Kevin Drum - June 2012

Fed: Income and Wealth Have Plummeted

| Mon Jun. 11, 2012 5:50 PM EDT

The Federal Reserve published its triennial look at family income and wealth today, and it ain't pretty. The chart on the right provides the basics. The poorest families (far left) showed a slight gain in income since 2001 but a 35% loss in wealth. The richest families (far right) showed flat incomes and a 16% increase in wealth. The families in the middle — the vast majority of the country — showed substantial losses in both income and wealth.

Overall, median net worth dropped 27% between 2001 and 2010. For middle class families this overwhelmingly represents housing wealth: the housing bust since 2007 more than wiped out all the gains they saw during the housing boom. And although there have been gains in paying off debt since then, they've been small:

Despite these setbacks, consumers have continued to spend surprising amounts of money in recent years, helping to keep the economy growing at a modest pace. The survey underscores where the money is coming from: Americans are saving less for future needs and making little progress in repaying debts.

....The report highlighted the fact that households had made limited progress in reducing the amount that they owed to lenders. The share of households reporting any debt declined by 2.1 percentage points over the last three years, but 74.9 percent of households still owe something and the median amount of the debt did not change.

It's unlikely that these numbers have changed substantially in the past 18 months. If you want to know why the recovery has been so sluggish, you don't need to look much further than this.

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The Fight Over Evolution Isn't Actually All That Important

| Mon Jun. 11, 2012 1:04 PM EDT

I'm not especially trying to pick on Andrew Sullivan here, but today he echoed a meme that I now feel like I've heard a million times and that really, really needs some pushback. He's responding to Gallup's latest survey about evolution, in which 46% of Americans say God created humans in their present form sometime in the past 10,000 years:

This chart is a useful tonic to anyone feeling optimistic about bringing the country together....I'm not sure how many of the 46 percent actually believe the story of 10,000 years ago. Surely some of them know it's less empirically spported than Bigfoot. My fear is that some of that 46 percent are giving that answer not as an empirical response, but as a cultural signifier. That means that some are more prepared to cling to untruth than concede a thing to libruls or atheists or blue America, or whatever the "other" is at any given point in time. I simply do not know how you construct a civil discourse indispensable to a functioning democracy with this vast a gulf between citizens in their basic understanding of the world.

Come on. This 46% number has barely budged over the past three decades, and I'm willing to bet it was at least as high back in the 50s and early 60s, that supposed golden age of comity and bipartisanship. It simply has nothing to do with whether we can all get along and nothing to do with whether we can construct a civil discourse.

The fact is that belief in evolution has virtually no real-life impact on anything. That's why 46% of the country can safely choose not to believe it: their lack of belief has precisely zero effect on their lives. Sure, it's a handy way of saying that they're God-fearing Christians — a "cultural signifier," as Andrew puts it — but our lives are jam-packed with cultural signifiers. This is just one of thousands, one whose importance probably barely cracks America's top 100 list.

And the reason it doesn't is that even creationists don't take their own views seriously. How do I know this? Well, creationists like to fight over whether we should teach evolution in high school, but they never go much beyond that. Nobody wants to remove it from university biology departments. Nobody wants to shut down actual medical research that depends on the workings of evolution. In short, almost nobody wants to fight evolution except at the purely symbolic level of high school curricula, the one place where it barely matters in the first place. The dirty truth is that a 10th grade knowledge of evolution adds only slightly to a 10th grade understanding of biology.

Now, I think evolution should remain in high school texts anyway. Why? Because it's true. Biology is a science, and evolution is one of the pillars of modern science. For me, that's a cultural signifier every bit as much as a literal reading of the Bible is for 46% of the country. But you know what? I could spend an entire day arguing politics and economics and culture with a conservative and never so much as mention evolution. It's just not that important, and it doesn't tell us much of anything about our widening political polarization. We should keep up the fight, but at the same time we shouldn't pretend it has an epic significance that it doesn't. I'm not optimistic about anyone or anything "bringing the country together," but not because lots of people choose to deny evolution. Frankly, that's one of the least of our problems.

