Kevin Drum - October 2011

The Real Victims of Climate Change

| Thu Oct. 13, 2011 10:11 AM EDT

Climate change is the public policy problem from hell. If you were inventing a problem that would be virtually impossible to solve, you'd give it all the characteristics of climate change: it's largely invisibile, it's slow moving, it's expensive to fix, it requires global coordination, and its effects will be disproportionately borne by poor countries that nobody cares about.

That last item might seem like a harsh way of putting things, but it's pretty much the truth. And today, via Brad Plumer, we have a new OECD report that illustrates the problem starkly. It examines which cities will have the most residents vulnerable to coastal flooding due to storm surge and high winds in 2070, and as you can see on the map below, the risk is almost entirely concentrated in developing countries in Asia and Africa. New York and Tokyo have a small bit of exposure, leaving Miami as the sole rich city with a substantial exposure. The total number of vulnerable residents will increase from 40 million today to 150 million in 2070, with the vast bulk of the increase coming in developing countries. The five riskiest cities — by a large margin — are Kolkata, Mumbai, Dhaka, Guangzhou, and Ho Chi Minh City.

Can we just adapt to this? Sure, I suppose we could, if the rich world were willing to donate enormous sums of money to these cities to finance a massive campaign of preparation and amelioration. But what are the odds of that happening? After all, the rich world isn't even doing that in its own cities.

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Matt Taibbi's Advice for #OWS

| Wed Oct. 12, 2011 11:25 PM EDT

Matt Taibbi, the man who memorably dubbed Goldman Sachs "a great vampire squid wrapped around the face of humanity," is unsurprisingly sympathetic to the Occupy Wall Street protesters. "But the time is rapidly approaching when the movement is going to have to offer concrete solutions to the problems posed by Wall Street," he says. "To do that, it will need a short but powerful list of demands." Here's an abridged version of his five suggestions:

  1. Break up the monopolies....There are about 20 such firms in America, and they need to be dismantled.
  2. Pay for your own bailouts. A tax of 0.1 percent on all trades of stocks and bonds and a 0.01 percent tax on all trades of derivatives would generate enough revenue to pay us back for the bailouts, and still have plenty left over to fight the deficits the banks claim to be so worried about.
  3. No public money for private lobbying. A company that receives a public bailout should not be allowed to use the taxpayer's own money to lobby against him.
  4. Tax hedge-fund gamblers. For starters, we need an immediate repeal of the preposterous and indefensible carried-interest tax break.
  5. Change the way bankers get paid. We need new laws preventing Wall Street executives from getting bonuses upfront for deals that might blow up in all of our faces later.

I think Taibbi is probably right that the OWS protest can't stay chaotic and inchoate forever. The anarchist types in the crowd are apparently opposed to anything that suggests they merely want to reform the existing system instead of tearing it down completely, but let's face it: that's a path to irrelevancy before too much longer.

Taibbi's list is pretty good — and surprisingly measured — and makes a workable starting place. I think #3 probably isn't practical for a variety of reasons, and #5 would be a little tricky, but doable. The others all sound great. If it were up to me I'd slot in some kind of leverage requirement in place of the lobbying item, but I recognize that this wouldn't exactly be a populist crowd pleaser. So if that doesn't work, how about banning credit default swaps? Despite the best efforts of several people to convince me otherwise, I remain skeptical that they're a net positive for the financial system. I don't know how practical an outright ban would be unless we got the rest of the world to go along, but it's probably a little bit better as a rallying cry than "Hey hey, ho ho, risk-based capital has got to go, and it should be replaced by a simple leverage ratio of at least 10%." On the other hand, free silver at 16:1 caught on big a century ago, so who knows?

