Kevin Drum - September 2011

Jobs, Jobs, Jobs

| Fri Sep. 16, 2011 11:06 AM PDT

Jamison Foser has a question:

The real answer, of course, is: "Because they'd tell us that spending cuts will hurt the economy and be bad for jobs. And that's not something we have any interest in hearing."

But perhaps you can think of something better. What excuse should Republicans use? It's a waste of precious CBO resources? The CBO is hiding the truth from us by refusing to use time-tested supply-side models? Doug Elmendorf once went to dinner with somebody who was friends with someone else who invested in Solyndra? There's gotta be something.

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Notes Toward Some Heuristics for Ignoring Claptrap

| Fri Sep. 16, 2011 10:36 AM PDT

Conservative economics columnist James Pethokoukis recently wrote a piece arguing that the 2009 stimulus bill actually made things worse. Shazam! Even Rick Perry only claims it created zero jobs, not a negative number. I suspect Pethokoukis got this envelope-pushing idea from Amity Shlaes, who's become a conservative hero for her book arguing that the New Deal prolonged the Great Depression.

But Ezra Klein tells me something I didn't know: Pethokoukis actually made two arguments in his column. I didn't know that because I quit reading after I hit the first one. I'll let Ezra explain:

Pethokoukis’s first argument is that the White House’s “own economists predicted the stimulus would prevent the unemployment rate from hitting 8 percent. But the rate actually rose as high as 10.1 percent...."

The Bernstein-Romer calculations were conducted in December 2008 and released in January 2009....And they weren’t alone. Every private-sector forecaster — from Macroeconomic Advisers to Moody’s to Goldman Sachs — was making the same mistake....The bottom line is simple, and it need do no damage to Pethokoukis’s case: In the fourth quarter of 2008, our economic inputs were wrong. So forecasts using those inputs to make predictions about the future produced answers that were also wrong. That says nothing about whether the stimulus worked or failed.

....(In general, I have actually found this to be a useful test: When economic commentators use this argument, I know not to take them seriously, because they either don’t know the facts or aren’t letting them stand in the way of their argument.)

See? That's exactly how I felt. The only difference is that because it was obvious Pethokoukis was making such a dumb argument, I just quit reading. Ezra, tenacious reporter that he is, actually slogged his way through the rest.

And guess what? It wasn't any better! Imagine that.

The Single-Minded Presidency

| Fri Sep. 16, 2011 10:03 AM PDT

Was the 2009 stimulus bill too small and too badly designed? Bruce Bartlett says yes, but argues that this is understandable. Congress just wasn't going to pass anything bigger, and an imperfect set of tax and spending priorities is pretty much inevitable when you're operating quickly with fuzzy information. But he does blame Obama for then taking his eye off the ball:

Once the stimulus was enacted, he turned his attention elsewhere. He appeared to believe that he had done quite enough to turn the economy around and thus moved on to other issues such as health reform, the environment and energy policy, which occupied an enormous amount of White House attention in 2009 and 2010.

....Imagine that instead of wasting months on health reform and other non-economic and non-time-sensitive measures in 2009 and 2010, Obama had single-mindedly kept his attention on the economy. If the time he spent being briefed on health reform had instead been spent with his economic advisers, then perhaps he would have been more aware than he appears to have been that the stimulus was insufficient. Perhaps there might have been opportunities during the appropriations process to raise and redirect funds into more economically stimulative channels. Perhaps the Federal Reserve could have been pressured to be more aggressive in terms of monetary policy.

I have to confess that this line of criticism has always perplexed me.  What does it mean to "single-mindedly" keep his attention on the economy? I just don't understand how that translates into concrete action. I think Obama got briefed plenty to understand the trajectory of the economy (you really don't need eight hours a day to figure that out) and I have a hard time thinking that it's a good use of presidential time to insert himself into the details of the appropriation process. I also doubt that Obama really had much influence over Ben Bernanke.

Maybe I'm missing something. Certainly you can argue that Obama's pivot to the deficit in early 2010 was a mistake. But look at the jobs chart above. Yes, there were signs by early 2010 that the stimulus hadn't been big enough, but as late as May job growth was continuing to tick up smartly, reaching over 400,000 that month — and plenty of liberals were crowing over this. True, some of that was temporary census hiring, but most of it wasn't. The jobs picture really did look promising. Given numbers like that, what were the chances that Obama could have persuaded a nervous Congress to pass another big stimulus bill?

