Kevin Drum - December 2011

The Itsy Bitsy Curbside Bus Market

| Mon Dec. 26, 2011 2:42 PM EST

Everyone's writing about luxury intercity bus travel today because a new study was released a few days ago claiming that a new breed of "curbside" bus operators has grown their business by 32% in the past year. Matt Yglesias thinks this is mostly new travel, not substitutes for existing travel. Felix Salmon isn't so sure: he suspects that new operators like BoltBus and Megabus are just cannibalizing business from the older breed of "Chinatown operators."

I'm not sure this is really answerable. The first thing I wondered when I saw that 32% increase was how many trips that represented in absolute terms. I figured it might be fairly low, but I didn't expect it to be this low:

Curbside operators expanded daily bus operations by 32.1% in 2011, primarily due to  the addition of three new hubs. Curbside operators now account for 778 daily bus operations in the continental United States, up from 589 last year.

So that's 189 new daily operations. At a very rough guess, that represents growth of maybe 3 million passengers per year.

At another rough guess based on available information, airplanes carry nearly a billion passengers per year on intercity travel and cars carry another 2 billion or so. So that means the growth in curbside bus traffic amounts to about 0.1% of total intercity passenger traffic.

That's a rounding error. There's just no way of knowing whether that's new traffic, substitution traffic, or anything else. It's literally below the level of measurability. For now, I think we just have to admit that we're in the dark about this.

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Japan's Secret Plan to Dominate the World

| Mon Dec. 26, 2011 1:33 PM EST

And now for something completely different. The Counterparties blog today highlights an old post from Eamonn Fingleton arguing that Japan's "Lost Decade" is a myth. This is not the story I've heard before, suggesting merely that Japan has done pretty well considering its demographic problems. Not at all. This story suggests that Japan is just flat out lying about its economic growth. For example, here's a piece of data from Fingleton's blog:

In 2007 it was discovered that the long-term record in electricity output completely gainsaid the “lost decades” story. Adjusted to a per-capita basis, the figures showed that Japan’s electricity output in the 1990s rose 2.7 times faster than America’s!....Electricity output is widely accepted as an impartial, culture-neutral proxy for economic growth and it is indeed relied on by international organizations such as the IMF and World Bank when a government may not be following international accounting standards in calculating GDP growth.

Fascinating! But why is Japan supposedly lying about its economic growth?

For those who know Japanese history, a clue lies in trade policy. The fact is that, constantly since the 1870s (with the exception of a brief interlude in the late 1930s and early 1940s), Japan's pre-eminent policy objective has been to keep ramping up exports. That policy came very close to derailment in the late 1980s as a groundswell of opposition built up in the West. By the early 1990s, however, the opposition had largely evaporated as news of the crash led Western policymakers to pity rather than fear the "humbled juggernaut." It is a short jump from this to the conclusion that Japanese officials have decided to put a negative spin on much of the economic news ever since.

What is undeniable is that just as corporate executives enjoy great latitude to juggle their profits up or down for different disclosure purposes (generally up for shareholders, and almost invariably down for the Internal Revenue Service), government officials enjoy even greater latitude to vary a nation's ostensible growth rate. The fact is that the calculation of economic growth depends on a myriad debatable assumptions (value judgments are critical because most growth these days takes the form of better goods and services, rather than more, e.g. better health care) and, while most governments like to plump up the numbers, it is a simple matter to plug in ultra-conservative assumptions.

So the story here is that bureaucrats reacted to the wave of Japan bashing in the late 80s by bowing and scraping in public and pretending to be in dire straits. And it worked! Everyone felt sorry for them, and we've left them alone ever since.

Fingleton has been making this case for a long time, but unfortunately I can't find an awful lot of details on his blog site. His basic argument has to do with Japan's extremely healthy trade surplus, its strong currency, and its leading position in "producers' goods," a super-technologically demanding sector that includes highly miniaturized components, advanced materials, and super-precise machines that other countries (such as China) use to make final consumer goods.