Repealing Obamacare is Harder Than Mitt Romney Thinks

| Wed Oct. 12, 2011 4:21 PM EDT

Every Republican candidate has sworn that repealing Obamacare will be his or her very first item of business once Obama himself is booted from the Oval Office. Last night, Mitt Romney got a little more specific: On Day 1, he said, he'd issue a waiver from Obamacare for all 50 states, and on Day 2 he'd repeal the whole enchilada via a reconciliation bill, which requires only 51 votes and can't be filibustered.

Sounds great! (Assuming Republicans take control of the Senate, of course.) But would it work? Well, reconciliation can only be used on things that affect the budget, so there's a lot of Obamacare that could indeed be repealed that way. But not quite all. You see, one part of the bill establishes what's called "community rating," which means that health insurers are required to take on all comers and are required to charge them all the same price. This is a godsend for really sick people, who will sign up in droves for health insurance, but not so great for the insurance companies that have to shell out big bucks to keep them healthy.

Crucially, though, this is a regulation that's not budget related. This is why the main healthcare bill was passed via regular order, not reconciliation, and it's why it can't be completely repealed via reconciliation either. And while insurers don't like community rating much, they were willing to accept it as long as everyone, not just the sick, was subsidized by the government and required to get insurance. Jon Chait explains the real-life choices Republicans will have once this becomes clear:

If they eliminate the subsidies but leave the regulations in place, you’ll have insurers required to sell policies to people who are sick, but no way to bring healthy people into the risk pool. A few states tried that. It created a cost spiral that collapsed the whole market. Romney would end up screwing the health insurance industry, which is much harder to do, politically, than screwing the uninsured. The industry has lobbyists.

Those lobbyists were happy to preserve the old system, which screwed all the uninsured and none of the insurance companies. They were fine with the Obama plan that screwed none of the uninsured and none of the insurance firms. They're not going to be happy about creating a system that screws some of the uninsured and all of the insurance companies.

So things aren't so simple. Unless Republicans get rid of the filibuster, they can damage Obamacare but they can't kill it completely. And health insurers, who know perfectly well that repealing the mandate and the subsidies while leaving community rating in place would destroy them, will make their position perfectly clear. For them, repeal is an all or nothing affair.

Obviously, Romney and the other GOP candidates aren't eager to acknowledge this bit of grubby reality. But it's there, and it's going to give fits to any Republican who wins the presidency. To me and my fellow radical socialist America haters, of course, avoiding this whole mess and keeping Obamacare intact is a pretty good reason not to elect a Republican president in the first place — quite possibly the best reason at the moment. But even God's chillun need to acknowledge reality and figure out what their real game plan is going to be if they win next year. Flat out repeal just isn't in the cards.

Why Are Political Headlines so Limp?

| Wed Oct. 12, 2011 3:35 PM EDT

Steve Benen and James Fallows remind me of one of my favorite pet peeves today: the routine use of headlines that blame "the Senate" or "Congress" for blocking a bill. For example: last night every Senate Republican banded together to filibuster a vote on Obama's jobs bill. So how did the New York Times copy desk headline this? Like so: "Obama's Jobs Bill Fails in Senate in First Legislative Test." Nothing about Republicans and nothing about a filibuster. Fallows comments:

The subhead and story make the real situation clear. So how about a headline that says plainly what happened: "Obama's Job Bill Blocked by GOP in Procedural Move" It would fit. And it would help offset the mounting mis-impression that the Constitution dictates a 60-vote margin for getting anything done.

Consider yourselves lucky, guys! My morning copy of the LA Times headlined it just as badly, and unlike the NYT, the subhead doesn't make things any clearer. Needless to say, there was no need for this. The hed could just as well have read "GOP Kills Obama Jobs Plan" if they'd wanted it to.

So why didn't they? This is a genuine question. Why do newspaper editors shy away from making partisan differences clearer in headlines? Is it because two (2) Democrats also voted against the bill, so they think it's unfair to blame it all on Republicans? Is it because they don't want to seem too partisan themselves? Or what? If any friendly copy desk chief has an explanation for this, I'd be happy to pass it along.