In retrospect, sure: of course Obama should have spent more time on the economy. But in the first half of 2010 that really wasn't so obvious, and it's light years from obvious that he could have done anything to prod Congress into significant action so soon after the 2009 stimulus anyway. Republicans were in full-out war mode, after all, and that's not even counting the half dozen conservative Democratic senators who also would have been dead set against more spending.

Maybe I'm off base here. But I really think we often overestimate just how much difference presidential "attention" makes. It's just not possible to stay focused laser-like on the economy for years at a time when (a) things really do seem to be improving, and (b) your own party is eager to get moving on other stuff. That was the situation in early 2010. I'm not convinced that there was really all that much Obama could have done about it.

The Fox News Primary

| Fri Sep. 16, 2011 8:35 AM PDT

Are presidential nominations mostly controlled by the grass roots of the party? Or mostly by party thought leaders acting indirectly? Jonathan Bernstein says that political scientists think it's mostly the latter, and in the case of Republicans one of the biggest thought leaders is Fox News. So Walter Shapiro sat through 50 hours of Fox News a couple of weeks ago to find out who they were rooting for. The answer wasn't hard to come by:

No Republican makes Fox squirm like Ron Paul....Meanwhile, Newt Gingrich and Rick Santorum were each granted a single, respectful, prime-time interview and were otherwise mercifully left on the cutting-room floor.

....When I began this undertaking, I was braced for a bacchanalia of Michele Bachmann coverage....[But] without a major gaffe or gotcha moment, Bachmann was almost entirely absent, like a Red Army general excised from the Great Soviet Encyclopedia after being purged by Joseph Stalin. She was almost never pictured on screen, even though she was on a four-day campaign swing through Florida. When her name came up, it was usually coupled with a glib dismissal of her chances.

....The Bachmann blackout was, of course, the direct result of Rick Perry pandemonium. More rapidly than the rest of the press corps, Fox News simplified the GOP battle to Perry versus Mitt Romney. Eric Bolling, one of the regular panelists on “The Five,” captured the glow surrounding Perry, saying, “We have had this discussion every day since Perry got in the race—that he is the real deal.”....Where does Romney fit into the prevailing Perrymania? Awkwardly. Romney has not been ignored like Bachmann, since every two-man race needs a second banana.

....Still, it wasn’t hard to infer where the preferences of most Fox personalities lie. Late-night Fox host Greg Gutfeld offered the most memorable summary on “The Five.” “Mitt Romney is like somebody you hook up with periodically until you get serious and you want to meet somebody serious,” he said. “He [is] friends with benefits. And Perry is marriage material.” Yikes.

So there you have it. The GOP's most influential thought leaders have made their preference clear, and they have the biggest megaphone around. (Shapiro: "According to a 2010 poll by the Pew Research Center, 40 percent of Republicans habitually watch Fox News.") The rest of the party's mandarins had better rally around Romney pronto if they really think he's their only chance to beat Obama next year.

How to Talk About Solyndra

| Fri Sep. 16, 2011 2:55 AM PDT
President Barack Obama speaks at an event at Solyndra in May 2010. The company went belly-up in August.

You've probably heard of Solyndra by now, right? It's the solar power company that got $500 million in Recovery Act loans from the Department of Energy and then went belly up a couple of weeks ago.

Conservatives have been trying to paint this as a big scandal of some kind, despite the fact that: the company had plenty of private investors too; it's the only DOE loan that has failed so far; and there's no real evidence that anyone in the White House did anything worse than push OMB to speed up their decision-making process a bit in 2009. Stephen Lacey has the full timeline here.

But I think Dave Roberts probably has the bigger picture right:

Watching this unfold over the last week, I keep thinking back to "Climategate." When it first broke back in late 2009, lefties and bloggers and Dem lawmakers just ignored it, because it was obviously dumb. This left the field entirely open to a massive attack from the right, coordinated among ideological media, staffers, lobbyists, and pols. When the left finally stirred itself to action, all that emerged were a bunch of long, boring investigations into the details and good-faith efforts to be fair about how both sides a point. By the time five separate investigations had cleared the scientists of all wrongdoing, the damage was done. Now we're seeing the same script play out again.

…The right is going after this whole hog, trying to make the name synonymous with clean energy boondoggle. And the left is flailing around, throwing out this fact and that fact with no coherent message. Lord am I tired of watching this script play out.

