Kevin Drum - April 2012

Forget "Government Spending." The Only Thing That Really Matters is Healthcare.

| Tue Apr. 17, 2012 2:16 PM EDT

Josh Barro says that government expenditures (federal + state + local) are going up, up, up. Just take a look at the top chart on the right:

This chart has a lot to teach us about what we can expect from the coming fiscal adjustment. For me, the most notable fact about this chart is that the growth of government spending has been remarkably steady. The trend over the last 83 years has been for government spending to rise by 0.24 percent of GDP per year, and the correlation is strong: a linear regression on this trend has an R-squared value of 0.72, meaning that time explains most of the movement in government spending.

But there's another way to look at this too. The chart on the bottom is my take: I've cut it off at 2007 so that the Great Recession doesn't obscure the real trend of the past few decades: government spending increased steadily until the mid-70s, but since then it's flattened out almost completely.

Now, I agree with Barro that entitlement spending is certain to go up over the next 20-30 years as the baby boomers retire. But what the bottom chart shows us is that government expenditures in general haven't been on an inexorable upward path over the past three decades, and there's no special reason to think they'll rise inexorably in the future. Generally speaking, domestic spending, defense spending, and Social Security are on extremely sustainable paths.

What's left is healthcare spending. That's it.

So this is basically just another excuse to repeat something that I and others have said over and over: We don't have a spending problem in America. We have a healthcare problem. The other three categories of government spending taken together will probably rise by a point or two over the next few decades, but that's not a big deal. We need to pay normal, prudential attention to them, but nothing more.

Bottom line: no one serious should spend an awful lot of time talking about "the deficit" or about "government spending." We should be talking about healthcare. Everything else is just a red herring.

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Fear Keeps the Filibuster Alive

| Tue Apr. 17, 2012 12:51 PM EDT

Barney Frank says the only structural reform he cares about is getting rid of the filibuster in the Senate. Ed Kilgore comments:

I'm among those who really get upset when people sort of internalize the recent routine use of the filibuster by Republicans to create a de facto 60-vote requirement for doing business in the Senate, as though it came down from Mount Sinai on stone tablets. It didn't. It's a revolutionary development in the empowerment of congressional minorities, of special utility to those who wish to obstruct progress. And it has a huge ripple effect on what happens in the House (as Frank indicates), the White House, and the country. We should never get used to it until it's modified or gone.

Agreed. And yet, in a way, it seems to me that Ed is wrong: we have to internalize the recent routine use of the filibuster first in order to have any chance of getting rid of it. As long as the public continues to hear about "filibusters," they'll continue to think that this is just Mr. Smith Goes to Washington, something that happens now and again when the minority party opposes a bill especially strongly. It's only when everyone starts to realize that the Senate is a 60-vote body — not a place where filibusters take place periodically, but a 60-vote body — that we might finally get some public pushback on this.

Or maybe not. The sad truth is that no matter what we call it, filibusters will probably retain strong support pretty much forever. In general, fear of what your opponents could do in a majoritarian Congress seems to be a much stronger motivation than passion for what your own party could do. That's more true of conservatives than liberals, but it's true of a lot of liberals too. When you sit down and start to think about what, say, Paul Ryan might be able to do in a filibuster-less Senate, it makes your blood run cold. Suddenly 60 votes doesn't sound so bad, even if it does mean there's stuff of our own that will never see the light of day either.

Fear is stronger than hope. Every once in a great while that reverses, but not often and not for long. Most of the time, fear is stronger than hope.

Our Long-Awaited Construction Boom Still Isn't Quite Here

| Tue Apr. 17, 2012 11:53 AM EDT

As you may recall, Smithian economics suggests that we're due for a big rebound in housing construction and that this rebound will drive a strong economic recovery over the next few years. However, Karl Smith himself is starting to get pessimistic. Multi-unit housing starts are increasing, but they still look pretty anemic compared to past housing booms:

The “hopeful” argument is that while the absolute increase is much smaller this time around the pace is actually a bit faster, a four-fold increase rather than a 3-fold increase.

