Kevin Drum - April 2012

Karl Rove's Pro-Millionaire Facebook Campaign

| Wed Apr. 11, 2012 10:49 AM EDT

The latest brainstorm from Karl Rove & Co. is on the right: a Facebook petition opposing the "Buffett Rule," which would ensure that millionaires pay a minimum 30% tax rate. "Really," says Greg Sargent, "it continues to amaze that people in positions of real influence could venture something this idiotic with no evident sense of embarrassment."

Lack of gall has never been one of Karl Rove's weaknesses, so his lack of embarrassment probably isn't really all that surprising. But what's this all about? It is kind of dumb, after all. My guess: it's just part of a "mud against the wall" strategy. It's not likely to gain much traction, but it's cheap and it might produce some useful feedback. Do enough of this kind of stuff and eventually you find out which message will stick. It's early days.

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Can Cheap Smartphone Apps Ever be Big Moneymakers?

| Wed Apr. 11, 2012 10:27 AM EDT

Matt Yglesias comments on the smartphone market:

Jenna Wortham writes that the Instapaper acquisition and the stunning growth of Draw Something maker OMGPop signals a new era for business strategy in which developing a compelling mobile ap comes first, and developing a Web interface aimed at full-feature PCs coomes second. What she doesn't really do is make clear why this happening—the smartphone market will almost certainly be bigger than the PC market very soon.

That's certainly true from a unit sales point of view, but the part I still don't understand is where the revenue will come from. The problem for the app market is that smartphone (and tablet) apps are so cheap that there's no way their makers will ever make substantial amounts of money. A few days ago I bought my most expensive app ever: $9.99 for Photoshop Touch. That's a lot! But Photoshop for a PC or a Mac will set you back about $400. Adobe would have to sell a helluva lot of copies of Touch for it to ever be a serious money spinner for them.

What's worse, as we all know from news consumption on the internet, once these kinds of low price points get established and people get used to them, it's all but impossible to raise them. With Apple's iPhoto priced at only $4.99, it's not as if Adobe has a lot of room to increase its price.

Obviously there will be plenty of winners in the app market, and some of those winners will get snapped up by established companies at eye-watering prices. Even free apps can occasionally become big profit centers, after all. Still, I wonder how big the smartphone software market will ever be? Even if there are, eventually, twice as many smartphones and tablets as home computers, low app prices will keep the overall market size pretty small. Or am I missing something here?

Eurozone Troubles Heating Up

| Wed Apr. 11, 2012 1:27 AM EDT

The latest from across the Atlantic:

Europe's sovereign debt crisis exploded back into life on Tuesday, with markets across the continent rocked by a wave of panic selling amid renewed fears about the impact of savage austerity measures in Spain and Italy.

....Italy and Spain, the eurozone's third and fourth biggest economies, were at the centre of the market turmoil, with investors demanding an increasingly high premium for holding their bonds.

Hopefully the Guardian's reporters are just being a little hyperbolic. But stock markets in the U.S. and Asia were pretty brutalized today too. Phase 4 of the Great Euro Crisis appears to be well and truly imminent.

Chart of the Day: Consumption Inequality and Income Inequality Have Both Skyrocketed

| Wed Apr. 11, 2012 12:50 AM EDT

One of the evergreen arguments in the debate over rising income inequality is that what really matters isn't income, it's consumption. And consumption inequality hasn't been rising all that fast. If you measure what people are actually buying, it turns out that the middle class is doing OK.

To the extent that this was true, it was partly thanks to the fact that the middle class was borrowing ever greater amounts in order to support its consumption habits. But that couldn't last forever. In 2008 all that borrowing came crashing to the ground — taking consumption along with it — and we learned once again that income matters after all. But yesterday Matt Yglesias pointed to a recent paper that adds a whole new dimension to this dispute: the authors (Orazio Attanasio, Erik Hurst, and Luigi Pistaferri) contend that when you correct for well-known problems in the consumption data, consumption inequality has been rising about as fast as income inequality. All the old arguments were just based on faulty data.

The charts below tell the story. They rely on survey data from the Panel Study of Income Dynamics, and for each year from 1980 through 2010 they measure the standard deviation of log income and log consumption. (Why use logs? Beats me, but apparently it's standard practice for this kind of thing.) Standard deviation, of course, is just a measure of dispersion. The bigger the number, the farther apart the highs and lows are from the mean.

