Kevin Drum - August 2012

Quote of the Day: Early Voting a Bad Idea Because it Makes it Easier for Blacks to Vote

| Sun Aug. 19, 2012 4:36 PM EDT

From Doug Preisse, chairman of the Franklin County Republican Party and a member of the elections board, on the reason he opposes extended voting hours in Columbus:

I guess I really actually feel we shouldn’t contort the voting process to accommodate the urban — read African-American — voter-turnout machine.

Points for honesty, I guess. Via Rick Hasen.

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Paul Ryan: Bailouts for Me, But Not for Thee

| Sun Aug. 19, 2012 12:13 PM EDT

Paul Ryan fought the 2009 stimulus bill but then worked to get stimulus dollars for his constituents. I don't have a problem with this. Once the bill had passed against his wishes, the money was going to be spent. Ryan's constituents deserved their share of the money as much as anyone else. After all, I think the mortgage interest deduction is bad policy, but that sure doesn't stop me from declaring it on my tax return.

Today, though, Kathleen Hennessey of the LA Times highlights a slightly lesser known part of Ryan's record: his vigorous efforts to save a GM plant in his hometown:

A General Motors plant, the lifeblood of his hometown, was set to close. The huge Suburbans and Tahoes from the Janesville production line were no longer in vogue. The aging plant was to stop production by Christmas — unless Ryan and other Wisconsin officials could save it.

Ryan, then the ranking Republican on the House Budget Committee, flew to Detroit to cajole GM executives. For more than an hour, he and other officials made a PowerPoint proposal that mixed union concessions with unprecedented state and local tax breaks for GM....Ryan helped pitch a $224-million proposal that included roughly $50 million in state enterprise zone tax credits, local government grants worth $22 million, and major contract concessions from the United Auto Workers union local.

But it soon became clear that the future of Janesville — and all of GM — hinged on federal intervention.

In late November, executives from Detroit's Big Three flew to Washington to ask for a bailout. The next day, Mitt Romney made his opposition clear in a New York Times op-ed titled, "Let Detroit Go Bankrupt."

Ryan disagreed. He supported a House bill that offered $14 billion in fast-tracked loans to GM and Chrysler. Ryan cited his district's "gut-wrenching" experience with layoffs, and a commitment to the auto industry. He also suggested that, under other circumstances, he might have voted no.

"At the forefront of my mind are jobs in southern Wisconsin and the retiree commitments to workers that could be placed in jeopardy under certain bankruptcy scenarios," Ryan said at the time. He said he backed the plan because it relied on previously appropriated money for auto technology loans, not added spending.

This is, needless to say, quite a different thing. Ryan didn't take advantage of a program that had been passed over his objections. On the contrary: he fought hard for a corporate bailout of the kind he now says he opposes. But back when it counted, he didn't oppose it. He supported it. Just like he supported the Bush administration's wars, Medicare Part D, No Child Left Behind, and TARP, even though none of them was paid for.

You might, of course, believe that Ryan had a genuine change of heart on January 20, 2009, and suddenly decided that the federal deficit was out of hand and needed to be reined in. Or you might believe that something else happened on that day. It's your call.

Why Do I Have 80 GB of Mysterious Crap on My Computer?

| Sat Aug. 18, 2012 8:12 PM EDT

A little while back I noticed that I had run out of room on my backup drive. That seemed kind of weird, since I don't have a huge amount of stuff on my primary (Windows 7) drive. So I looked around to see what was up.

Long story short, I have about 150 GB of stuff on my primary drive. Several different methods confirm this. However, it turns out there's another 80 GB of mysterious dark matter there, which (apparently) gets compressed into 75 GB of backup dark matter on my backup drive. I'm flummoxed. What is this stuff? As near as I can tell, I've accounted for everything: hidden files, system files, swap files, hibernation files, etc. etc. But there's still 80 GB more. What can it possibly be?

UPDATE: Mystery solved! It was 80 GB of restore points accumulated since the day I bought the PC, because that was the default setting my machine came with. I cut the maximum down to 15 GB and that restored 65 GB of free space. Thanks, everyone!