However, given the current conditions in housing I was looking for an even stronger snap back. This alone will not be enough to push the economy into a boom. We need a series step-up in the rate of growth.

What’s worse from a long run perspective is that the failure of multifamily to bounce back potentially sets up single family for a new bubble....That kind of instability is difficult to manage. Economic stabilization going forward would be better if there was a larger stock of multifamily rental housing, yet that is looking increasingly unlikely.

This might just be a temporary problem. Price-to-rent ratios are continuing to decline after a brief upward blip in 2009, which should make apartment construction increasingly attractive to developers. In the end, though, it's all going to depend on the same virtuous circle that ends every recession: more jobs means more income, which means more homebuilding, which in turn produces more jobs, world without end. (For a few years, anyway.) But we're still not producing enough new jobs to get all those 20-somethings to move out of their parents' basements in big enough numbers, so the virtuous circle is having trouble really catching fire. More stimulus, please.

SCAG Wants to Make Southern California More Urban

| Tue Apr. 17, 2012 11:21 AM EDT

This is mostly Yglesias bait, but the rest of you might be interested too. It's from a short op-ed about the recent decision of the Southern California Assn. of Governments, or SCAG, to adopt a new Regional Transportation Plan/Sustainable Communities Strategy:

The plan includes expansion of housing near public transit by 60%....and projections of more than 4 million new jobs — with public transit within half a mile of most of them. Amanda Eaken of the Natural Resources Defense Council praised it as "the strongest transportation plan" in the history of "car-loving Southern California."

.... SCAG's new plan is born of the realization that as a region, we have to grow up, not out. That doesn't mean Hong Kong skyscrapers in Whittier and Redlands. It does mean more apartments near light-rail stations and more vibrant mixed-use areas like the ones in downtown Pasadena, Ventura and Brea. It doesn't mean wresting the car keys from suburban commuters. It does mean making jobs and housing accessible via foot, bike, bus and rail.

In theory, a plan like this should have almost unanimous support. Developers like it because they can put up denser buildings. Environmentalists like it because it's more sustainable. Urbanists like it because it creates more walkable communities. City governments like it because it creates a stronger tax base.

There's really only one constituency that doesn't like it much: every single person who already lives in these communities and hates the idea of dense, high-rise construction near their homes. So there's going to be fireworks. It'll be interesting to see how the NIMBY bloc gets bought off.

Chart of the Day: Our Robot Overlords Will Take Over Soon

| Tue Apr. 17, 2012 10:44 AM EDT

The chart on the right is based on data that may or may not be accurate and an extrapolation that's unreliable. So the precise shape of the curve is mostly guesswork. But generally speaking, it's probably about right, and it shows that the global population of robots is set to skyrocket over the next few decades. Sometime in the 2030s there will be more robots than people. Stuart Staniford draws some bleak conclusions:

  • This trend will continue because it's in the short-term interests of societal elites. The median influencer's life can be made better with more robotically produced consumer goods and with service robots to perform tedious chores (or human labor made cheap by competition from robots).
  • The creative classes can have fun with new toys and with thinking up new uses for the technology.
  • Ever larger numbers of people will continue to be made technologically unemployed by this trend.

Six more bullet points follow, ending with:

  • However, by that point, there may very well be no easy way back, and all hell will break loose.

Read the whole thing. I pretty much agree that Stuart's gloomy view is the most likely one in the medium term, and it's unfortunate that, for a variety of reasons, we're unlikely in the extreme to ever try to seriously plan for it. Those reasons include the fact that it will happen slowly; lots of people just don't believe Stuart's scenario in the first place; lots more don't want to believe it for self-interested reasons; and addressing it in a serious way would require our cognitive and financial elites to give up a lot of power and wealth, which they won't do willingly. So this will all probably unfold pretty grimly for a lot of people.

The Bush National Guard Story Lives!

| Mon Apr. 16, 2012 7:04 PM EDT

Joe Hagan has a long story in the current issue of the Texas Monthly about George Bush's adventures in the Texas Air National Guard, and as a longtime Bush National Guard junkie I was eager to read it. As it turns out, it doesn't really break a lot of new ground, but it's got a few new tidbits here and there and overall it's a pretty good take on the whole affair. It's worth a read. 