The top chart shows the growth of income inequality: it's gone up from about .75 to .95, an increase of .2 units. The bottom chart shows the growth of various corrected measures of consumption inequality. The broadest measures are the two top ones, which have gone up from about .8 to 1.05, an increase of .25 units. Or, as the authors put it, "Taken together, the results from the PSID data [] is that consumption inequality and income inequality tracked each other nearly identically during this time period."

If this is all true, it means that consumption tracks income pretty well, and both have become steadily more unequal over the past three decades. Surprised?

Dad and Junior: A Wee Tale of Medicare Spending and Double Counting

| Tue Apr. 10, 2012 5:52 PM EDT

Today I want to tell you a little economic fable. My tale is about a family with two members: Dad and Junior. Dad earns $100 per month in the lucrative field of political blogging. Junior earns $10 per month from his lemonade stand. He uses his money to buy comic books, and if he has any money left over at the end of the month he gives it to Dad, who gives him an IOU in return. Over time, Junior has built up $25 in IOUs from Dad. Needless to say, Dad has long since spent the money that Junior gave him.

Our story opens in January. Junior has discovered some new comic books that he likes, so he starts spending $15 per month on comics. His lemonade income isn't enough to cover this, so he finances his habit by cashing in $5 worth of IOUs each month. This goes on for three months, and during that time Dad has $95 to spend on food, clothing, and other necessities of life.

In March, Junior realizes that he only has $10 worth of IOUs left. At his current rate of comic consumption, he'll run out by the end of May! So he decides to cut back: from now on, he'll buy only $12 worth of comics per month. This means he has to cash in only $2 per month in IOUs.

There are two consequences of Junior's decision to cut back:

  • Dad has $98 to spend instead of $95. This is no mirage. It's real money that he can spend on additional stuff.
  • Junior's stock of IOUs will now last longer. Instead of running dry in May, it will last through August. Again, this is no mirage. His IOUs really will last longer.

Do you see what this means? Both of these things are true. Dad really does have more money to spend, and Junior's stockpile of IOUs really will last longer. There's no effect on total family spending, and no effect on total family debt.

In essence, this is the story of Obamacare and the great "double counting" flap, which has gotten a new lease on life following the release of a new report from Charles Blahous, a Republican trustee for Medicare. Blahous is retailing a conservative story of long standing, namely that Obamacare double counts its planned savings from Medicare.

But it doesn't. In the story above, Dad is the federal government, Junior is Medicare, and the IOUs are treasury bills. When Medicare spending is cut back — as it is under Obamacare — it cashes in fewer treasuries. This means that the federal government has more money to spend on other healthcare needs and that the Medicare trust fund will last longer. Both these things are true. And there's no net effect on either spending or the deficit. Other actions of the federal government, which has unlimited taxing and borrowing power, might increase both spending and the deficit, but this particular mechanism doesn't.

Now, there are other things you can say about all this. You might be skeptical that Obamacare's spending cuts will actually pan out. You might want to re-run the deficit numbers now that HHS has given up on the CLASS Act. You might believe that Obamacare is likely to cost more than anyone estimates right now. That's all fine. Beyond that, you might, as Blahous does, worry that extending the life of the Medicare trust fund will lull everyone into complacency and delay an all-out effort to rein in Medicare spending. Or you could go further, as Blahous also does, and assume that without Obamacare we'd already be feverishly at work cutting back Medicare benefits. The fact that we aren't therefore counts as additional spending and bigger deficits.

That seems to me like an eccentric way of looking at things, but Blahous certainly has the right to do so. What he can't do, however, is pretend that there's double counting here. There just isn't.

UPDATE: Ezra Klein tackles this issue in a more conventional way here.

Rick Santorum Bows Out

| Tue Apr. 10, 2012 2:16 PM EDT

Apparently Rick Santorum is bowing out of the presidential race. Mitt Romney, the inevitable nominee, is now truly inevitable.

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James O'Keefe Shows Everyone Just How Hard Voter Fraud Is

| Tue Apr. 10, 2012 12:56 PM EDT

I see that famous right-wing videographer/editor James O'Keefe is back in the news. His latest obsession is voter fraud, and a few days ago he conducted one of his famous stunts. You see, Attorney General Eric Holder says (correctly) that actual voter fraud is all but nonexistent in America, so O'Keefe hired a white guy who looks nothing like Holder to walk into a polling place and cast a vote as Eric Holder. See? It is possible to vote fraudulently!