Paul Ryan and the Problem With Competitive Bidding

| Sat Aug. 18, 2012 1:40 PM EDT

Paul Ryan is in Florida today promoting his Medicare plan, but there's a part of his plan that he very carefully avoided talking about: what he'll do if his cost controls don't work.

Let's recap: Ryan's plan relies on competitive bidding to hold down costs. Insurance companies bid for Medicare contracts, and seniors all get a voucher that allows them to purchase the second cheapest plan. They can buy one of the cheap plans; they can buy standard Medicare (which submits a bid along with everyone else); or they can pay more and buy a more expensive plan.

By itself, there's nothing wrong with this. There's good evidence that competitive bidding is a useful part of the healthcare discussion and can indeed help control medical costs. But how much?

Critics like to point to Medicare Advantage to show that competitive bidding has been a failure. But that's a mistake: although MA has indeed been a failure, costing taxpayers more than traditional Medicare, that's partly because it's based on some rather convoluted formulas that prevent us from getting a good idea of what competitive bidding could accomplish if it were designed right. But there's another reason it's a mistake to focus on MA: you don't need to.

Instead, just focus on private insurance. When a corporation provides health insurance for its employees, what does it do? Answer: it sets some minimum requirements and then solicits competitive bids from insurance companies. After it gets the bids, it chooses one of the low bidders. This is competitive bidding in its purest form.

So how has that done at holding down healthcare costs? In case you need a hint, the charts on the right tell the story. Since 1999, according to the Kaiser Family Foundation, group insurance premiums have gone up 168%. And CBPP reports that private insurance costs have risen faster than Medicare costs consistently over the past four decades.

Private corporations all rely on competitive bidding, and it just hasn't done much to hold down costs. That's because the real source of America's high medical costs is the fact that we simply pay more than other countries for everything we get: more for doctors, more for procedures, more for hospital stays, more for drugs, and — yes — more for insurance. If you really want to hold down costs, you have to hold down costs at the source, and Paul Ryan's Medicare plan has no mechanisms for doing this. It relies solely on competitive bidding, and there's very little chance that this alone can keep Medicare costs from outpacing his "fallback" growth cap. It's a near certainty that his growth cap will be the real mechanism for reining in costs.

So again the question is: what happens if health providers bid for Medicare contracts but the bids all come in higher than Ryan's growth cap? Do premiums go up for seniors? Ryan doesn't say so, but then again, he also refuses to say what would happen. But there's no fairy dust here. If costs under the Ryan plan go up more quickly than his growth cap — and they almost certainly will — then someone has to pay the difference. And that someone is either beneficiaries or taxpayers or healthcare providers. There aren't any other choices.

But it can't be taxpayers, because that undermines the whole point of the plan. And it can't be providers, because Ryan's plan has no mechanism for cutting payments to providers. In fact, he and Mitt Romney have recently abandoned even the existing provider cuts contained in Obamacare.

So all that's left is seniors. Every year their voucher will cover less and less of the cost of the cheapest plan, and seniors will have to pay more and more out of their own pocket. By refusing to address this issue, Ryan has successfully kept things vague enough that no one can produce hard numbers about how much more seniors would end up paying. But it would be a lot.

Friday Cat Blogging - 17 August 2012

| Fri Aug. 17, 2012 2:46 PM EDT

When Marian gets home from work, her shoes are delightfully smelly. Delightful to a cat, anyway, for reasons that are beyond human ken. Last night I tried to snap a pic of Domino rolling around in Marian's shoes as if they were a grove of catnip, but none of them quite turned out. So instead you get this. This is Domino relaxing a bit after rolling around in Marian's shoes like they were a grove of catnip. I think she was still trying to decide if she was finished or if she should shove her snout deep into those lovely, lovely shoes one last time.

A Question for Paul Ryan

| Fri Aug. 17, 2012 2:37 PM EDT

Earlier this morning I wrote a post about the differences between Paul Ryan's 2012 Medicare plan and Paul Ryan's 2013 Medicare plan. My point was simple: the 2013 plan is quite different from the 2012 plan, and if we're going to attack his plan, we should be attacking the current one.

