Kevin Drum - February 2012

Rick Santorum Playing the Class Warfare Card

| Mon Feb. 27, 2012 9:31 AM PST

Check out this campaign dispatch from LA Times reporter Paul West:

"I don't come from the elite. My grandfather was a coal miner. I grew up in public housing on a VA grounds. I worked my way to the success that I had, and I'm proud of it," Santorum said Saturday in Troy, before a working-class audience gathered in the county where Romney enjoyed a privileged upbringing. Santorum didn't elaborate, but his family wasn't poor; his father, a psychologist, and his mother, a nurse, worked for the Veterans Administration — now the Department of Veterans Affairs — which provided them with an apartment.

....Santorum's latest campaign ad attacks Romney for "turning his back on Michigan workers" without mentioning that Santorum also opposed the auto industry bailout.

How about that? A campaign story that actually fact checks a candidate's statements in real time. Good work!

The rest of the story is mainly about the gobsmacking way in which a Republican primary race has pretty much turned into the class warfare they all claim to loathe so much when Democrats do it. My grandfather was a coal miner! The other guy makes a lot of money! College is for snobs! And of course, Romney is helping Santorum's cause by pandering for the NASCAR vote and then admitting he doesn't really care much about the sport but "I have some great friends who are NASCAR team owners." It's an edifying spectacle.

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Why We All Hate Jury Duty

| Mon Feb. 27, 2012 8:59 AM PST

Matt Yglesias doesn't understand the widespread dislike of jury duty:

I struggle to understand America's disdain for jury duty. I've been called twice, and both times was happy to go. All things considered, I'd much rather do my regular job day-in and day-out that do jury duty, but I do my regular job every day. I find that taking a day or two or three off every few years to go do something different is pretty fun.

....Is everyone else's job really so amazing that they can't bear the thought of a few days off to listen to testimony and pronounce on a verdict? I don't buy it. I feel like as a society we've coordinated on a pointless anti-social norm that you're some kind of sucker if you're willing to just smile and do what the judge wants even though there are no really good self-interested reasons to want out. For salaried professionals, jury duty is a paid vacation. What's not to like?

In the past, one legitimate beef was the way jury duty was run: calling in for days at a time over the course of a month, never knowing if you could make plans or if you'd get called in. Here in my neck of the woods things are now much better: you call in once, or at most three or four days in a row, and you're either called in or not. That's not nearly so bad.

Beyond that, there's the problem of long trials. Getting called into muni court isn't so bad. Trials rarely last more than a few days. Superior court is a different story. These are bigger cases, with trials lasting weeks at a time. That can be a real grind, and on the occasions I've been called downtown I usually do whatever I can to avoid getting called for a case.

What else? It's pretty boring. For someone like me, it's really tedious stuff waiting around, then waiting around some more while the lawyers play their voir dire games, then sitting around while they present their endless cases. I suppose the lawyers in my audience will disagree, but to a lot of us these trials seem like they should take about three or four hours, not three or four days (or weeks). And while trials are tedious in one direction for those of us with interesting jobs, I suspect they're tedious in a different direction for people who aren't used to sitting all day and thinking about evidence.

And of course, some people don't get paid for jury duty. That sucks. Plus the hours are inflexible, which might cause problems that your regular job doesn't. Or maybe you don't work at all, and jury duty means needing to scrounge up daycare that you don't normally need. Or maybe your job is one where the work will pile up and have to get done when you get back, which means facing a gigantic in-basket once the trial is over.

And speaking solely for myself, the one jury I've ever been on went a long way toward wrecking my faith in the criminal justice system. It was a case that shouldn't even have gone to trial, let alone sucked up four days of my time, the judge's time, and the bailiff's time. I suppose that's a lousy attitude, but I hated the idea that so many of us were having so much of our time wasted over a case that was only in court because some rich dude could afford a fancy lawyer to take a flier on weaseling out of a pretty obvious violation of the law.

Anything I've missed? Any reason I should love jury duty? You know where to tell me.