Since I spent so much time on this story in 2004, I hope everyone will indulge me for diving into a few of the details that Hagan brings up. But first, I want to say that I agree with this summary of Bush's National Guard service, which was distinctly spotty during his final couple of years:

[Bush's] story, taken as a whole, isn’t particularly damning; it was typical for young men of Bush’s social standing. But it fundamentally undermines an element of Bush’s political identity: the “badass” jet pilot for whom flying was a “lifetime pursuit,” as he once put it. And because of Bush’s stonewalling on the issue, the power of the unanswered questions about this period of his life would take on a life of their own.

That's pretty much what I took away from the story too in February 2004: "Bush cut a few corners and was less than zealous about finishing his 6-year commitment. Given Bush's age, the tenor of the times, and the winding down of the Vietnam War, this is hardly noteworthy." In a nutshell, Bush pulled strings to get into the Guard and, in one way or another, messed up during his fourth year and pretty much disappeared. Nothing happened to him, though, because Vietnam was winding down, no one really cared that much about a superfluous pilot, and nobody wanted to make trouble for the son of a Republican Party bigshot anyway. It's hardly a laudable story, but frankly, it was never all that contemptible either. It was only a big deal because Bush eventually ran for office himself and felt like he had to cover up the failings of his youth. 

And now for a few little details that caught my obsessive eye. As you recall, this whole story became infamous in 2004 after 60 Minutes II aired a segment that featured several documents critical of Bush that were allegedly written in 1972 by Jerry Killian, Bush's commanding officer at the time. Mary Mapes, the producer of the segment, got copies of these documents from a guy named Bill Burkett. Here's Hagan:

Over several days of questioning, Burkett told Mapes he’d gotten the documents from a former Guard colleague named George Conn, who had previously vouched for Burkett’s credibility in press reports. But Mapes never found Conn to corroborate the story.

This has always struck as one of the least believable parts of the story. By 2004 Mapes had been running down these allegations for more than four years, and in all that time she said she had never been able to connect with Conn. But I talked to Conn. I got his number from a friend, called him in Germany, and we chatted for about 20 minutes. He wasn't willing to say very much, but I had no trouble finding him. Several other reporters talked to him too. So is it really plausible that after four years of digging Mapes didn't manage to talk to him? I've always wondered. Especially considering that, for various reasons, Conn was probably about the least likely source imaginable for these documents, and it would have set off ear-splitting alarm bells if anyone had known he was supposedly the source.

More importantly, I'm a little agog over Hagan's apparent agnoticism about whether the Killian memos were forgeries. As you'll recall, as soon as 60 Minutes aired its segment, a conservative blogger named Harry MacDougald argued that they were fake because the fonts in the memos couldn't have been produced by 1972-era typewriters. Others immediately piled on, but Hagan says we now know this wasn't true:

MacDougald’s arguments about the documents turned out to be inaccurate. He acknowledged as much in an interview with me in 2008. And in a speech given that same year, Mike Missal, a lawyer for the firm that CBS hired to investigate its own report, said, “It’s ironic that the blogs were actually wrong. . . . We actually did find typewriters that did have the superscript, did have proportional spacing. And on the fonts, given that these are copies, it’s really hard to say, but there were some typewriters that looked like they could have some similar fonts there. So the initial concerns didn’t seem as though they would hold up.”

This is eye watering. It's not a question of whether any typewriter in the world could have produced the Killian documents, it's a question of whether the typewriters at the National Guard base in Austin could have produced them. And we know they couldn't have because Killian's secretary, Marian Carr Knox, has told us which typewriters she used in Killian's office in 1972: an Olympia and a Selectric. And neither one of those typewriters could possibly have produced those memos.

There are a whole bunch of other reasons to be quite sure that the memos are fakes, not the least of which is Bill Burkett's preposterous story about how he came by them, which he offered up after he'd been forced to admit that he lied about getting them from George Conn. But no matter where they came from, the key question has always been why anyone would have held onto them in the first place. Why would Jerry Killian have kept them? And even if he did, why would someone have cleaned out Killian's files when he died in 1984 but saved just those six documents? At the time, George W. Bush was a nobody. It simply makes no sense that someone would have taken those six files, and only those six files, and then would have held onto them for 20 years without ever showing them to anyone.

