EDT

The Senate just approved the debt ceiling deal and President Obama will sign it later today. That means it's time to declare a winner from last month's pool. The three items you had to guess were:

  • When will an agreement be reached?
  • How much will the debt ceiling be increased?
  • Will there be any revenue increases in the deal? How much?

My guesses were August 7, $1.7 trillion, and $200 billion. Not too bad! The correct answer is slightly variable, but assuming that (a) Congress fails to approve a balanced budget amendment and (b) Obama asks for the maximum increase he's allowed to, the deal raises the debt ceiling by $2.1 trillion. So the winning combination is August 2, $2.1 trillion, and zero.

So who won? Here are the closest guesses:

  • shooter242: August 2, $1 trillion, zero.
  • Model62: August 2, $2 trillion, a little bit via COLA adjustments to tax brackets
  • cld: August 2, "a lot," zero.
  • Austin_Will: August 1, $1.5 trillion, zero.

In the original post, I defined "a lot" as "the full $2 trillion or so," so I think that makes cld the winner. Congratulations! And good work from the runners up too. Your non-prizes will not be mailed out to you shortly.

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The Coming Non-Fight Over the Gas Tax

| Tue Aug. 2, 2011 11:15 AM EDT

I've been assuming that the next big fight in Washington will be over the 2012 budget, but apparently all the Beltway gossip is now focused on something else: a vote to reauthorize the federal gasoline tax next month. Doug Mataconis mulls this over:

You can already see how this issue could play itself out a month from now. As it is the issue of increased energy prices is an easy one to demagouge with simplistic slogans (“Drill Baby Drill”) and even more simplistic ideas (anyone remember when Hillary Clinton and John McCain came up with the idiotic idea of a Federal Gas Tax Holiday during the 2008 campaign?). It’s not at all hard to see the argument over the the gas tax being boiled down to the slogan Barack Obama wants to increase the price of gas.

....There are, in fact, some remarkable similarities between the just concluded debt ceiling showdown and the showdown that could result over increasing the gas tax. Like increasing the debt ceiling, the renewal of the Federal Gasoline Tax has been a fairly non-controversial action in the past. Ronald Reagan did it in 1982, George H.W. Bush did it in 1990, Bill Clinton did it in 1993, and George W. Bush and a Republican Congress did it in 2005. Additionally, attempts to roll back the tax in the past have generally failed.

I know it's dangerous to assume that something won't happen just because it makes no sense, but.....I don't think this fight will happen. This isn't because the anti-tax jihadists will suddenly have an outbreak of common sense, but because a gas tax fight won't fly with the public. It's easy to demagogue "taxes," since lots of people are convinced that "taxes" are merely ladled out to favored interest groups, wasteful boondoggles, foreign aid, and the layabout poor. But gasoline taxes are different: they're used to build highways. And everyone likes highways.

Generally speaking, people don't object to taxes if they see tangible results from them. And highways are about as tangible as you can get. The Republican leadership is smart enough to pick fights that have a certain amount of surface appeal, and this one doesn't, not even to the hardcore tea party crowd. They'll find something else to fight about.

Gaming Out the Supercommittee

| Tue Aug. 2, 2011 10:05 AM EDT

With the debt ceiling deal all but assured of passage, Suzy Khimm moves on to the next big question: who's going to be on the Supercommittee that's tasked with cutting an additional $1.5 trillion from the deficit by November?

Republicans, for their part, are unlikely to appoint anyone who’s publicly supported including revenue as part of a debt deal, namely in the form of tax increases....“No one from the Senate Gang of Six, who proposed tax increases, need apply,” the Wall Street Journal opined. “The GOP choices should start with Arizona Senator Jon Kyl and House Budget Chairman Paul Ryan, adding four others who will follow their lead.”

On the Democratic side, fiscal hawks and centrists will probably back Senate Finance Committee Chairman Max Baucus, who reportedly pushed for cutbacks to Medicaid, food stamps and other entitlements....Liberals will want to see the likes of Sen. Tom Harkin and Sen. Sherrod Brown on the committee. “Unfortunately, I don’t think the leadership will allow this,” says Dean Baker, an economist at the Center for Economic Policy Research. “I worry that the Dems will be the usual suspects, starting with the Gang of Six crew.”