Tonight's Oscar Thread

| Sun Feb. 26, 2012 6:30 PM PST

My take on the Oscars: 2011 was not a great year for movies. The Academy's decision to increase the number of Best Picture nominees from five to ten has never looked more pathetic. Especially since they could only come up with nine this year.

That said, I thought The Artist was clever, but ultimately little more than a bon bon. I'm hard-pressed to understand the lavish praise it got. Tree of Life was ambitious and had some sparks of brilliance, but in the end it didn't work. The Descendants was good; mainstream but good. However, it was a little too overtly manipulative for my taste. Midnight in Paris was a cute trifle, but just a trifle. Moneyball was very good, but just a little too ordinary to play in the big leagues. I didn't see The Help, War Horse, or Extremely Loud & Incredibly Close.

By process of elimination, that means my pick for Best Picture this year is.....Hugo. I didn't like all of Hugo, but I liked a lot of it, and if the Academy is going to give the big prize to a valentine to Hollywood, I'd pick Hugo over The Artist. Needless to say, I expect to be pretty disappointed this evening.

The Metaphysics of Citizens United and Campaign Finance Law

| Sun Feb. 26, 2012 12:09 PM PST

Did the Supreme Court decision in Citizens United produce the recent explosion of Super PACs and their flood of independent money from rich donors into the 2012 campaign? There's been a bit of a cottage industry lately claiming that this is a myth, followed by a bit of a counter-cottage industry insisting that it's true after all. In a nutshell, the mythbusters claim (correctly) that Citizens United affected only the ability of corporations and unions to make independent campaign expenditures, but most of the money flowing into Super PACs has comes from private individuals, who have been able to spend unlimited sums for years. The counterclaim is that Citizens United really did unleash expenditures from individuals, but did it indirectly. Legally, the chain goes from Citizens United to SpeechNow, which was the case that removed all previous limitations on private expenditures. Andrew Sprung has a pretty good summary of the arguments here.

So which is it? In the end, I think the argument is inherently a little metaphysical. Remember 527s? Prior to Citizens United, rich people who wanted to spend lots of money on campaign ads either did it themselves or contributed to 527 groups. That's how the Swift Boat folks were organized, for example. But here's the thing: legally, 527s were allowed to raise money for "issue advocacy," but not to explicitly advocate for or against a federal candidate. This was, needless to say, a crock: 527s routinely ran ads that viciously attacked and supported candidates. They just stopped (barely) short of expressly saying, "On Tuesday, vote for John Doe."

So what impact have Super PACs had? On the one hand, you can argue that they really haven't changed anything on the ground. They run pretty much the same kinds of attack ads as the 527s used to, and the only change is that they don't have to worry about legal challenges anymore. On the other hand, you can argue that the added freedom is genuinely important. Being able to explicitly raise money for candidates, instead of pretending to be an issue advocacy group, makes a real difference.

So which is it? Obviously there's a bit of truth to both sides, and which argument you give the most weight to is mainly a matter of temperament and attitude. For myself, I think it's fair to say that Citizens United really did have an impact on individual expenditures, but probably didn't empower rich people quite as much as popular legend has it.

That said, there are also a couple of other points to make. First, Citizens United obviously did unleash spending by corporations and unions. In the 2010 election it seemed as though the impact of Citizens United on corporate spending had turned out to be a bit of a dud, but this year it looks as though it's finally taking off. Second, one of the commonest complaints about Super PACs is that they're allowed to hide the sources of their contributions. But this has nothing to do with Citizens United. It has to do with the legal requirements of 501(c)(4) groups, which have become major funding sources for Super PACs. The FEC has declined to force 501(c)(4)s to disclose their donors, and the IRS has declined to enforce the law that says they can't have electoral politics as their primary purpose. Both of these problems could be fixed tomorrow by legislative means if Congress wanted to. Rick Hasen has a pretty good summary of the current state of play here.

UPDATE: Fred Wertheimer of Democracy21 emails to point out that, in fact, Swift Boat Veterans for Truth was fined $300,000 by the FEC for violating campaign rules. Likewise, America Coming Together, which got substantial funding from George Soros, was fined $775,000.