Is Fingleton right? I have no idea. This is light years above my pay grade at the moment. He sounds a bit cranky on the subject because everyone's been ignoring him for so long, but that doesn't necessarily mean he's wrong. On the other hand, if Japan really has been manipulating its official statistics for two decades, this is one of the biggest, most complex conspiracies in history to stay secret for so long. By now, it would amount to something like a 20-30% cumulative difference between reported GDP and actual GDP, which would be damn hard for the rest of the world not to notice, and it would require the active collusion and silence of thousands and thousands of bureaucrats with not so much as a single leak over the course of 20 years.

Still, it would be interesting to see someone debate him on this subject. Not in a live debate, mind you, which I consider about the worst possible medium ever invented for getting at the truth, but in a printed debate. Bring your best evidence. Show us your tables and your charts. Take the proper time to both make and respond to arguments. I'd read it.

Proposition 13 Goes to Court

| Mon Dec. 26, 2011 12:24 PM EST

Back when Proposition 8 — the anti-gay marriage initiative — was in court, one of the arguments made against it was that it represented a fundamental revision to the California constitution, not a mere amendment. As such, it should have required two-thirds approval from both houses of the legislature plus a majority of the public.

Gay rights supporters lost that argument, but Charles Young, the former chancellor of UCLA, had a brainstorm. Maybe Prop 8 wasn't a fundamental revision, but how about Proposition 13?

Passed at a time when property taxes were sharply on the rise and California was running a surplus, Proposition 13 limited property taxes to 1% of a property's value and restricted the annual increases on assessed values. Those provisions seem like a traditional amendment — they change or add specific rules within a larger constitutional set of provisions. But Proposition 13 also required that "any change in state statute which results in a taxpayer paying a higher tax" must be approved by two-thirds of both houses of the Legislature.

That language has had a profound impact on the power of the executive and the Legislature. The power that it constrains — the authority to raise public funds — is among the most fundamental of government. And the requirement gives more weight to some legislators — and, by extension, their constituents. As the lawsuit notes, "legislators opposing a tax increase are given the functional equivalent of more votes than those legislators who favor such proposals."

Young and William Norris, a retired U.S. 9th Circuit Court of Appeals judge, have filed a lawsuit making exactly this case. Merits aside, I'd be pretty surprised if any court were willing to overturn Prop 13 after more than 30 years on the books. But then again, the merits of the case, frankly, seem pretty strong. Moving from majority rule to supermajority rule strikes me as a pretty fundamental revision of the basic plan of government, especially when it applies to a core function of government like raising money to fund itself. Californians may be in for a surprise once Young and Norris get their day in court.

Not an entirely unpleasant surprise, either. Sure, everyone likes having their property taxes capped. But Prop 13 has had a helluva lot of unintended consequences aside from simply making it hard to raise revenue efficiently. It's also fundamentally changed the relationship between the state and local communities, putting far more power in Sacramento than in the past. It's created permanent special treatment for businesses, which tend to own property for a long time and therefore pay lower average property taxes than the rest of us. And since revenue has to come from somewhere, it's created an insane crazy quilt of "fees" that often make little sense but can be put in place by majority vote. Getting rid of all that would be no bad thing, even if it does mean that a few people might see their taxes raised more easily than before. Stay tuned.

Merry Christmas!

| Sun Dec. 25, 2011 10:00 AM EST

And now for our traditional Christmas ornament greeting. Maybe someday Domino will get an ornament too. Until then, whether you celebrate Christmas, the War on Christmas, or some other holiday, enjoy the day.

By the way, have I mentioned recently that my sister designed this ornament? Well, she did. And now it's a holiday classic. It wouldn't be Christmas without it.

Merry Christmas Eve

| Sat Dec. 24, 2011 5:17 PM EST

'Twas the night before Christmas, when all through the house
Not a creature was stirring, not even a cat.

That's how it goes around this house, anyway. And not just on the night before Christmas, either. Enjoy your sugar plums, everyone.

The Housing Bubble and the Big Lie

| Sat Dec. 24, 2011 1:37 PM EST

As longtime readers with good memories will remember, Peter Wallison of AEI has spent several years pushing the preposterous idea that Fannie Mae and Freddie Mac were responsible for the subprime bubble. (See here and here for background.) After Wallison's latest jeremiad, Joe Nocera has finally decided he can't take it anymore:

So this is how the Big Lie works.