Public Service Announcement

| Wed Oct. 12, 2011 2:29 PM EDT

Herman Cain is not going to win the 2012 Republican presidential nomination. That is all. 

Team Perry Goes the Extra Mile for Climate Denial

| Wed Oct. 12, 2011 12:27 PM EDT

Kate Sheppard reports today that the sea level in Galveston Bay is rising, but Rick Perry's administration wants to make sure that nobody knows about it:

Top environmental officials under Perry have gutted a recent report on sea level rise in Galveston Bay, removing all mentions of climate change....John Anderson, the oceanographer at Rice University who wrote the chapter, provided Mother Jones with a copy of the edited document, complete with tracked changes from top TCEQ officials. You can see the cuts—which include how much sea level rise has increased over the years, as well as the statement that this rise "is one of the main impacts of global climate change"—here. As the document shows, most of the tracked changes came from Katherine Nelson, the assistant director in the water quality planning division. Her boss, Kelly Holligan, is listed as a reviewer on the document as well.

Click the link for more. They didn't just delete every reference in the report to climate change, they deleted most of the references to the mere fact of sea level rise. I guess they were hoping to spare their boss any more embarrassing debate questions. Click the link for the whole story.

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Suburban Wildlife Update

| Wed Oct. 12, 2011 12:10 PM EDT

Our squirrel was back today. I know, I know, it's just a squirrel. Who cares? But there was some doubt about my report of its coloring the last time I mentioned it, and this time I got a picture of our little friend — which is harder than it sounds. They're quick little things. Quicker than the autofocus on my camera, anyway.

So, anyway, here it is, nature red in tooth and claw. Domino was fascinated for a while until the squirrel did something that scared her off. I can't imagine what, since it was hopping from tree to tree the whole time and never got closer to her than ten feet. But something happened, and she made a dash around the side yard. In any case, I assume that our resident squirrel experts can tell me what kind of squirrel this is now that I have a picture? Or maybe embarrass me by telling me that it's actually a chipmunk or something?

This soothing nature break has been brought to you by Emerald Nuts, the favorite of nut-hoarding squirrels everywhere. Frenetic political blogging will resume shortly.

The GOP's Reality Distortion Field

| Wed Oct. 12, 2011 11:02 AM EDT

People used to jokingly refer to Steve Jobs's "reality distortion field," his ability to convince the public that Apple's products existed on a plane of revolutionary awesomeness that no other company in history had ever matched. This is pretty much how I feel when I listen to Republican debates. They seem to take place in some kind of weird extra-dimensional bubble in which mundane laws of evidence and logic are no longer considered necessary. Paul Waldman captures this magical thinking in last night's debate:

  1. Health care in general, and Medicare in particular, are bankrupting our country.
  2. But government should never try to figure out which treatments are effective.
  3. Medicare should pay for any treatment anyone wants, regardless of whether it works or what it costs.
  4. If an insurance company refuses to pay for a procedure, that's their right as actors in the free market; if Medicare refuses to pay for a procedure, that's Washington bureaucrats trying to kill you.
  5. We need to cut Medicare benefits, because don't forget it's bankrupting our country.

That's about the shape of it: Medicare costs too much, but all proposed cuts to Medicare are a death sentence for seniors. Unless, of course, those cuts are really, really deep and come from Paul Ryan. Don't try to make sense of it. It will just make your head hurt.

Making Money the Old Fashioned Way, By Cooking the Books

| Wed Oct. 12, 2011 10:26 AM EDT

Via Tyler Cowen, here's a fascinating bit of research from Jialan Wang based on Benford's Law. Benford's Law tells us about the distribution of digits in many kinds of tabular data, including financial data. The digit 1 shows up 30.1% of the time, 2 shows up 17.6% of the time, all the way to 9, which shows up 4.6% of the time. If you examine some financial data, and the digits show up in the wrong proportions, it probably means the books have been cooked.