So here's the main point of attack: Ryan's 2013 plan relies on competitive bidding to lower costs. Healthcare providers all bid for Medicare contracts, and seniors get a voucher equal to the second lowest bid. That way, there are always at least two plans they can buy without having to fork out any money beyond the value of the voucher.

But Ryan also includes a "fallback" growth cap. The overall cost of Medicare won't be allowed to rise faster than GDP + 0.5%.

So here's the question reporters should be asking Ryan: What happens if all the bidders submit bids that are over the growth cap? Who pays the difference? Seniors?

If not seniors, then who? You can't just arbitrarily force everyone to lower their bids. Nor can you lower payments to providers for specific services, since you're just soliciting bids for insurance coverage, not paying providers directly for services. So what happens?

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Smart Machines Are in Our Future, Whether We Like It Or Not

| Fri Aug. 17, 2012 2:14 PM EDT

As the world becomes more complex, it rewards people who can deal effectively with complexity. So does this mean that income inequality is inevitably going to increase, as highly-educated elites gain a bigger and bigger advantage over the less educated? Ryan Avent, responding to Brink Lindsey's new ebook, Human Capitalism, isn't so sure. After all, the Industrial Revolution produced such high economic growth that even as less skilled workers replaced artisans, they ended up earning more money:

Now it could be the case that that era was the abberration and the more recent period of rising skill premiums and increased inequality the norm. But it's also possible that just as an earlier era of rising complexity erased the premiums earned by skilled craftsmen and transferred them to human cogs, a new period of innovation in machine thinking could wipe away the premium now commanded by many of today's craftsmen—doctors, lawyers, designers, engineers, and so on—and reallocate the gains to the hoi polloi.

It seems to me that the nature of the complementarities between human workers and an enormously complex economy are incredibly uncertain and difficult to predict. I also imagine there are many possible equilibria out there, and that which of those obtain is not unrelated to things like bargaining power. So while I endorse many of Mr Lindsey's conclusions and policy recommendations, which include things like a focus on early childhood education, I'm less sure that past economic performance is indicative of future results.

I agree, especially with Ryan's point that there's a very high level of uncertainty about how this will play out. In fact, I'm mainly linking to this for exactly that reason: because I believe it's something that deserves a lot of thought. Regardless of whether or not true artificial intelligence is in our near future, computer automation is bound to increase significantly, and in labor markets this is almost certain to shift even more bargaining power toward the owners of capital (who will own the machines) and away from unskilled and semi-skilled workers.

At least, that's probably what will happen by default. If we don't want it to happen, we're going to have to think long and hard about how to stop it.

Chart of the Day: Low Global Demand for Oil Probably Points to a Sluggish Global Economy

| Fri Aug. 17, 2012 12:51 PM EDT

Stuart Staniford notes that oil production, which plateaued in early 2012, has since dropped off:

OPEC has revised down their numbers for June significantly and both the IEA and OPEC show very slight increases in July relatively to June. The overall effect is now that production appears to have fallen about 1mbd in June versus the plateau level that obtained from January to May, and has not recovered in July....Prices rebounded slightly in June — but nowhere near the level of earlier in the year.

This is a bad economic indicator. If a drop in supply doesn't stimulate a rise in prices, it means either that inventories are high — which they aren't — or that global demand is dropping significantly. And if global demand is dropping, that most likely means the global economy is turning down.

It's just one data point. No need to start tearing your hair out over it. But it's a pretty big data point.

Programming Note: Ryan 2013 Is Not Ryan 2012

| Fri Aug. 17, 2012 12:23 PM EDT

Last night I got this in email from a regular reader:

Jennifer Granholm had a chart on Current less than an hour ago that showed that according the CBO in several years seniors would pay an average of $12,000 for their health coverage compared to about $6,000 now, and that the government, which is now paying an average of $8,000 for a senior’s medicare, would only be paying $6,000. That’s a big difference, and one you don’t mention: that the burden of costs would shift under the GOP plan from Uncle Sam to individuals.