You begin with a hypothesis that has a certain surface plausibility. You find an ally whose background suggests that he’s an “expert”; out of thin air, he devises “data.” You write articles in sympathetic publications, repeating the data endlessly; in time, some of these publications make your cause their own. Like-minded congressmen pick up your mantra and invite you to testify at hearings.

....Thus has Peter Wallison, a resident scholar at the American Enterprise Institute, and a former member of the Financial Crisis Inquiry Commission, almost single-handedly created the myth that Fannie Mae and Freddie Mac caused the financial crisis....Allies? Start with Congressional Republicans, who have vowed to eliminate Fannie and Freddie — because, after all, they caused the crisis! Throw in The Wall Street Journal’s editorial page, which, on Wednesday, published one of Wallison’s many articles repeating the Big Lie. It was followed on Thursday by an editorial in The Journal making essentially the same point. Repetition is all-important to spreading a Big Lie.

What's most remarkable about this is how brazen it is. As Nocera notes, Wallison's latest piece is about the charges the SEC brought last week against six former Fannie and Freddie executives. That's a plausible hook for Wallison's hobbyhorse, but even a casual reading of the case shows that the SEC isn't claiming that government mandates for affordable housing drove Fannie and Freddie headlong into the subprime market. Just the opposite: Starting around 2002, Wall Street banks started their subprime binge and Fannie and Freddie began to lose market share. A few years later, when Fannie and Freddie joined the subprime orgy, they were doing it to compete with their private sector rivals, not because Congress or anyone else was forcing them to.

How brazen is this? Just look at the chart on the right. In 2002, Wall Street banks start the subprime bubble. That same year, Fannie and Freddie see their market share start to plummet. It's not until 2005, at the tail end of the bubble, that Fannie and Freddie get back into the game.

This is butt simple stuff. All you have to do is look at one simple chart to see exactly what happened. And yet, conservatives don't care. As Paul Krugman says, this "isn’t just a case where different people look at the same facts but reach different conclusions. Instead, we’re looking at a situation in which one side of the debate just isn’t interested in the truth, in which alleged scholarship is actually just propaganda."

Fannie and Freddie were bad actors in a lot of ways, and that makes them an easy target for conservatives who are desperate to absolve the private sector of any blame for the financial crisis. But when it comes to assigning blame for the housing bubble, the evidence against them is laughably thin. Like it or not, this was Wall Street's fault.

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Why Obama Won The Payroll Tax Fight

| Sat Dec. 24, 2011 12:10 PM EST

Peter Nicholas of the LA Times writes that President Obama won the payroll tax battle because he followed a shiny new strategy for dealing with Congress:

President Obama's success in getting congressional Republicans to renew a payroll tax cut flowed from a strategy the White House has employed since the summer: Bypass Congress and marshal the political power of middle-class voters fed up with Washington gridlock.

....The revised approach is rooted in lessons learned from a debacle over the summer. Obama spent weeks holed up in meetings with congressional leaders, trying to resolve a stalemate over raising the debt ceiling. In the end, Congress complied, but at a severe cost to the nation's credit rating and Obama's public standing. Obama could not persuade Republicans to ease deficits through a mix of tax hikes and spending cuts and was perceived as having surrendered to their demands.

...."If the short-term tactical approach was to distance himself from Congress and put him on the side of jobs for the middle class, you'd have to say that that tactical effort has stopped the bleeding and probably shored him up with his base, which was ready to jump ship after the debt ceiling fiasco," said William Galston, a senior fellow at the Brookings Institution.

I hope no one in the White House really believes this. Obama's new strategy might have had a modest effect, but the real reason he won this battle is pretty simple: his bargaining position was way better. During the budget showdown and the debt ceiling showdown, Republicans had the upper hand because (a) deficit reduction was popular with the public and (b) they could credibly threaten to shut down the government. During this showdown, they had a weak position because (a) lower taxes are popular with the public and (b) their only credible threat was to refuse to pass the payroll tax extension, something that wouldn't really cause the president much harm. It's pretty easy to hold out against that.

