Kevin Drum - May 2012

Europe's Collective Action Problem

| Wed May 2, 2012 1:27 PM EDT

Matt Yglesias disagrees with my previous post suggesting that Europe faces a gigantic collective action problem:

Collective action is difficult, but I don't really think that's the issue here....If you look at a big place like the United States or China what you see are huge place-to-place divergences in economic vitality paired with large open-ended transfer programs. Even in smaller economies, the old West Germany has been subsidizing the old East Germany for a long time and will continue to do so for a long time.

....The Euro was meant to be a step in a project of "ever closer union" in which Europe's nationalisms would be overcome and replaced by a pan-European identity. That's because the only way to make it workable would be for European voters and European politicians to act in a spirit of continental solidarity and think on a continental scale. It was, from the beginning, a fairly utopian project. But now that the crisis is upon us, it looks like nobody wants to try to play the role of visionary leader who brings the utopia to fruition.

It's probably important to understand the scope of our disagreement here. Certainly I agree that transfers from the core to the periphery are necessary right now. No argument there. But I don't think that open-ended transfers, even if they were politically feasible, would solve Europe's problems.

In the United States, some regions have higher productivity and higher wages than others. Others have lower productivity and lower wages. Federal transfers ameliorate some of the differences, but it's wage differences and high labor mobility that play the main role in keeping things balanced. People are paid less in Alabama than they are in California, which makes their lower productivity sustainable, and workers who want to do better are pretty free to move if they don't like Alabama's low-wage-low-service economy.

Europe's problem is that over the past decade, wages in the periphery went up but productivity stayed considerably lower than in the core. At the same time, labor mobility, thanks to language and cultural differences, is inherently much lower than in the United States. The level of fiscal transfer it would take to sustain the eurozone in the face of these problems would be enormous. At least, I think it would be. I'd be interested in seeing someone try to estimate what it would take and then compare it to the United States. But unless the numbers turn out to be a lot lower than I think, I simply don't see how open-ended fiscal transfers would be a workable solution for Europe.

And that's not even taking account of politics. But as Matt says, Europe isn't a single country, and "visionary" in this case means convincing the Germans and the French to pony up extraordinary amounts of money for the south indefinitely. That might sound visionary in New York and Washington DC, but probably not so much in Stuttgart and Marseilles.

So: I think we're in agreement about the value of short-term transfers, and also about the lack of European identity getting in the way of longer-term solutions. But even accounting for that, I doubt that open-ended fiscal transfers on their own are a plausible solution. Thus the need for a genuine kind of multi-state collective action, as opposed to the somewhat easier kind you have when a single federal government is in charge. That might not be possible no matter what, but certainly a minimum requirement would be a credible long-term commitment from Europe's periphery to reform their labor markets. Without that, it's hard to see any solution at all.

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Europe Still Slouching Toward Catastrophe

| Wed May 2, 2012 11:34 AM EDT

The eurozone economy is headed toward recession again, and Ryan Avent is beside himself:

Ordinarily, of course, policymakers would react to this deterioration by taking steps to stabilise the economy. What is most frightening about the euro-area picture is that this is not happening. For now, austerity remains the rule. Despite the nastiness of the economic picture, the ECB is widely expected to take no action at its meeting tomorrow. The euro area is walking, eyes wide open, into depression. Led by its periphery, which is already there.

....If, when all of this is said and done, the euro zone descends into a chaotic, costly break-up, many people will write that such a thing was inevitable, unavoidable. They'll be wrong. We are watching causation this very moment: institutions that know how and why to prevent things from falling apart and which nonetheless sit back and do nothing.

It's a dismal prospect, all right, and in the future the collapse of the eurozone — if it happens — will probably become a textbook example of the difficulty of collective action, right along with climate change and the League of Nations. In the long term, Europe's periphery needs to credibly commit to even greater labor market reforms than they already have, but further reforms seem politically hopeless and no one really knows how to make them credible in any case. In the short term, Europe's core needs to pony up more money, but that's politically hopeless too, especially in the absence of credible long-term reforms in the periphery. And so the entire continent is stuck. The lack of a mechanism to commit to credible long-term reforms prevents any credible short-term action, and the lack of credible short-term action makes long-term disaster a growing certainty.