There's a lot of other evidence that the documents are forgeries beyond just their dubious provenance, and I've long believed that Bill Burkett was pretty obviously the source. One of the enduring mysteries about the memos is why a forger would create documents that look for all the world as if they were created in Microsoft Word with all the default settings intact. You'd have to be a helluva technical bonehead to do that! But as it turns out, that describes Burkett pretty well. I talked to Burkett for a couple of hours back when I was reporting this story, and toward the end of our conversation Burkett got sidetracked into an odd rant about PCs and technology that he was having trouble with. It was obvious that he simply knew nothing about computers or typewriters or pretty much anything related to them. In other words, he's exactly the kind of person who (a) knew enough about the Bush record to invent memos that sounded right, (b) lacked just enough Air Force background (he was Army National Guard) to screw up the lingo a bit, and (c) was ignorant enough of technology not to realize that a document created in Word looks nothing like a document created on a typewriter in 1972. Nobody will ever be able to prove that Burkett forged those memos unless he fesses up someday, but he sure seems like the prime candidate.

In any case, there's a mountain of evidence that the Killian memos are fake, and it's sad to see Dan Rather tell Hagan, "I believed at the time that the documents were genuine and I’ve never ceased believing that they are genuine." That's just delusional.

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Jim Kim is Now the President of the World Bank

| Mon Apr. 16, 2012 3:01 PM EDT

Despite a surprisingly vigorous campaign from the American politico-economic blogosphere, Nigerian finance minister Ngozi Okonjo-Iweala will not be the next head of the World Bank. Instead, just as it's been for the past 60 years, the next president will be the U.S. nominee, Dartmouth College’s Jim Yong Kim. Apparently the blogosphere still has approximately zero influence on great power politics. Maybe next time.

Is it Science or Is It Bullshit? (Cookie Crumbling Edition)

| Mon Apr. 16, 2012 1:17 PM EDT

Sarah Kliff reports on a new study showing that portion size matters. Here's the nickel version: If you offer kids a bowl full of cookies, they eat more than if you offer them a bowl full of smaller cookies.

Well, that sounded interesting. But I was curious about the details. So I found the original dissertation, which is ungated, and browsed through it. First there was this:

Recruitment was performed in an elementary school attended by one of the experimenter's children. School director and legal guardians (i.e. mother/father) gave all written informed consent and both 1st and [] 6th grade classes participated voluntarily. The experimental protocol was approved by the Ethical Committee of the Faculty of Psychological Sciences of the Université Libre de Bruxelles.

OK, that has nothing to do with the research. It just cracks me up. They had to get IRB approval to feed some kids whole cookies and other kids half-size cookies! This is modern science, red in tooth and claw.

Moving on, there's a detailed description of the cookies (several layers of wafers filled with milk chocolate topping) and the number of kids (85 total, about half of them girls). The experiment took place at 2:45 pm (the children's "usual snack time"). Here's the experimental design:

Kids were called up in alphabetical order, reported pre-study hunger (4-point scale labeled ‘not at all’, ‘a little’, ‘fairly’ and ‘a lot’) and were randomly assigned to a room and table. Children were seated in front of square tables. Individual plates were used in order to stick to maximize external validity, as all children bring their own afternoon snack. For first graders, nine tables were filled with four and one with three children. For sixth graders, ten tables were filled with four and two with three children. Children were told they could eat as much or as little as desired and were informed they would be given a refill if they liked to. They were allowed to talk but not to share their food. Experimenters ensured that the foods were not shared and if not consumed, were left on the table.