Unfortunately, this is my take too. Republicans will appoint nothing but tax hardliners (which shouldn't be too hard, since that's at least 80% of their caucus) while Democrats will appoint at least one or two centrist types. That's all it will take to get a majority in favor of yet another cuts-only plan. Whether this can pass in the Senate is unclear, but it might not matter. The entire debt ceiling agreement may have been negotiated under the presumption that no follow-on deal would be reached and the automatic trigger cuts were highly likely to go into effect. The Supercommittee might just be window dressing.

But maybe not. So given the reality that the Supercommittee exists, what would be my dream deal? Pretty simple: it would be an agreement to focus 100% of the plan on healthcare, split between benefit cuts and tax increases. Politically, this is a pipe dream, of course. And substantively, it runs into the fact that PPACA already made a lot of cuts in Medicare and we don't yet know how they're going to work out, which makes further cuts sort of dicey. That may not make additional reforms impossible, but it does make it especially important to choose the details thoughtfully. A slow phase-in of higher payroll taxes might be OK, for example, along with a little bit of means testing. Ditto for some reductions in provider payments, cuts in Medicare Advantage, and negotiating authority for prescription drugs. (Then again, these things might not be OK. I'd defer to smarter people than me over the details.)

But one way or another, if we're going to insist on obsessing over the long-term deficit, then we might as well obsess over the part of the federal government that's actually responsible for the long-term deficit. And that's all in healthcare.

The Ever Shrinking Tea Party

| Mon Aug. 1, 2011 11:38 PM EDT

According to a recent poll, only 22% of Americans consider themselves tea party members or supporters, half the number of last November. And of that 22%, two-thirds supported a debt ceiling compromise and more than half thought it should include tax increases as well as spending cuts:

In a nationwide CBS News poll in mid-July, 66 percent of Tea Party supporters said that Republicans in Congress should compromise on some of their positions to come to an agreement with Democrats on the debt-ceiling increase. By contrast, 31 percent said Republicans should stick to their positions even if it meant not coming to an agreement....When Tea Party supporters were asked if the debt-ceiling agreement should include only tax increases, only spending cuts, or a combination of both, the majority — 53 percent — said that it should include a combination. Forty-five percent preferred only spending cuts.

So who was driving the absolutist view in Congress over the past few months? If it was the no-compromise wing of the tea party, that's less than 10% of the country. So riddle me this: how did we manage to let 10% of the country bring us to the brink of disaster? It is a remarkable thing.

Pentagon Not a Debt Ceiling Loser After All

| Mon Aug. 1, 2011 11:07 PM EDT

I've been reading all day that the Pentagon is the big loser from today's debt ceiling deal, and I just sort of vaguely accepted that as true. They're getting socked with a pretty big chunk of the initial $1 trillion in cuts, after all. But McClatchy's Nancy Youssef sets the record straight:

Rather than cutting $400 billion in defense spending through 2023, as President Barack Obama had proposed in April, the current debt proposal trims $350 billion through 2024, effectively giving the Pentagon $50 billion more than it had been expecting over the next decade.

...."This is a good deal for defense when you probe under the numbers," said Lawrence Korb, a defense expert at the Center for American Progress, a left-leaning research center. "It's better than what the Defense Department was expecting."

Now, if the follow-on deal includes lots of additional defense cuts, then the Pentagon might actually come out of this with some serious scars. But for now, apparently they're doing OK.

Quote of the Day: Economists and the Great Recession

| Mon Aug. 1, 2011 10:48 PM EDT

From Scott Sumner, after reading a poll showing that there are virtually no economic forecasters anywhere in the world willing to concede that monetary policy is currently too tight:

If the public of the developing world actually understood the role of economists in this crisis, we’d all be lynched. They think we failed to predict it. But since monetary policy generally reflects the establishment view of the economics profession, it would be more accurate to say we caused the Great Recession.