These are fairly modest sums compared to the amounts raised (nearly $7 million for the Swift Boat group and $137 million for ACT). So again, you'll have to decide for yourself if these fines mean (a) 527 groups really did operate under meaningful legal constraints or (b) they were a joke and had no real impact.

Regardless, I had forgotten about these fines, and they do suggest that there was at least a little bit more oversight on the old 527 groups than I originally suggested.

There is More Cynicism Than Hypocrisy in Washington

| Sat Feb. 25, 2012 3:29 PM PST

There is unquestionably a sort of kabuki-like level of hypocrisy that's routine in Washington DC. The party in the majority routinely rails against the obstructionism of the minority, but flips around and extols the filibuster as a cornerstone of democracy when they're in the minority themselves. The president's party always votes for debt limit increases, but flips around and attacks them as signs of fiscal malfeasance when the other guys occupy the White House. We can argue about which party abuses this more, but basically both of them do it. It's genuine hypocrisy, but as these things go it's also fairly harmless.

But there's a different kind of supposed hypocrisy that's not so genuine: changes of position that are based on changing sets of alternatives. If you give me a choice between a carrot and a radish, I'll tell you that carrots are wonderful. If you give me a choice between a carrot and a chocolate bar, suddenly I don't care for carrots so much. I've changed my mind, but only because my options have changed.

This kind of faux hypocrisy is common in politics too. In 1993, when Clintoncare was polling well and seemed like it might well become law, Republicans were big fans of a less statist solution that incorporated private healthcare and an individual mandate. In 2009, when defeating healthcare reform entirely seemed like a feasible alternative, suddenly the mandate became a tool of Satan. But this isn't hypocrisy. The individual mandate was always a second-best option for conservatives, and when their first-best option seemed attainable, they ditched it.

Ditto for cap-and-trade. In 2006, when Al Gore was flying high and EPA regulation of carbon seemed like a real possibility, cap-and-trade was appealing to conservatives as a more efficient, less statist solution. By 2010, when it was clear that the EPA was unlikely to take more than modest action, they ditched their support for cap-and-trade. From their point of view, it was a good idea compared to the EPA, but a bad idea compared to doing nothing. Likewise, Medicare cuts that help pay for universal healthcare strike liberals as a good trade (hooray Obamacare!). Medicare cuts that pay for tax cuts on the rich seem like a lousy trade (boo Ryancare!). 

Circumstances can change in other ways too. During the Bush administration Democrats mostly criticized the big budget deficits he ran. In 2009, suddenly they suddenly became big fans of deficits. But circumstances had changed: orthodox liberal economic theory suggests that you try to balance the budget over the course of an economic cycle. That means you should run surpluses during an economic expansion (2002-08) and deficits during a downturn (2009-present). Democrats weren't hypocrites, they were just taking their own models seriously.

This is all a long-winded way of saying that I think Ezra Klein goes too far when he charges both parties with routine hypocrisy over issues like this. I think it's fair to call Republicans cynical over their abandonment of cap-and-trade and the individual mandate: even though their early support was halfhearted at best, they milked it in order to persuade the public that they weren't just pure obstructionists. There's a lot of political calculation there, but not really a lot of hypocrisy. Likewise, you might doubt that Democrats are really all that dedicated to running budget surpluses during good economic times. But again, that's not a sign of hypocrisy. It's just normal human weakness.

LA Times Joins the Paywall Brigade

| Sat Feb. 25, 2012 11:33 AM PST

I see that the LA Times will soon be putting in place a paywall — oops, I mean a "membership program" — for its online readers:

Starting March 5, online readers will be asked to buy a digital subscription at an initial rate of 99 cents for four weeks. Readers who do not subscribe will be able to read 15 stories in a 30-day period for free. There will be no digital access charge for subscribers of the printed newspaper.

....Other news outlets that have begun charging for online journalism include the New York Times, the Wall Street Journal and the Dallas Morning News. Gannett, the nation's largest newspaper company, this week announced plans to launch a similar program at 80 publications, saying it could boost earnings by $100 million in 2013.