Brad DeLong shakes his head in dismay:

I feel as though I am sitting through a Charlie Kindleberger lecture about Europe in the early 1930s. Every country thinking that the global and continental level of aggregate demand was somebody else's business. Every country thinking that if only it could impress international investors with its creditworthiness that investment would flow to it and away from other countries. Nobody willing to act like a hegemon. And nobody upset at the absence of a hegemon willing to act responsibly.

Three more months of this and I will be calling on European sovereigns to incorporate themselves in Delaware as bank holding companies and join the Federal Reserve System...

We're now in — what? Phase 4 of the euro crisis? Phase 5? I've lost count. At some point, though, the latest half measure from the great and good of Europe won't calm markets for even a week, let alone six months. When that happens — if it happens — we'll all be well and truly screwed.

Does the Pentagon Still Know How to Build Airplanes?

| Wed May 2, 2012 10:03 AM EDT

Here is today's news in military aviation. First, the F-22:

Some of the nation's top aviators are refusing to fly the radar-evading F-22 Raptor, a fighter jet with ongoing problems with the oxygen systems that have plagued the fleet for four years. At the risk of significant reprimand — or even discharge from the Air Force — fighter pilots are turning down the opportunity to climb into the cockpit of the F-22, the world's most expensive fighter jet.

And here's Winslow Wheeler on the everything-but-the-kitchen-sink design that is the F-35:

This grotesquely unpromising plan has already resulted in multitudes of problems — and 80 percent of the flight testing remains. A virtual flying piano, the F-35 lacks the F-16's agility in the air-to-air mode and the F-15E's range and payload in the bombing mode, and it can't even begin to compare to the A-10 at low-altitude close air support for troops engaged in combat. Worse yet, it won't be able to get into the air as often to perform any mission — or just as importantly, to train pilots — because its complexity prolongs maintenance and limits availability.

....The bottom line: The F-35 is not the wonder its advocates claim. It is a gigantic performance disappointment, and in some respects a step backward. The problems, integral to the design, cannot be fixed without starting from a clean sheet of paper.

It's just a coincidence that I read these two stories within five minutes of each other, and neither of them says anything new, really. We've known this stuff for years. But it does make you wonder why we seem to have lost the ability to build a next generation fighter that works well at a reasonable cost. Have we reached some inherent plateau of complexity that we're not currently able to surpass? Have the smartest engineers all decamped to Silicon Valley? Or what? These are hardly the first Pentagon programs to sink under their own weight, but they're certainly among the longest-lasting and highest-profile failures ever. I wonder what's really going on here.

Democrats Have Moved to the Right, Not the Left

| Tue May 1, 2012 8:42 PM EDT

This morning I mentioned (and praised) Norm Ornstein and Thomas Mann's new book, It's Even Worse Than It Looks, which basically blames Republicans for the collapse of governance over the past couple of decades. The headline on the op-ed version of their book makes the point even more bluntly: "Let's just say it: The Republicans are the problem."

But Matt Steinglass catches even Ornstein and Mann not quite having the courage of their convictions. In the op-ed, they use a football metaphor to describe how the two parties have evolved since the end of the Reagan era: "While the Democrats may have moved from their 40-yard line to their 25, the Republicans have gone from their 40 to somewhere behind their goal post." But that's really not true:

The Democrats, as far as I can see, have moved from their 40-yard-line to midfield, or their opponents' 45. As recently as the Clinton presidency, Democrats actively pushed for gun control, defence budgets under 3% of GDP, banning oil exploration off America's Atlantic and Pacific coasts, a public option or single-payer solution to universal health insurance, and...well, Clinton-era progressive income-tax rates. Today these positions have all been abandoned. And we're talking about positions held under Bill Clinton, a "third way" leader who himself moved Democratic ideology dramatically to the right, the guy responsible for "ending welfare as we know it". Since then, Democrats have moved much further yet to the right, in the fruitless search for a compromise with a Republican Party that sees compromise itself as fundamentally evil. The obvious example is that the Democrats in 2010 literally passed the universal health-insurance reform that had been proposed by the GOP opposition in the Clinton administration, only to find today's GOP vilifying it as a form of Leninist socialist totalitarianism.

And Matt doesn't even mention education policy, civil liberties, or crime, all areas where Democrats have also moved to the right since the end of the '80s.