Breaking: Conservatives Still More Disciplined Than Liberals

| Mon Jun. 11, 2012 11:22 AM EDT

On May 31, Tod Kelly TIVOed three hours of prime-time Fox News and three hours of prime-time MSNBC. Then he watched them. As a nickel summary, let's just say he was.... unimpressed. It was almost exclusively spittle-flecked ranting for all six hours except for Rachel Maddow. His entire (long) summary is here, but here's one interesting observation:

All three shows on FOX essentially cover the same four stories, in different orders. (Those stories are the Wisconsin recall, birtherism, planned parenthood promotes gender-based abortion, and the obligatory anti-Obama story.) There is some variation in the Obama smack-downs, but all of the others hammer home the exact same arguments using the exact same verbiage; each is pretty much interchangeable with the other, and might well have been penned by a single source.

....On the other hand, MSNBC has only one story covered by all three programs: the obligatory anti-Romney segments, which do not have the uniformity in commentary that FOX has with its anti-Obama segments. (And the truth is that grouping Maddow’s commentary with Shultz’s or O’Donnell’s is a huge stretch. Shultz and O’Donnell’s Romney rants seem more akin to the FOX anti-Obama screeds, politics aside.) Past that there is very little overlap at MSNBC. Whereas FOX’s shows have the appearance of a concerted and strategized effort, the hosts of MSNBC are all over the map.

And there you have it: liberalism vs. conservatism in a nutshell. We may be able to rant as well as they do, but we're just not as disciplined about it. The Fox hosts get their marching orders in the morning, and off they go. The memes of the day get promoted in lockstep. (And, as Tod would have noticed if he'd watched all day, these same memes are promoted, sometimes subtly and sometimes not, throughout the day on other programs as well.)

But liberals? Well, over the past few years we've decided that we're willing to yell into the camera too if that's what it takes to compete, but by God no one tells us what to say. That's just too humiliating. However, I suspect that this is at least part of the reason that conservative memes find their way into the mainstream media more often and more forcefully than liberal memes. They just repeat theirs more vigorously. Pretty good strategy, huh?

Chart of the Day: Kicking the Can Now Works for Only a Few Hours in the Eurozone

| Mon Jun. 11, 2012 10:25 AM EDT

The chart below comes via Brad Plumer, and it shows bond yields in Spain (orange) and Italy (gray). As you can see, when markets opened on Monday after this weekend's bailout of Spanish banks, yields settled down to about 6%. Hooray! But instead of a few months — or at least a few weeks — of relief before everyone got jittery again, this time we got only a few hours. By noon, yields were well above 6% in Spain and touching 6% in Italy.

It's pretty obvious that after four or five go-arounds in the eurozone crisis, financial markets just aren't impressed with stopgap measures anymore. Not even for a short time.

So much has been written about the eurozone crisis, both by me and by others much smarter than me, that it feels pointless to write about it again. The eurozone needs more fiscal consolidation, it needs more transfers from rich to poor countries, it needs to stop running persistent internal trade deficits, and it needs to abandon austerity in the short term. All of these things are politically nearly impossible, and yet, they're the only solution aside from a crackup. The financial markets are now making it clear that they've figured this out and won't be bought off with anything less.

Do You Give Money To Panhandlers?

| Sat Jun. 9, 2012 11:48 AM EDT

New York magazine has a regular feature where they ask various luminaries a short list of questions and print the answers. The questions are always the same, and one of them is "Do you give money to panhandlers?" Here are the answers from their past year's worth of interviews:

  • I used to all the time. Now it's 50/50.
  • You know, I try not to, but sometimes you should. So sometimes I do.
  • Yes.
  • From time to time....But it's very capricious.
  • Not always.
  • On subways. It’s not like a rule or anything: only subways. It’s just I’m always very distracted on the street.
  • Always.
  • Yes, unless they are clearly high or wasted.
  • Only when my kids (ages 7 and 4) are with me.
  • Sometimes — it's on a case by case basis, but I always give my leftovers away.
  • Seldom. But always to those Mexican musicians on the 3 train.
  • Sometimes.
  • Yes.
  • Yes. I give money, food, to whoever.
  • Musicians and street performers almost always. Panhandlers sometimes.
  • Depends — it’s case by case.
  • Yes.
  • All the time.
  • Yes, sometimes.
  • Yes.
  • Depends on the panhandler.
  • When they play instruments. Not like, every time I see a musician I'll give them money, but usually if I give to panhandlers it'll be if they're playing an instrument.
  • Yes, and all buskers on principle.
  • Yes.
  • Always.
  • Only if they entertain me.
  • Yes, but I often feel I choose the wrong ones.
  • Occasionally, but never to those in expensive down jackets, new boots, and designer jeans.
  • Yup!
  • Sometimes.
  • Why not?
  • Yesss, I cant help it. I always feel deep inside that one day that could be me.
  • Almost always.
  • I do, not all the time, but I do.
  • I choose to share food, water, and a smile.
  • I give them money if I find them entertaining and not annoying.
  • I do. Who doesn’t need a little help now and then?
  • Yes.