After the first month, the price goes up to $3.99 per week, which seems a wee bit steep to me. The New York Times charges me $2.60 per week and the Wall Street Journal charges me $3.99 per week, and meaning no offense, those are much better papers with far more content. It doesn't really matter to me, of course, since I already subscribe to the print edition, but I have my doubts that there are thousands of new subscribers itching to pay that kind of money for the LAT.

As it happens, the trend toward paywalls is a particular problem for me, since I'm a blogger and rely on access to lots of news sources on a regular basis. But I already subscribe to the Times and the Journal, since they provide content that's genuinely unique/valuable, and also to the LA Times, mostly out of habit and residual loyalty. But that's about all I can afford. I'd like to read the Financial Times more regularly too, but $700 per year in newspaper subscriptions has me tapped out. As other papers start erecting paywalls, it's going to make my job ever harder.

At the same time, although I think the LA Times is overpriced, I don't really blame them or anyone else for putting up a paywall. The conventional wisdom among the digerati, as near as I can tell, is that paywalls are always and forever bad things, but why is that? I'd say just the opposite: I've never entirely understood why most newspapers offer online editions at all. I've heard dozens of strained arguments about how online editions don't cannibalize sales of the paper edition, but come on. Of course they do. There's always been a strong whiff of special pleading to these arguments: we don't want to pay for news, therefore it must be bad to charge for news. Online editions are good PR! They draw in new readers! Etc. We heard the same arguments for years in the music biz, and guess what? Online piracy/sales cannibalized the hell out of existing channels.

The same thing is almost certainly true of newspapers, and as the digital generation grows up cannibalization will increase. But what do do? Even after more than a decade of dotcom experience, online advertising still doesn't cover the cost of producing your average metro daily. Not even close. I'm not sure online advertising even covers the marginal cost of running a website. So you either charge or die.

Of course, "die" is going to be the choice for a lot of news outlets. Most of them do a crappy job of reporting national and international news, and sports and gossip are available from a million places. That leaves purely local news, which is a pretty tiny niche.

But they might as well try. It's not like there's some cosmic law that says news outlets are required to give away their products for free. The advertising model isn't working, and maybe no other model will either, but they might as well start experimenting. It's either that or give up.

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Raw Data: How Registration Affects Comments

| Sat Feb. 25, 2012 9:51 AM PST

A few weeks ago we started requiring registration with email verification for commenters. So how has that worked out? Here are the basic stats from our tech wizards:

  • 22% decrease in total comments
  • 22% increase in Twitter logins
  • 257% increase in Facebook logins
  • 45% decrease in comments our moderators decided to delete

So there you have it. We're getting fewer comments, but not a lot fewer, and anecdotally, the tone of the comments section seems much more civil.

The moral of the story is: Register today! You can use your Twitter or Facebook login, but you don't have to. Just submit your name, you'll get an email address with a verification link to click, and you're good to go. You only have to do it once.

Friday Cat Blogging - 24 February 2012

| Fri Feb. 24, 2012 12:54 PM PST

This week doesn't really have a theme. Just a couple of cats enjoying the nice weather. On the left, Domino is rolling around in the sunshine and peering out from behind a potted plant on the patio. On the right, Inkblot obviously has some serious business on his mind as he strides purposefully toward the camera. As it turns out, that serious business was jumping down off the fence and going inside to see if the food bowl had been magically replenished. Sadly, it hadn't been. Maybe next time.

Obama Takes on the Private Equity Industry

| Fri Feb. 24, 2012 12:35 PM PST

As we all know, corporations are allowed to deduct the interest they pay on loans from their taxable income. This often makes borrowing a more attractive way of raising money than an equity offering. Barack Obama would like to put debt and equity on a more even footing, so he's proposing to reduce the deductibility of interest expenses. Dan Primack digs in:

Obama's basic framework is to lower the corporate rate from 35% to 28%....Private equity firms would uniformly support the lower rate, since it would benefit every one of their portfolio companies. But Obama also wants a reduction in the deductibility of interest payments on corporate debt....And for PE-backed companies with major leverage loads, this is not an even trade-off.