So where have Democrats moved to the left? Gay rights is one area, I suppose. Climate change is another: at least Obama tried to pass a cap-and-trade bill. And you could say that compared to the Clinton/Rubin era, Democrats are a bit more willing to regulate the financial sector than they used to be. Beyond that, there are maybe a couple of other arguable cases, but nothing of much significance.

The irony here is that Ornstein and Mann are explicitly arguing that reporters and pundits should drop the "both sides are responsible" pose and call a spade a spade. But even they feel the need to hedge a little. Nevertheless, the truth is that both sides haven't moved away from the center. Only Republicans have, and Democrats have spent the past 20 years chasing them in hopes that eventually they could reach some kind of reconciliation. But it never did any good. The Democratic move rightward was interpreted not as a bid for compromise somewhere in the middle, but as a victory for a resurgent conservative movement that merely inspired them to move the goalposts even further out.

Is it any wonder that so many Democrats are no longer in any mood to appease the right? It hasn't exactly been a winning strategy for liberal ambitions, has it?

No Room for Gays in the Republican Party

| Tue May 1, 2012 5:02 PM EDT

Molly Ball on April 24, 2012:

The recent hiring of Richard Grenell, Mitt Romney's openly gay foreign-policy spokesman, represents a breakthrough in the world of Republican presidential campaigns. Grenell isn't the first out gay person to serve as a high-level staffer to a GOP nominee, but as far as I can tell, he is the first such press spokesman — the first to serve as the public face of the all-but-certain Republican nominee — and on the historically sensitive issue of national security, no less.

Congratulations, Mitt! This is a long overdue sign of increased tolerance and — wait. What's that? He's gone already? Here's Jennifer Rubin today:

Richard Grenell, the openly gay spokesman recently hired to sharpen the foreign policy message of Mitt Romney’s presidential campaign, has resigned in the wake of a full-court press by anti-gay conservatives.

....According to sources familiar with the situation, Grenell decided to resign after being kept under wraps during a time when national security issues, including the president’s ad concerning Osama bin Laden, had emerged front and center in the campaign....The ongoing pressure from social conservatives over his appointment and the reluctance of the Romney campaign to send Grenell out as a spokesman while controversy swirled left Grenell essentially with no job.

Well, that's that. The Republican base doesn't just oppose gay marriage on principle, they oppose the very idea of allowing someone who's openly gay to serve in any kind of highly visible position. And in Republican-land, if you get into an argument with the base, the base wins.

Building Better Kids: A Big Idea We Should Embrace

| Tue May 1, 2012 2:25 PM EDT

Dana Goldstein says that if she could have her pick of one big idea to inject into the presidential campaign, it would be universal pre-K schooling:

Any radical rethinking of American public policy ought to start with a consideration of one of our most politically neglected populations: The majority of 3-to-5-year-olds who have no access to high-quality, low-cost educational options. As scientists have learned more about the brain, they've concluded the early years are the most crucial ones for cognitive development. Seventy-five percent of middle-class kindergarteners can write their own names, compared to just about half of poor kindergartners. The typical middle-class 5-year old can identify all 26 letters of the alphabet on her first day of school; a 5-year old living in poverty may know only two letters. By first grade, middle-class children have double the vocabulary of their low-income peers.

Regular readers know that I'm on board with this. In fact, aside from universal healthcare, it's about the only big-ticket social program that I'm completely sold on. My reasons, however, are a little different than Dana's. Universal pre-K might very well raise academic achievement, but frankly, the evidence on that score is fairly thin. Nonetheless, there are good reasons to support universal pre-K anyway.

We all know that nothing is certain except death and taxes, but with that caveat out of the way I think we can safely say that there's a pretty compelling body of evidence that pre-K has a ton of benefits. It might raise IQs and jumpstart academic achievement — and certainly won't do any harm — but that's the least of its effects. A growing body of research suggests that pre-K increases high school completion rates; reduces rates of substance abuse; reduces felony rates; increases lifetime income; and improves non-IQ cognitive traits like the ability to delay gratification, the ability to hold a job, and the ability to control your temper. What's more, there's a growing body of evidence that especially bad home environments cause permanent biological damage and can do it before the age of two.