This is, obviously, only a cross section of New Yorkers who range from well-off to rich. Still, I draw two conclusions from this. First, panhandlers would all have houses in the suburbs and buskers would all be millionaires if everyone here were telling the truth. Second, nobody is willing to just flat-out admit in a public forum that they don't give money to panhandlers. Marla Maples ("I choose to share food, water, and a smile") and Randy Cohen ("I try not to") come the closest. Discuss.

Friday Cat Blogging - 8 June 2012

| Fri Jun. 8, 2012 2:04 PM EDT

This has been a tough blogging week for me. The news has been slow, I'm still feeling inexplicably jetlagged, and I'm annoyed by my inability to come to grips with all the latest news about drone strikes and what I think about them. So catblogging is more than normally welcome today. On the left, we see the shadow silhouette of Domino as she perches herself on the table in front of a window. On the right, Inkblot is obviously still trying to recover from the trauma of spending two weeks in a kennel. He seems to be coming along pretty well, no?

Enjoy your weekend, everyone. I promise that next week will be better.

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Obama's Big Stick on Healthcare Reform

| Fri Jun. 8, 2012 1:49 PM EDT

This doesn't strike me as very big news, but congressional Republicans have apparently released copies of some emails that were exchanged between the White House and the pharmaceutical industry during negotiations over the healthcare reform bill. Here is Peter Baker of the New York Times:

On June 3, 2009, one of the lobbyists e-mailed Nancy-Ann DeParle, the president’s top health care adviser. Ms. DeParle sent a message back reassuring the lobbyist. Although Mr. Obama was overseas, she wrote, she and other top officials had “made decision, based on how constructive you guys have been, to oppose importation on the bill.” Just like that, Mr. Obama’s staff abandoned his support for the reimportation of prescription medicines at lower prices.... 

“There was no way we had the votes in either the House or the Senate if PhRMA was opposed — period,” said a senior Democratic official involved in the talks, referring to the Pharmaceutical Research and Manufacturers of America, the drug industry trade group.

Republicans see the deal as hypocritical. “He said it was going to be the most open and honest and transparent administration ever and lobbyists won’t be drafting the bills,” said Representative Michael C. Burgess of Texas, one of the Republicans on the House Energy and Commerce subcommittee that is examining the deal. “Then when it came time, the door closed, the lobbyists came in and the bills were written.”

Some of the liberals bothered by the deal-making in 2009 now find the Republican criticism hard to take given the party’s long-standing ties to the pharmaceutical industry. “Republicans trumpeting these e-mails is like a fox complaining someone else raided the chicken coop,” said Robert Reich, the former labor secretary under President Bill Clinton. “Sad to say, it’s called politics in an era when big corporations have an effective veto over major legislation affecting them and when the G.O.P. is usually the beneficiary.”

This is all stuff we've known for years, and the new emails don't seem to add an awful lot other than a bit of detail. The spin the Times puts on this is that it's unusual because Obama had denounced Big Pharma so strongly during the 2008 campaign, but this strikes me as painfully naive. Attacks like this are usually done precisely to get public opinion on your side and soften up your opponents so they'll be more likely to deal once you're in office. As Baker writes of the negotiations themselves, "The White House depicted in the message traffic comes across as deeply involved in the give-and-take, and not averse to pressure tactics, including having Mr. Obama publicly assail the industry unless it gave in on key points."

Right. And these are exactly the kind of hardball tactics that most liberals think Obama should engage in more often. It is, if you like, Obama acting a bit like LBJ. Perhaps, if Republicans had been genuinely willing to cooperate on healthcare and provide Obama with a few more votes, this sort of thing might not have been necessary. But they weren't, so it was.

Obama: Private Sector is "Doing Fine"

| Fri Jun. 8, 2012 11:24 AM EDT

Zeke Miller provides us with the meme of the day:

President Barack Obama offered up a gift to Republicans Friday morning, declaring "the private sector is doing fine," at a White House press conference.

"Where we are seeing weaknesses in our economy, had to do with state and local government, often times cuts initiated by governors or mayors who are not getting the kind of help that they have in the past from the federal Government, and who don't have the same flexibility as the federal government in dealing with fewer revenues coming in," Obama continued, calling on Congressional Republicans to take steps to help local and state governments create jobs.