Let's just stop right here. There's a grand total of 85 kids in this experiment, about 20 in each experimental group (half in each grade level, half of each getting whole cookies and half getting small cookies). It was, apparently, run once. It was preceded by having the kids report their "pre-study hunger." Kids were trooped over to a table and given instructions so specific that even a six-year-old would know something was up. Eight kids were excluded from the analysis due to an unexplained algorithm based on "presence of food allergies, overweight, weight problems, dieting behavior, food intake control in order to gain / lose weight and not hungry." On the remaining data, "One-sample Kolmogorov-Smirnov was used to examine normality of data distributions and chi-square tests to analyze the independence of the sampling distributions for the habit to eat cookies." The study apparently made no effort to see if reduced cookie eating had any effect on total caloric intake for the rest of the day. Nor did it follow up to see if the children's behavior remained the same if they were offered the different cookie choices repeatedly over a period of weeks or months.

Look: portion control is probably important. No argument there. But this study is ridiculous. I have no idea how stuff like this gets published. The small sample size and one-time nature of the experiment should be enough to get it laughed out of town immediately, and the rest of the problems are just icing on the cake (so to speak). Unless someone can convince me that I'm being unfair here, I'd say that on the "Is it science or is it bullshit" scale, this one qualifies pretty firmly as bullshit.

UPDATE: For what it's worth, no one in comments has convinced that this study is non-ridiculous. After reading a few of the defenses, however, I'm starting to have some doubts about the modern scientific enterprise.

The Reign in Spain Is Not Keynes

| Mon Apr. 16, 2012 12:18 PM EDT

Via Brad Delong, here is Wolfgang Münchau writing about the latest mushrooming economic crisis in Europe, this one centered on Spain:

News coverage seems to suggest that the markets are panicking about the deficits themselves. I think this is wrong. The investors I know are worried that austerity may destroy the Spanish economy, and that it will drive Spain either out of the euro or into the arms of the European Stability Mechanism.

....The periodic episodes of market panic about Spain have always tended to follow an austerity announcement. One such episode came with the discussion that led to the recently introduced draft budget, which included a deficit correction of 3.2 per cent of gross domestic product for 2012. When Mariano Rajoy, Spain’s prime minister, began to outline the deficit cuts for 2013 last week, the markets panicked again and drove Spanish 10-year yields back to 6 per cent. The targeted fiscal adjustment amounts to 5.5 per cent of GDP over a period of two years. It is one of the biggest fiscal adjustments ever attempted by a large industrial country. It is perfectly rational for investors to be scared.

Let's put that into perspective. The GDP of the United States is $15 trillion. So 5.5% of GDP would be $820 billion. This means that Spain's two-year target would be the equivalent of the United States cutting its annual budget by $410 billion. No one — literally no one, not even Paul Ryan — has suggested budget cuts anywhere remotely near those levels. Even though the U.S. economy is in much better shape than Spain's, everyone believes that budget cuts of that magnitude would wreck our fragile recovery.

And yet, in Spain, which currently has unemployment levels about the same as ours during the Great Depression, that's the plan. It's barely short of insane.

So I'm not sure what to say about this, aside from writing interminable blog posts about how crazy it is. But if you want an analytic thought, here it is: Our titans of global finance usually talk like fiscal conservatives. They want low inflation, balanced budgets, and a restrained central bank. But during an economic downturn their actions speak differently. When they actually get all the stuff they say they like, they panic. In their guts they may be tea party conservatives, but when it comes time to actually risk their wealth, they make Paul Krugman look like some kind of milksop Austrian.

Mitt Romney's Underwhelming Tax Plan

| Mon Apr. 16, 2012 10:35 AM EDT

What is Mitt Romney's real tax plan? Apparently we got a rare glimpse of this when reporters overheard a private conversation Sunday night with supporters at a fundraising party:

"I'm going to probably eliminate for high income people the second home mortgage deduction," Romney said, adding that he would also likely eliminate deductions for state income and property taxes as well. "By virtue of doing that, we'll get the same tax revenue, but we'll have lower rates."

Okey dokey. If Romney could actually get Congress to agree to this, I figure it would bring in roughly $100 billion in revenue. That's assuming a complete elimination of the deduction for all state, local, and property taxes. In return, this would allow tax rates to go down across the board by about one percentage point. Maybe one and a half. Or, alternatively, it might allow tax rates on the rich to go down by five or ten points. I wonder which he has in mind?