So it's not just pre-K. It's also things like home nursing visits and better childcare in our poorest neighborhoods. And it wouldn't be cheap. But as near as I can tell, taking, say, $100 billion out of K-12 education and redirecting it to pre-K would almost certainly be a pure win. That might not be the best way to fund it, but if political realities prevent us from raising more money in the near future, shifting spending would be a second-best alternative. Given the almost endless procession of educational reforms that turn out to have no measurable effect once you scale them up or study them for more than a couple of years, I doubt that decreasing funding for K-12 would have anywhere near as big an effect as increasing funding for pre-K. There are too many interest groups dedicated to K-12 funding to make this kind of funding shift easy, but it's something worth pushing for anyway.

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There's a Whole Lot of Crazy People in America

| Tue May 1, 2012 12:45 PM EDT

Years ago the political blogosphere became overwhelmed by the growing popularity of Outrage of the Day™ blogging. These days there are usually four or five of these stories each day, all of them covered by the usual suspects before they move on to the next day's outrages and all of them following a familiar pattern. Basically, somebody somewhere said something dumb/outrageous/offensive/whatever, which means we're all going to spend the day explaining exactly why the remark was dumb/outrageous/offensive/whatever and why we're personally outraged/offended/whatever by it.

I do some of this myself, so it's not like I'm purer than Caesar's wife here, but for the most part I find it pretty tiresome. However, via Dave Weigel, I learn today that David Wong has solved a problem for me: what to call this phenomenon. "Outrage of the Day" has never felt quite right, but I've never taken the time to figure out a better handle for it. Here's Wong, in his listicle of "5 Ways to Spot a B.S. Political Story in Under 10 Seconds":

#2. The Headline Is About a "Lawmaker" Saying Something Stupid

In every single group of human beings, you have a certain percentage of crazy shitheads. Find me an organization of a million charity workers who have devoted their lives to saving homeless golden retrievers, and I'll bet my life that within that group I can find a faction of crazy shitheads.

....So if you see a headline citing something a "lawmaker" said, the first thing you should know is if it's someone with actual power with implications on policy (i.e., a senator stating how he or she is going to vote on upcoming legislation) or if it's simply a nobody who's being held up as the Crazy Shithead of the Week (CSotW).

For instance, in the headline earlier about the CSotW comparing rape to a flat tire, the crazy shithead was a member of the Kansas state legislature — one of 165 members of the body that makes laws in Kansas. This guy is so hugely important that it took a whopping five thousand votes to elect him. You could fit every one of his supporters in a high school gym. Which is to say, he has just slightly more power to enact law than you do. And none outside of Kansas.

Wong's point in the first paragraph is one that I usually refer to as the "300 million person problem." The United States has a population of over 300 million, and that's a number so vast that you can always find a large number of people doing some particular thing, no matter how stupid it is. Interest groups take advantage of this all the time, filling their monthly newsletters with outrages against common decency even though most of these outrages are, in fact, vanishingly rare. But in a population of 300 million, even 0.0000001% of the population amounts to 30 separate people doing 30 separate outrageous things every month. That's plenty for a newsletter.

As for the rest, my only change would be to replace week with day. Or maybe hour. So the acronym probably ought to be CSotH. Welcome to modern politics.

Clouds Are the Last Hope of the Climate Deniers

| Tue May 1, 2012 12:03 PM EDT

The New York Times reports today that climate skeptics have pretty much run out of plausible pseudo-science to support their claim that global warming is a myth. Sunspots are a joke. Weather station innacuracy isn't an issue. Paleoclimate reconstructions seem to be fine. Urban heat islands aren't distorting measurements. And no, it hasn't been getting cooler since 1998.

According to Justin Gillis, the deniers have only one arrow left in their quiver: cloud formation. Climate scientists remain unsure of the effect of cloud formation on weather patterns, and this has given MIT's Richard Lindzen all the opening he needs:

When Dr. Lindzen first published this theory, in 2001, he said it was supported by satellite records over the Pacific Ocean. But other researchers quickly published work saying that the methods he had used to analyze the data were flawed and that his theory made assumptions that were inconsistent with known facts. Using what they considered more realistic assumptions, they said they could not verify his claims.

Today, most mainstream researchers consider Dr. Lindzen’s theory discredited. He does not agree, but he has had difficulty establishing his case in the scientific literature. Dr. Lindzen published a paper in 2009 offering more support for his case that the earth’s sensitivity to greenhouse gases is low, but once again scientists identified errors, including a failure to account for known inaccuracies in satellite measurements.