Unfortunately, I think that a bit of flailing was inevitable. Conservatives had a clear attack line: anything and everything that makes Solyndra look bad. They didn't care what. Liberals didn't have the same luxury. At the time this story broke, none of us knew enough about Solyndra to really have any idea if the company itself was defensible, so a bit of hesitancy was inevitable. But Dave is right: At this point we do know enough, and there's really no reason to hesitate any longer. Basically, Solyndra was working on a solar technology that promised to be cheaper than silicon, and at the time of the loan it looked really promising both to DOE and to private investors. But then the market turned: Silicon prices dropped, and China started producing super low-cost silicon PV. That spelled doom for Solyndra. They had a good idea, but it didn't work out.

In any case, Solyndra is a tiny fraction of DOE's green-energy loan program, and Solyndra's loan guarantees are dwarfed by those of both fossil fuel and nuclear companies, which range into the multiple billions. There was no scandal in the loan process, and there's nothing unusual about having a certain fraction of speculative programs like this fail. It's all part of the way the free market works.

Want to learn more? Read the timeline here, and then listen to Rep. Ed Markey at Wednesday's hearing. You'll learn the facts from one, and how to talk about Solyndra from the other. No more flailing, okay?

A Walk Down Memory Lane, Texas Style

| Thu Sep. 15, 2011 10:23 PM PDT

So I was listening to Rachel Maddow's interview with Jimmy Carter earlier tonight, and he mentioned the Panama Canal treaty. That brought back memories. If you're under 50 or so this is just dusty history, but boy howdy was that a big deal to conservatives back in the 70s. Remember "We built it, we paid for it, it's ours, and we are going to keep it"? The wingers just went crazy for that.

Then dinnertime interrupted, but this episode reminded me that as recently as a decade ago, return of the Panama Canal was still a plank in the Texas Republican Party platform. So I wondered if it still was. The 2010 platform is here, and it turns out the answer is no. The gold standard is gone too. That's sad. I kind of miss those planks. But all the rest of the insanity is still there, plus more. In fact, the platform now has about 250 separate items. They're really exercised about a lot of stuff down in Texas.

Long story short, they're in favor of the Electoral College, voter ID laws, a return to the "traditional filibuster" (really?), November elections, the Ten Commandments, the right to life in all its myriad forms, raw milk, corporal punishment, the death penalty, phonics, the Boy Scouts, a national sales tax, Texas sovereignty, resolution of the Kashmir dispute, recognition of Taiwan, and eviction of the UN.

They're opposed to bike paths, the Law of the Sea Treaty, human trafficking, mandatory preschool, Hamas, the Fairness Doctrine, red light cameras, ACORN and the ACLU, homosexuality, Obamacare, "transportation projects which surrender control or ownership to foreign interests," the 16th Amendment, the Federal Reserve, one-world government, RFID chips for either pets or humans, most federal agencies except for NASA, and the Rosebush-Blocker rule, whatever that is.

And then there's this:

Elimination of Executive Orders – We demand elimination of presidential authority to issue executive orders and other mandates lacking congressional approval, as well as repeal of all previous executive orders and mandates.

Wow. I knew that mandates were a cause célèbre among the tea party crowd thanks to Obamacare, but these guys have taken it to the next level. They want to repeal every single executive order on the books. That would really be something.

Anyway, this is the fever swamp from which Rick Perry comes, so it's hardly any surprise that he says the things he does. The only surprising thing is that I'm no longer surprised by this stuff. Eight years ago I thought it was the most deranged shit I'd ever seen. "This is plain and simple madness," I fumed, "and it is very much the future of the Republican Party." But now that it is the Republican Party, I'm used to it. Eliminate the Federal Reserve? Repeal the 16th Amendment? Don't just get out of the UN, but evict the bastards completely? Sure. Whatever. Just another day at the office. It's the bigotry of low expectations, I guess.

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Obama Loses Control!

| Thu Sep. 15, 2011 7:40 PM PDT

Ron Suskind's new book sounds.....interesting:

The book states [Timothy] Geithner and the Treasury Department ignored a March 2009 order to consider dissolving banking giant Citigroup while continuing stress tests on banks, which were burdened with toxic mortgage assets.

In the book, Obama does not deny Suskind's account, but does not reveal what he told Geithner when he found out. "Agitated may be too strong a word," Suskind quotes Obama as saying....Suskind states that Obama accepts the blame for mismanagement in his administration while noting that restructuring the financial system was complicated and could have resulted in deeper financial harm. One of the major complaints about Obama's administration is that it was too easy on major financial institutions, including Citi.

....Larry Summers, the former White House economic adviser, is quoted as lamenting that he and others felt "home alone" and that mistakes made under Obama would not have happened under President Clinton, for whom Summers also served. Interviewed by Suskind, Summers initially denied making such comments, then acknowledged them, saying he was frustrated at having "five issues" of major importance to deal with at once and not "five times as many" officials to handle them.