Sumner has an idiosyncratic view of monetary policy, but that hardly matters. Even conventional economic models suggest that monetary policy is too tight right now. But we're doing nothing about it thanks to a groundless belief among policy elites that inflation in the future is more dangerous than sky-high unemployment right now. (And in the case of Europe, more dangerous than even the possible collapse of several eurozone countries.) And so, here the rest of us sit.

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JJ Abrams and "Lost"

| Mon Aug. 1, 2011 6:44 PM EDT

The Guardian interviews JJ Abrams:

Do woebegone Losties give Abrams an earful about the finale?

"Oh my God, yes," he groans. "For years, I had people praising Lost to death, and now they say: 'I'm so pissed at you for the end of Lost.' I think a lot of people who were upset with the ending, were just upset that it ended. And I've not yet heard the pitch of what the ending should have been. I've just heard: 'That sucked.'"

WTF? He thinks we're pissed off because the series ended? And no one has ever held his attention long enough to explain just what it was that really annoyed us so much about the whole last season? Seriously?

I'm not the one to explain it, but honestly, I don't think it's all that hard. We weren't demanding that the whole series be wrapped up in a nice, neat bow, but we were hoping for at least most of the major plotlines to be resolved. We were hoping for at least most of the major mysteries to be explained. We were hoping that at least the whole thing didn't turn out to be a St. Elsewhere style fantasy world. And we were sure as hell annoyed when they pretended they had run out of time to tie this stuff up after wasting the entire first half of the final season with a brand new plotline that came out of nowhere, went nowhere, never got resolved, and had no purpose at all.

I was sort of hoping never to hear about Lost again. The contempt the creators showed for their audience pissed me off, as did having to concede victory to all the critics who kept saying the show runners had no idea what they were doing. But this is just too much. Abrams has no clue why so many fans felt cheated by the whole thing? Spare me.

POSTSCRIPT: Here's a question: has any show that generated such enormous buzz and such intense fan loyalty ever dropped out of sight so fast? About a week or two after the finale, it just disappeared and no one ever mentioned it again. I wonder what Abrams makes of that? Or is he still waiting for some fan to provide him with an ending to his own story?

POSTSCRIPT 2: On the other hand, I'm grateful for the chance to write about something other than the debt ceiling. Thanks, JJ!

The Bars Go Up, Spending Goes Down

| Mon Aug. 1, 2011 4:27 PM EDT

This chart has been making the rounds today. It's from Cato's Chris Edwards, who's pretty unhappy about the proposed spending cap in the debt ceiling deal:

Wait a minute, those bars are rising! Spending isn’t being cut at all. The “cuts” in the deal are only cuts from the CBO “baseline,” which is a Washington construct of ever-rising spending....No program or agency terminations are identified in the deal. None of the vast armada of federal subsidies are targeted for elimination. Old folks will continue to gorge themselves on inflated benefits paid for by young families and future generations.

Well, yeah, I guess that's right. The plan doesn't eliminate either the Education Department or Social Security. Still, just do a bit of arithmetic on those spending levels: they amount to an increase of 1.9% per year. That's almost certainly well below the future rate of inflation and population growth. If we actually stick to these caps, they represent a steady and consistent decrease in real per-capita spending, and that's the only fair way to look at it.

Per my last post, I suppose I should be gleefully reprinting this chart and agreeing with Edwards that the tea party got rolled on this deal. But I guess I don't have it in me. Looked at honestly, this represents a decrease in spending. It just does.

(But will these caps actually hold together in future years? Who knows. That's a fairer criticism, though I don't really know what more you could do to enforce them than the deal already does.)

Using the Debt Deal to Split the GOP

| Mon Aug. 1, 2011 3:46 PM EDT

Republicans have done a great job over the past two years of tearing the Democratic Party apart. Their posture of relentless obstruction has pushed President Obama to compromise even more than he wanted to,1 and the logic of politics says that any bill that passes, regardless of how it turns out, should be embraced as a legislative triumph. The resulting combination of compromise and the glorification of compromise has seriously alienated the progressive wing of the party2 and provoked open warfare within the liberal base. Good job, Republicans!