I didn't see Granholm's show, so I don't know if this is an accurate summary of what she said. But it's a good excuse to make an explicit point that might be confusing some people: Paul Ryan's 2013 plan for Medicare is not the same as his 2012 plan for Medicare.

Ryan's 2012 plan was essentially a voucher that grew at the rate of general inflation. However, because healthcare costs are rising faster than overall inflation, this means the voucher wouldn't keep up with the growing cost of Medicare. As a result, a couple of decades down the road seniors could end up paying huge premiums. CBO estimates that under Ryan's 2012 plan, within a decade the government would be paying only 40% of the cost of an average Medicare premium. Seniors would be responsible for the rest. And it would get even worse a decade after that.

However, Ryan's 2013 plan is completely different. Under this plan, private providers submit bids for their Medicare policies. Their policies have to be equivalent to standard Medicare, which also submits a bid. Seniors then get a voucher equal to the second-lowest bid. Seniors still have to make the same premium payments they do today, but aside from that the voucher is guaranteed to cover 100% of the cost of at least two plans that are actuarially equivalent to standard Medicare. There's no risk of seniors being stuck with enormous bills because the voucher is too small.1 More details here.

There are plenty of things to dislike about Ryan's 2013 plan, but the truth is that it's not that bad. I doubt very much that it would hold down costs without other mechanisms in place, since it relies primarily on competition between insurance companies, and insurance companies simply aren't the main source of high healthcare costs in the United States. Still, if it doesn't work it wouldn't leave seniors high and dry. It's a big improvement over Ryan 2012.

But whatever you think of it, Ryan 2013 is the current plan, and it's the plan that Mitt Romney supports. It's very different from the plan that was (justifiably) savaged by the liberal community a year ago.

1Or is there? Like Obamacare, Ryan's plan includes an overall growth cap equal to GDP + 0.5%. But what happens if Medicare costs grow faster than that even with competitive bidding? The answer is: Ryan doesn't say. That doesn't mean that retirees will automatically get stuck with the bill if Medicare grows faster than the cap, but it does mean that Ryan isn't willing to guarantee that they won't.

Facebook: Latest Victim of Wall Street ADHD

| Fri Aug. 17, 2012 11:40 AM EDT

Here is everything that is wrong with Wall Street culture in a nutshell:

The deepening slide in Facebook Inc.'s stock is fueling talk once considered implausible on Wall Street and in Silicon Valley. Should Mark Zuckerberg, the social media visionary but neophyte corporate manager, step aside as CEO to let a more seasoned executive run the multibillion-dollar company?

...."There is a growing sense that Mark Zuckerberg, talented though he may be, is in over his hoodie as CEO of a multibillion-dollar public company," said Sam Hamadeh, head of research firm PrivCo. "While in many cases a company founder can, and does, grow into the job, things are happening so quickly that there is precious little time here for Zuckerberg to do that."

I'm not the biggest fan in the world of either Facebook or Zuckerberg. But we're talking about a guy who built the single biggest success in the social media universe and has a long track record of understanding that market better than anyone on the planet. ("Long" in social media terms, anyway.) Now, after a short three months — and that's a short time even in social media terms — investors are "restless." Give me a break.

Did Zuckerberg overvalue the stock during Facebook's public offering? Maybe. But nobody put a gun to investors' heads and made them buy it. Did this "siphon extra profit for the company"? Sure. But contrary to the febrile expectations of Wall Street executives who think the world guarantees them a quick profit every time they lift their eyebrows, that's what an IPO is for: to raise money for the company, not to give a guaranteed pop to early buyers. Zuckerberg would have been negligent not to squeeze every penny he could from the IPO.

As for the current slide in the stock: boo hoo. Early investors made a mistake. (Maybe.) That's their problem. They knew perfectly well that buying into Facebook was a risk, and they knew perfectly well that there was a chance the stock would drop when lockup periods expire. That's a risk with every IPO.

If Zuckerberg is demonstrably not ready for prime time a couple of years from now, fine. Push him to step down. But after three months? Get a grip, folks.