Forget "strategy." This showdown turned out differently because the fundamentals of the situation were different. This time, Obama held all the cards. Just about any strategy at all would have produced a better result than this year's other showdowns.

Friday Cat Blogging - 23 December 2011

| Fri Dec. 23, 2011 3:02 PM EST

This is what Christmas is like in Southern California. It's about 70 degrees and the cats are frolicking in the backyard. Inkblot is up on his favorite fence, entranced by the sight of birds he'll never catch. Domino is down in the garden, rolling around on a spot that used to have a catnip plant and perhaps still retains a bit of feline allure.

Need more cats? BuzzFeed has 'em: The 30 Most Important Cats of 2011. It's obviously missing a couple of pretty important cats, but I guess even superstars have to make way once in a while.

Still looking for some last-minute gift ideas? Here's a couple of thoughts. Click here and you'll get a list of MoJo's favorite books of the year. There's bound to be something there for that hard-to-shop-for loved one on your list. Or click here and give someone a gift subscription to Mother Jones. It's only $9.95 for six issues. At that price, nobody needs to be a grinch this year.

Yes Virginia, Ron Paul is a Kook

| Fri Dec. 23, 2011 2:06 PM EST

Ha ha. I was just kidding in the last post. It got cut off because, um, my cat knocked over a power line and my neighborhood lost electricity for a bit. But we're all good now! And I'd just like to say that Barack Obama is the kindest, bravest, warmest, most wonderful president a country could ever hope to have.

Anyway. As we all know, President Obama's most dangerous enemy is Ron Paul, and it's now my duty to tear him down so that his siren call of freedom will never reach the American people. So here you go: a fundraising letter "written" by Ron Paul in, I guess, 1991 or so. Question: what the hell is he talking about here? He's scared, he says, by the government's announcement of "New Money," which could wipe you out and leave your family destitute.

Answer: as near as I can tell, he's babbling about the introduction in 1991 of new currency designed to be harder to counterfeit. It made his skin crawl! The bills were tinted pink and blue! And they were being printed in — a nondescript building that has security measures and three-color printing presses!

There's also some stuff about new federal rules requiring you to report cash transactions over $10,000, and I can at least understand a guy like Ron Paul having nightmares about that.

But new currency designed to be hard to counterfeit? That's a totalitarian nightmare? You know, even a stopped clock is right twice a day, and the fact that Ron Paul has a few good ideas doesn't mean he's not a lunatic kook. He is. He's a lunatic kook who's learned to speak in complete sentences1 and whose kookiness occasionally overlaps with the pet ideas of both left and right.

But he's still a kook.

1In fairness, a lot of kooks have learned this trick recently.

UPDATE: More here. Much more.

Bo-Gate: The Coverup Starts to Unravel

| Fri Dec. 23, 2011 12:34 PM EST

I know that you've all been holding your breath over the unfolding scandal known as Bo-gate, so here's the latest:

Scott Miscovich, who lives down the street from the Obama vacation rental home on Kailuana Place told the Star-Advertiser Sunday, "My wife saw Michelle and the kids passing by and we've seen Bo (the Obamas' dog) walking."

A White House spokesman told the Star-Advertiser that Bo did not travel to Hawaii with the first lady and daughters Malia and Sasha.

This afternoon, Miscovich released the following statement: "It is now clear my wife saw another black dog walking our neighborhood. We would like to apologize to Bo and the Obama family for any inconvenience this may have caused them. We would also like to wish them a peaceful and Merry Christmas."

So apparently the White House is doubling down on its coverup. They say Bo didn't go to Hawaii. They say Bo didn't fly back to Virginia the next day in order to stage a photo op with President Obama. They say Bo doesn't have his own private 747 to ferry him around the country. And they obviously used their well-honed Chicago thug tactics to force Scott Miscovich to recant. It's just like Darkness at Noon.

This is not over. Oh no. It's not even close. Maybe the Obamas can get Scott Miscovich to back down, but they'll never get to me. This blog will bring you the truth about Bo until their jackbooted thugs drag me away from my computer kicking and screa