Needless to say, Republicans have pounced on Obama's suggestion that the private sector is "doing fine." Here's the Romney campaign:

The 23 million Americans who are struggling for work are not ‘doing fine.’ Job creators and small businesses are not ‘doing fine.’ The middle class is not ‘doing fine.’ Etc.

There's no question that Obama left himself wide open to this attack. It's an unusual gaffe from someone who's usually more careful with his words. Still, whether Republicans like it or not, Obama is more right than wrong. The private sector may not be "doing fine," but it's doing OK. Meanwhile, the public sector continues to struggle badly, shedding jobs and cutting back on spending, and this has been a big contributor to our anemic recovery. Paul Krugman has the charts on spending here, and I've got the chart on employment below. As you can see, the private sector has indeed rebounded from the depths of the recession and is now adding two million jobs per year. That's not great, but it's not terrible. The public sector, conversely, started cutting jobs even before the stimulus money ran out and is now shedding about 200 thousand jobs per year. That may be good for conservative small-government ideology, but it's a significant drag on an already fragile economy.

In Defense of the Fax Machine

| Fri Jun. 8, 2012 10:46 AM EDT

The Washington Post reports today that even as the fax machine is consigned to the dustbin of history in most of the world, it remains popular in Japan. Here are the basic stats:

As of March, according to Japan’s Cabinet Office, fax machines could be found in 59 percent of Japanese homes. (That penetration rate, after climbing for years, has peaked in the past five years.) Coming up with a similar number for the United States would require a “polite fiction,” said Jonathan Coopersmith, a Texas A&M University associate professor and an expert on the history of the facsimile.

Really? I have a fax machine in my home. Two of them, in fact. That's because, like millions of other people, Marian and I both have multifunction devices connected to our computers, and those multifunction devices include a fax machine. Perhaps the difference is that I actually have mine connected to a phone line, while most people don't bother.

But I'm curious about that. I have mine connected because (a) a phone cord came with the device, so it costs me nothing, and (b) I actually use it once in a while. But most people are sort of agog about that. Use a fax machine? Good God, man, that's just embarrassing. Why not carve out your message on a piece of granite and have a team of oxen haul it to its destination?

But every once in a while, it's still necessary to send a copy of something to someone. Just yesterday we faxed over a counteroffer on a piece of property we're trying to sell. The alternative is to scan the document and email it, but that's actually more work than just faxing. So why is the humble fax machine held in such contempt? Isn't it still occasionally a useful device to have around? And since for most of us who use multifunction devices it's free, why not use it?

I open this burning question to you, my loyal readership. What am I missing here?

Regulatory Uncertainty vs. Economic Uncertainty

| Fri Jun. 8, 2012 9:50 AM EDT

Jared Bernstein:

I’ve avoiding adding my voice to the uncertainty chorus—the idea that what’s holding back growth and hiring is uncertainty about the future of health care, tax, or environmental policy. It’s neither what businesses themselves say nor what economic theory would dictate as the cause of the current slump—that would be weak demand for their goods and services. Show me a business person who would leave profits on the table because of what might happen to health care reform in 2014 and I’ll show you a business person who will soon be busted.

But I’m coming around. Reading Fed speeches this week, looking at the upcoming fiscal slope and debt ceiling fights, watching Europe bumble along, and just trying to read the economic tea leaves—“uncertainty” is a pretty good word to describe the way a lot of people are probably thinking and feeling about the current economy right now.

I get what Jared is saying, but I wish he hadn't said it quite this way. There are two kinds of uncertainty here: regulatory uncertainty and economic uncertainty. Conservatives complain about the former regularly, but there's simply no evidence that regulatory uncertainty is, or ever has been, a significant issue for American businesses. In fact, all the evidence says exactly the opposite.

Economic uncertainty is a whole different thing, and there's really nothing here to come around on. That's been holding back investment and hiring for a long time, and it's always been one of the strongest arguments in favor of further fiscal and monetary stimulus. And the primary argument, as Jared suggests, is that it's good insurance. The upside is pretty strong, since the global economy is weak and full of risks, but the downside is negligible. There's virtually no risk to being more aggressive with either fiscal or monetary policy for the next couple of years. Interest rates are low, inflation is well controlled, and hiring still hasn't picked up. There's essentially zero chance of overheating. The fact that we've continued along our current tight-spending/tight-money path anyway is just plain crazy.