Alex Koppelman has more here, but he misses out on the biggest point of all: O'Keefe's video doesn't show how easy it is to vote fraudulently. It shows how hard it is. You see, O'Keefe's stunt double didn't actually vote. Ben Shapiro, editor-at-large of Breitbart.com, explains why: "Obviously this wasn’t an actual case of voter fraud—O’Keefe and Project Veritas didn’t want to break the law."

Obviously. And that's the whole point. Nobody in his right mind deliberately casts an illegal ballot. You're risking a felony rap over one vote. Hell, O'Keefe's guy wasn't willing to risk it even though that was the whole point of the stunt, and even though, according to Shapiro, the odds of getting caught were "almost zero." That's because O'Keefe's stooge isn't clinically insane, which is about what you'd have to be to take a chance like that for essentially no gain at all.

But wait! How about the possibility of wide-scale fraud? Risking prison to cast a single vote might not be worth it, but maybe the reanimated corpse of ACORN would be willing to pay thousands of people to vote fraudulently — enough to seriously influence an election. But that's just a fever dream too. Does anyone seriously think that an enterprise like that could (a) work and (b) be kept secret? With thousands of participants? Please.

There's no question that in-person voter fraud is possible. No one's ever denied it. The question is whether anyone ever actually does it. And on that score, there's voluminous evidence that virtually no one ever does. That's because anyone crazy enough to do it is busy yelling at passersby about the approaching end of the world, not wandering into polling places to cast ballots in the name of Eric Holder.

POSTSCRIPT: It's worth adding that notwithstanding all this, O'Keefe's video is very effective. He may be a hack, but he's a pretty impressive one.

America Getting Back on Track

| Tue Apr. 10, 2012 12:19 PM EDT

No special reason for posting this, but I was browsing through the latest ABC/Washington Post poll and was curious to see how things were going on the famous right track/wrong track question beloved of Beltway pundits. And since I took the trouble to graph it, I figured I might as well share. Answer: things are looking up. Not strongly up, but right track bottomed out last September and it's been rising slowly but steadily ever since.

Playing Games With the George Zimmerman Video

| Tue Apr. 10, 2012 11:35 AM EDT

I don't watch very much political TV, either on MSNBC or elsewhere, and I've been following the Trayvon Martin case only from a distance. But I'm aware that we've had videotape of George Zimmerman being taken into custody for some time now, and that one point of contention is whether the videotape shows evidence of any injuries, which might buttress Zimmerman's claim that Martin was pounding his head on a sidewalk before Zimmerman shot him. And in fact, the police video does seem to suggest that Zimmerman sustained some kind of head injury. So Bob Somerby, who does watch a lot of political TV, wants to know what happened on Al Sharpton's show last night:

At [about the 11:45] point, without comment from Sharpton, new videotape of Zimmerman appears. It offers a very large close-up of the back of his head as he arrives at the Sanford police station on the night of the killing.

This close-up isn’t grainy. And wow! In this close-up image, the back of Zimmerman’s head seems to be completely pristine. There isn’t the slightest sign of any blemish or injury.

There isn’t a stub of a hair out of place. There is no sign of any injury....Does that close-up represent an accurate picture of Zimmerman’s head on the night of the killing? We have no idea. But this close-up photo is impossible to reconcile with two earlier close-up shots, including one close-up which was aired by MSNBC on March 29. That close-up seemed to show an obvious goose-egg on the back of Zimmerman’s head, crowned with an obvious abrasion.

Later, ABC produced another close-up of Zimmerman’s head. This close-up was grainer, and more distant, than the image aired by MSNBC. But it seemed to show two abrasions on the back of Zimmerman’s head.

Especially given NBC's multiple problems with its editing of the Zimmerman 911 call, it really needs to be purer than Caesar's wife on this stuff. Did anyone else notice the same thing on Sharpton's show yesterday? How does the picture above compare to those you've seen elsewhere?

The Inventor of the Chair is History's Greatest Monster

| Tue Apr. 10, 2012 10:36 AM EDT

The New York Times summarizes a new bit of research:

They found that the more hours the men and women sat every day, the greater their chance of dying prematurely. Those people who sat more than eight hours a day — which other studies have found is about the amount that a typical American sits — had a 15 percent greater risk of dying during the study’s three-year follow-up period than people who sat for fewer than four hours a day.

That increased risk held true in the Australian study even if the people sitting eight hours a day spent at least part of that day exercising.

That's a drag. I think you can guess about how many hours a day my job keeps my butt firmly planted in a chair. I am doomed.