So what would be the best strategic response of liberals to the debt ceiling deal? It's really pretty obvious: we should be singing its praises; we should be gleefully pointing out that its spending cuts are heavily backloaded and might never happen — and that lots of them are sort of imaginary anyway; we should be dancing in the streets over the heavy focus on defense cuts; and we should be crowing about how this deal makes expiration of the Bush tax cuts all but inevitable. In short, we should be applauding the way the tea party got rolled yet again by its own leaders.

Is this stuff all true? Not really. Or not entirely, anyway, though all of these items have a germ of truth to them. But focusing on these points would help to incite open warfare in the Republican Party, which is pretty close to it already. This would be great for liberals and well deserved by conservatives.

But we won't do it. Hell, I haven't done it. It might be a terrific strategy, but we're not really constitutionally cut out to do this kind of thing. That's kinda too bad. It would fun once in a while to give conservatives a dose of their own medicine.

1I'll get questions about this, so let's get concrete about it. If Obama had had more votes available to him, I believe he would have supported a stronger healthcare bill that included a public option; he would have supported a second stimulus; and he would have supported passage of a cap-and-trade bill. He wouldn't have supported a stronger financial regulation bill and he wouldn't have changed his national security/civil liberties posture (though I do think he would have shut down Guantanamo if he could have). If this is how things had gone down, he'd still have critics on the left, but in general liberals would be far, far more united behind him.

2And, yes, Obama has made it even worse by his obvious eagerness to disown his own base. But I think the nearly unanimous Republican obstruction to his agenda has been a much bigger factor.

Patenting the Internet

| Mon Aug. 1, 2011 1:29 PM EDT

A few minutes ago I promised myself that I'd link to the very next blog post in my RSS feed that had nothing to do with the debt ceiling. The winner is Will Wilkinson, who highly recommends a recent Planet Money program, "When Patents Attack," about how our patent system is strangling innovation in the tech sector:

Planet Money's programme explains everything better than I can, but the thrust of it is that it is next to impossible to offer a new technology or software-driven service without getting sued for patent infringement. For example, Spotify, an innovative, highly-praised music streaming and subscription service, became available in America just a couple weeks ago. It took until last week for [it to get sued for patent infringement by a company called PacketVideo].

....This is apparently a patent on streaming music over the internet. Naturally, you are familiar with PacketVideo's popular music streaming service. Oh, you're not? I guess that's because they don't offer one. So, Spotify is trying to make money offering a service that will make consumer's happy. (I'm using it right now. I think it's terrific.) PacketVideo is trying to make money doing what? Shaking down Spotify?

Actually, PacketVideo makes Twonky, so they really do have a product of their own. They also make money by licensing their technology to big industry players like Verizon and Nokia.

But how about their patent claim? Is it really a patent on the mere idea of streaming music over the internet? It's easy to say that when you're working up a righteous head of steam on a blog post, but I figured there had to be more to it. So I looked at the patent. And — well, take a look for yourself. Here's their "invention":

That really does seem to be about it. There are no specific algorithms involved and no specific implementations proposed. Basically, it appears to be a claim that covers any system in which music is compressed and encrypted by a server, shipped out over a network, and then decrypted and decompressed at a client. The patent claims seem to include pretty much any kind of server, any kind of storage device, any kind of compression, an extremely broad set of communications protocols, and pretty much any kind of remote device. If you're streaming music this way — and honestly, there's really no other way to do it — then PacketVideo says you're infringing their patent.

At least, that's how it reads to me. Neither the news stories nor the legal filing go into much detail about the precise nature of the infringement PacketVideo is claiming, and they don't appear to have sued all the other streaming music vendors in the world, so it's possible their claim is more specific. But my amateur reading suggests they really are claiming patent rights to the whole idea of streaming music from a server. And the fact that they waited to file suit until Spotify had entered the U.S. market suggests that their claim isn't valid anywhere else. Only in the U.S. do we allow a patent claim this broad.

Once again, I invite experts to weigh in. Maybe I'm misreading this. But the patent claim is short and not too hard to understand, and it sure looks preposterous to me. Anyone out there care to defend this?