Well, guess what? Back in 1960 corporate reports followed Benford's Law almost precisely. Today? Not so much. The chart below shows deviations over time for three different industries. Finance took a big leap in 1980, when the S&L scandal was taking off, and then leveled out. IT and manufacturing took smaller jumps in the early 80s, bigger jumps during the dotcom era, and then leveled out at about the same rate as finance. But all three industries, and the business community as a whole, have deviations at much higher levels today than they did in 1960.

What does this mean? Possibly nothing. Maybe there's a plausible explanation. But what it probably means is that large corporations routinely fudge their figures far more than they used to. Wang puts it like this:

While these time series don't prove anything decisively, deviations from Benford's law are compellingly correlated with known financial crises, bubbles, and fraud waves. And overall, the picture looks grim. Accounting data seem to be less and less related to the natural data-generating process that governs everything from rivers to molecules to cities. Since these data form the basis of most of our research in finance, Benford's law casts serious doubt on the reliability of our results. And it's just one more reason for investors to beware.

I'm not surprised. But it would be interesting to do a similar study on European corporations to see if the same trend is evident. Is systematic book cooking mainly a Wall Street phenomenon, or has the entire world's business community been getting less honest over time?

Rick Perry Continues to Sink Into the Sunset

| Tue Oct. 11, 2011 9:19 PM EDT

I only saw half of tonight's debate because I forgot that Bloomberg even had a TV channel. When I remembered and went looking for it, I discovered that I do indeed get BloombergTV on my cable plan thanks to last year's upgrade to digital. So now I know. In the end, though, I ended up watching the streaming version anyway since that made it more convenient to make snarky tweets in real time.

Rick Perry continues to amaze. I mean, after his last disastrous outing, he must have known that Job 1 was looking like he was ready for prime time. Instead, he looked completely unprepared, as if he was surprised that people were still asking him actual questions instead of just nominating him on the spot. Check out this response to a Romney monologue on China and the decline of American manufacturing:

What we need to be focused on in this country today is not whether or not we are going to have this policy or that policy. What we need to be focused on is how we get America working again. That's where we need to be focused.

And let me tell you, we are sitting on this absolute treasure trove of energy in this country. And I don't need 999. We don't need any plan to pass Congress. We need to get a president of the United States that is committed to passing the types of regulations, pulling the regulations back, freeing this country to go develop the energy industry that we have in this country.

Holy cow. That's all he's got after three weeks of prep? We have to quit talking about "this policy or that policy," or worrying about Congress, and instead just man up and kick the economy in the balls? Urk. And when Karen Tumulty cross examined him over the similarity of his Texas investment fund to Solyndra, he looked like a deer in headlights even though you could have seen this question coming a mile away. Perry is barely ready for public access cable, let alone prime time.

(I got some grief a couple of months ago for suggesting that Perry just wasn't very bright: "Americans might not care if their presidents are geniuses," I said, "but there's a limit to how doltish they can be too." Anyone still want to give me any grief about that? I freely admit that this isn't the biggest reason he's falling in the polls, but I think it's one of the reasons. And it's a big reason he's losing the invisible primary: insiders are assessing his obvious unwillingness to put in even the minimal work needed to address simple questions in a debate and concluding that he's just flatly not up to the job.)

What else? Nothing really. The candidates in general continue to occupy some weird alternate universe where our biggest financial problem is that Wall Street is too regulated, our biggest health problem is that Medicare keeps denying treatments to old people, and our biggest economic problem is the intolerable burden of taxation we place on rich people. On an individual level, Rick Santorum continues to be bitter that so few people like him. Herman Cain continues to be a novelty candidate who can deliver sound bites with the conviction of a CEO giving a speech at a motivational seminar. Michele Bachmann continues to be out of it. And Mitt Romney continues to be strangely invulnerable to attacks. I know that Romney has so many negatives that it seems impossible for him to win, but somebody has to win, and I have a hard time seeing how it can be anyone else. The race is still his to lose.