Dr. Lindzen acknowledged that the 2009 paper contained “some stupid mistakes” in his handling of the satellite data. “It was just embarrassing,” he said in an interview. “The technical details of satellite measurements are really sort of grotesque.”

If Lindzen is the climate deniers' last hope, they should probably just give up the fight right now. But they won't, because Gillis is wrong: clouds aren't their last hope. Human greed and self interest are their last hope, and there's very little chance of that diminishing anytime in the near future. The deniers don't want to believe, so they don't.

As for Lindzen, this is where I'd normally link to the official 5,000-word takedown from Joe Romm, but I just flipped over to Climate Progress, and to my surprise there's nothing there yet. But check back later in the day. I'm sure he'll have chapter and verse on the good doctor before long.

UPDATE: Joe comes through! Full takedown here.

Delta Air Lines Buys an Oil Refinery

| Tue May 1, 2012 11:10 AM EDT

Matt Yglesias brings to my attention this morning a deal announced by Delta Air Lines to buy its very own jet fuel refining plant. Here's the explanation from Delta's CEO:

While Delta will remain hostage to fluctuating crude oil costs, the facility would enable it to save on the cost of refining a barrel of jet fuel, which is currently more than $2 billion a year for Delta and has been rising in the wake of U.S. refinery shutdowns, said Delta Chief Executive Richard Anderson. "What we're tackling here today is the jet crack spread, which you cannot hedge in the marketplace effectively," Anderson told reporters during a phone briefing. "It's the fastest single growing cost in our book of expense at Delta."

OK, so Delta thinks refinery profit margins are too high, and they don't feel like making refinery owners rich at their expense. But then there's this later in the article:

The refinery is expected to resume operations in the third quarter, Delta said, about a year after ConocoPhillips idled the plant as rising imported crude oil costs, a collapse in demand and tough competition from foreign refiners crushed margins.

This makes sense. After all, why would ConocoPhillips shut down the plant if it were making windfall profits?

Matt paints this acquisition as a failure of the financial industry, which ought to be able to help Delta hedge the cost of jet fuel more efficiently. Maybe so. But I'm just flat confused. If a collapse in demand and tough competition from foreign refiners has crushed profit margins, then what is Delta complaining about? It sounds like it's a buyer's market for jet fuel these days. And what on earth makes Delta think that it can run a refinery more efficiently than someone who's fighting tooth and nail for business in the free market? If they can really do that, it's not a failure of Wall Street, it's a failure of capitalism. This whole deal sounds crazy. Maybe ConocoPhillips should have bought Delta instead. 

Paul Krugman Says Debates Are Worthless

| Tue May 1, 2012 10:23 AM EDT

Paul Krugman "debated" Ron Paul yesterday, and afterward he had an epiphany: debates are useless.

Think about it: you approach what is, in the end, a somewhat technical subject in a format in which no data can be presented, in which there’s no opportunity to check facts (everything Paul said about growth after World War II was wrong, but who will ever call him on it?). So people react based on their prejudices. If Ron Paul got on TV and said “Gah gah goo goo debasement! theft!” — which is a rough summary of what he actually did say — his supporters would say that he won the debate hands down; I don’t think my supporters are quite the same, but opinions may differ.

Krugman is right, but I think he's also missing the point here. Wars of ideas are typically won in print: in journals, in books, in magazine articles, and in monographs. The audience is fellow professionals in your field, the language is often technical and abstruse, and you keep score by counting citations, being invited to conferences, and amassing disciples.

Public debates, including their gruesome modern variant, the three-minute hit on cable TV, aren't about that. They're solely designed to influence public opinion, and you keep score at the ballot box. Nobody cares if Ron Paul is technically right about the Romans debasing their currency, and nobody cares whether that really has anything to do with the modern global economy. All that matters is whether he's found an analogy that moves a few of the rubes to his side. Truth isn't just an obstacle in public debates, it's a handicap.

If you want to increase your understanding of a subject, public debates are worthless. But that's because that isn't their purpose. Their purpose is emotional appeal, and understanding actively gets in the way of that. Ron Paul already knows that. I hope Krugman does too.