For example, take a look at hospital chain HCA Holdings (HCA), whose private equity sponsors include Bain Capital and Kohlberg Kravis Roberts & Co. (KKR). For 2010, it reported $2.23 billion in income before income taxes, and nearly $2.1 billion in interest expenses. Let's imagine everything else is equal, except that the corporate rate is now 28% and there is no deductibility for interest payments. HCA's tax bill would climb by $587 million ($156m in savings plus $734m in new taxes).

....Obama argues that reducing the deductibility of corporate debt interest "will reduce incentives to overleverage and produce more stable business finances, especially in times of economic stress."....On the other hand, I happen to still believe that private equity is a net positive for the economy — more good than evil — and much of the model is based on this particular tax quirk.

The question, therefore, becomes how big of a reduction to the deductibility is Obama looking for? If he's just looking to reduce the deduction from 100% to 80%, then HCA would actually save money under Obama's plan (again, based only on these two variables — excluding other "lost" deductions). But it would lose money at a 70% deductibility threshold. Wish I could give you an answer on his thinking here, but all I have is a source at Treasury telling me that they haven't yet gotten into that level of detail.

For me, my initial bias would be to go to around 65% or so — thus achieving the goal of reducing leverage while not making the tax hike so onerous as to destroy the profit potential of debt-heavy LBOs. And probably add in an exemption for companies with revenue below a certain level ($20m?), so as not to discourage the creation of capital-intensive small businesses in markets like manufacturing.

I don't have a settled opinion on the goodness vs. evilness of private equity financing. But I do have a bias against the tax code heavily favoring one type of financing over another — not a huge bias, mind you, but still a sizeable one. So if leveraged buyouts make sense only because of quirks of the tax code, they'd have to be enormously beneficial to make it worth supporting those tax quirks. And the evidence suggests to me that it's a close call. Private equity might be a net benefit to society, but not by a whole lot compared to other ways of financing corporate growth and acquisition.

So I'd probably go further than Primack. If a deal makes no financial sense unless Uncle Sam gives you a big writeoff, then maybe it just doesn't make sense. Lowering the writeoff to 50% would still keep moderately leveraged buyouts profitable, but it would probably kill off the most heavily leveraged ones, which are also generally the most destructive. I think I could live with that.

Barack Obama Has Consistently Defended Religious Freedom

| Fri Feb. 24, 2012 10:45 AM PST

Is President Obama waging a war on religion? Just typing the words is enough to make slitting my wrists seem like a fairly reasonable life choice. But Steve Chapman, obviously a stouter man than me, takes the time to dissect just how dumb this argument is:

Amid all the uproar, it's easy to overlook something equally important: the administration's many battles for religious liberty.

....The most conspicuous surprise involves government rules for faith-based organizations that get federal funding for social services. President George W. Bush issued an executive order allowing such groups to hire only people who share their faith—exempting them from the usual ban on religious discrimination....In his presidential campaign, [Obama] said his view was simple: "If you get a federal grant, you can't use that grant money to proselytize to the people you help and you can't discriminate against them—or against the people you hire—on the basis of their religion." But it hasn't worked out that way. Obama has left Bush's rule in place, infuriating many groups that expected a reversal.

....His commitment is also on display in defending churches against municipal governments that would prefer to do without them....It filed a brief in support of a Hasidic Jewish congregation's lawsuit against the city of Los Angeles, which had forbidden it to hold services in a private home. A federal court ordered the city to back off.

The administration has also intervened in cases where prisoners are denied religious literature. After a South Carolina sheriff prohibited inmates from getting devotional materials and other publications in the mail, the Justice Department sued. In the end, the county agreed to let inmates receive Bibles, Torahs, Korans and related fare.

....In doing all this, the administration isn't simply doing the politically appealing thing....The congregations victimized by zoning regulations are too small to matter. Prison inmates generally can't vote. There is no detectable political gain in anything Obama is doing here.

No detectable political gain? I suppose. But look: we're dealing with people who think the reason Obama has left gun laws alone is because he wants to "lull gun owners to sleep and play us for fools in 2012." So he's probably doing the same thing here. Reelect the guy on November 6th, and on November 7th he'll begin his war on the Catholic church. There's really no arguing with this, is there?