Granted, it's not clear what it means to ignore an order to "consider" dissolving Citigroup. Still, considering that "agitated" in Obama would be about like a white hot rage in most people, it suggests that Obama was plenty cheesed off if this is even close to describing his reaction.

As for Summers, WTF? Is he seriously whining about not having a big enough staff? Or not having enough of the president's ear? Or what? I guess I'll have to wait to read the book to find out. But it doesn't sound pretty.

Chart of the Day: The Lasting Toll of Layoffs

| Thu Sep. 15, 2011 6:04 PM PDT

Here's a gloomy chart from a new Brookings paper. It shows the average wages of men under 50 who lose their jobs in a "mass layoff" event.

  • The red line is for men who are laid off during good economic times. On average, these men have steeply rising earnings in the five years before the layoff and then experience a big earnings plunge. They eventually get back to their old earnings level, but that's it. Their earnings never again get above that.
  • The blue line is for men who are laid off during recessions. They also have steeply rising earnings in the five years before the layoff and then experience a big earnings plunge. However, they never even come close to their old earnings level. They max out at about $36,000 compared to peak earnings before the layoff of $45,000.

The steeply rising earnings before the layoff are a little perplexing to me, and I wonder if this is related in any way to the probability of being laid off in the first place. The main takeaway, though, is that if you lose your job during a recession, you are probably screwed for the rest of your life. Even ten years later you'll earn about 20% less than you did before. This price has been paid needlessly by hundreds of thousands of workers because our political leaders have never had the courage to take action strong enough to get our economy moving again.

Netflix Falls to Earth

| Thu Sep. 15, 2011 4:16 PM PDT

Until recently, Netflix charged $9.99 for a combined DVD/streaming service. This was officially billed as $7.99 for streaming and $2 for DVDs, but really, it was just a $9.99 package deal for two services that cost $7.99 separately. So when they got rid of the package deal, I immediately canceled my streaming service. It looks like I'm something of an outlier, though:

Fewer customers than expected are opting to take Netflix's DVD-only subscription package. Netflix now expects to have 2.2 million such subscribers, down from the previous forecast of 3 million. The company also cut its forecast for streaming-only subscribers, to 21.8 million from 22 million.

In other words, DVD subscribers went down by 27% while streaming subscribers only went down 1%. Most people who responded to the Netflix price increase did the exact opposite of me.

Along with the much higher raw numbers for streaming subscribers, I guess this demonstrates that my consumption of video is just fundamentally different from most people. Basically, I think of something I want to watch and then go look for it. Usually it turned out that my choice wasn't available on streaming, which made the service pretty worthless to me. Apparently, though, most people don't work that way. They just dive into the streaming library and browse around until they find something that looks good. If that's the way you work, then the streaming service is a pretty good deal.

Anyway, I'm just curious if I have this right. Those of you who subscribe to and like the Netflix streaming service, is this more or less the way you use it? Or am I missing something?

Quote of the Day: Boeing vs. the NLRB

| Thu Sep. 15, 2011 2:59 PM PDT

OK, this quote is more than a year old. But here it is anyway. It's Boeing CEO Jim Albaugh telling a reporter why they decided to move the 787 Dreamliner assembly line to South Carolina:

The overriding factor was not the business climate. And it was not the wages we are paying today. It was that we can't afford to have a work stoppage every three years.

This is, basically, prima facie evidence that Boeing's decision was made in retaliation for past strikes at their Washington state facilities. And guess what? Like it or not, that's against the law. You're not allowed to retaliate against workers for exercising their right to strike by taking work away from them.

I don't really have a settled opinion on whether the NLRB should ultimately block Boeing from moving its assembly line to Charleston. Maybe the statements from Albaugh and other Boeing executives don't rise to the level of retaliation or intimidation. Hearings and appeals later this year will decide that. But Republicans have been howling about this case for months, pretending that it's some kind of insane socialist power grab from a bunch of business-hating bureaucrats, and now they're planning to introduce a bill to strip the NLRB of the right to hear cases like this. But the NLRB's case is neither crazy nor unprecedented. The union might not prevail in the end, but they have a perfectly sound basis for a complaint.

Anyway, I just wanted to write a very short post that spelled this out, since it so often gets buried. The real truth here is that Jim Albaugh is an idiot. He knows the law perfectly well, and he deliberately chose to make considered public statements that attributed the South Carolina move to past strikes. He didn't have to do that, and if he hadn't, the union would have been stuck. But for some reason he decided to tell the truth and practically dare the union to do something about it. So they did.