Kevin Drum - November 2012

Chickens, Beer, Books, Banks, and Glasses: Do You Recognize the Theme?

| Wed Nov. 14, 2012 2:35 PM EST

See if you can spot the common theme in three different pieces that I happened to read today. First up is "Obama's Game of Chicken," a piece in the Washington Monthly that tells the story of how small chicken farmers are now practically indentured servants to big poultry processors. The evolution of the industry started in the 50s, when processors changed from an open-market model to a contract model, but things remained OK all the way through the end of the 70s:

If a farmer didn’t like the terms offered by one company, he could, at the end of the contract period, simply switch to another. The basic balance of power between the farmers and the companies remained in place.

The change that finally upended this balance came in 1981. A group of Chicago School economists and lawyers working in the Reagan administration introduced a new interpretation of antitrust laws....Under Reagan, the Department of Justice narrowed the scope of those laws to promote primarily “consumer welfare,” based on “efficiency considerations.” In other words, the point of antitrust law would no longer be to promote competition by maintaining open markets.

....Although the change was strongly opposed by centrists in both parties, a number of left-wing academics and consumer activists in the Democratic Party embraced the new goal of promoting efficiency. The courts also soon began to reflect this political shift....In 1980, the four biggest meatpacking companies in the country controlled 36 percent of the market. Ten years later, their share had doubled, to 72 percent.

Next up is "Last Call," another piece in the Washington Monthly, about the fact that two gigantic multinational corporations now control manufacturing and distribution of 80 percent of the beer sold in America:

Prior to the 2008 takeover, Anheuser-Busch generally accepted the regulatory regime that had governed the U.S. alcohol industry since the repeal of Prohibition. It didn’t attack the independent wholesalers in control of its supply chain, and generally treated them well. “Tough but fair” is a phrase used by several wholesale-business sources to describe their dealings with the Busch family dynasty. Everyone was making money; there was no need to rock the boat.

All that changed quickly after Anheuser-Busch lost its independence....Today, with only one remaining real competitor, MillerCoors, the pressure it can put on its wholesalers is extraordinary. A wholesaler who loses its account with either company loses one of its two largest customers, and cannot offer his retail clients the name-brand beers that form the backbone of the market. The Big Two in effect have a captive system by which to bring their goods to market.

.... So distributors are caught in an impossible bind: they either do the brewer’s bidding, including selling their businesses to favored “Anchor Wholesalers,” or they lose Anheuser-Busch InBev as a client. And if the wholesalers try to push back? Anheuser-Busch InBev will get rough.

Finally, here is Tyler Cowen on how he expects the publishing industry to evolve:

I expect two or three major publishers, with stacked names (“Penguin Random House”), and they will be owned by Google, Apple, Amazon, and possibly Facebook, or their successors, which perhaps would make it “Apple Penguin Random House.” Those companies have lots of cash, amazing marketing penetration, potential synergies with marketing content they own, and very strong desires to remain focal in the eyes of their customer base. They could buy up a major publisher without running solvency risk. For instance Amazon revenues are about twelve times those of a merged Penguin Random House and arguably that gap will grow.

I made it too easy, didn't I? For more to cogitate about here, you might also want to revisit a recent 60 Minutes program about the eyewear market, and also think about how well the consolidation of the financial industry has worked out for us over the past decade or two.

Both parties, but Republicans especially, mostly spend their time protecting not the free market, as they insist, but big business interests. This is decidedly not the same thing, and it might well be that three or four vertically integrated giants in practically every industry isn't really all that good for the rest of us. This is just a thought, but in the long run, maybe competition really is a good thing. 

Advertise on MotherJones.com

Mandate, Schmandate: The Republican View of Elections

| Wed Nov. 14, 2012 1:06 PM EST

Paul Ryan, echoing perhaps the most popular GOP talking point of the week, says President Obama doesn't have a mandate because the American public returned a big Republican majority to Congress. As he told ABC News, if the public had really given Democrats a mandate, "they would have put Nancy Pelosi in charge of the House of Representatives."

Yeah, yeah. In 2008, the American public handed Barack Obama a huge victory and gave Democrats massive majorities in both the House and Senate. If you believe in mandates, that was as big as they come. And Paul Ryan didn't care. He opposed everything Obama did from day one. Ditto for the rest of the House Republican caucus.

In other words: who cares? Like everyone, Republicans believe in mandates when they win and they don't believe in them when they lose. Can we please stop talking about this nonsense?

Gerrymandering Not as Big a Deal as You Think

| Wed Nov. 14, 2012 12:48 PM EST

Democrats won over half the vote in House races this year, but still got blown out by Republicans, who return to Washington with a big majority of seats. Why? The obvious story is gerrymandering: Republicans in state legislatures drew themselves a whole lot of cozy districts last year that made it hard for Democrats to win.

Personally, I've been skeptical of this story for a couple of reasons. First, the research I've read in the past suggests that gerrymandering has only a modest effect. Not zero, but not huge, either. Second, as you may recall, Republicans blew the doors off Democrats in 2010, before any of this gerrymandering was done. That means they were the incumbent party going into 2012, and incumbents have a natural advantage.

But this is just my guess. What does the Science™ say? Eric McGhee brings the analysis:

We’ll drop our regular model and go bare bones. Two steps: 1) identify the relationship between this year’s actual election returns and the 2008 presidential vote in each district (calculated by Daily Kos), 2) use this relationship plus the 2008 presidential vote in the old districts to estimate what would have happened under the old lines. No incumbency, no assumptions about national climate. For the redistricting story to hold, this exercise must eliminate the discrepancy between Democratic vote share and seat share. Otherwise, something else is going on.

....Democrats do gain more seats under this simulation—seven more total—but fall far short of matching their predicted vote share. The point should be clear: even under the most generous assumptions, redistricting explains less than half the gap between vote share and seat share this election cycle.

In other words, even with the old 2008 district lines, Republicans still would have won a majority of seats this year. The new lines gave them, at most, seven additional seats, and McGhee thinks that even this probably overstates things. Bottom line: gerrymandering isn't nothing, but it's not a game changer. It's not the real story here.

Hindsight Bias and Obama's Victory

| Wed Nov. 14, 2012 12:04 PM EST

Brendan Nyhan writes today about the metamorphosis of campaign coverage:

The media has undergone a strange change of mindset. Immediately before last Tuesday’s election, many reporters and commentators ignored or dismissed the consensus among forecasters and betting markets that President Obama was very likely to defeat Mitt Romney and acted instead as if the candidates were neck and neck or Romney was ahead. Afterward, however, coverage of how Obama won betrayed far less uncertainty about the outcome of the election, which was frequently portrayed as a fait accompli—an inevitable consequence of how Romney’s image was defined by Obama’s early ads or overwhelmed by the President’s superior ground game.

Brendan says this is a result of hindsight bias, and I suppose that's true, sort of by definition. But there's nothing unique here. Before the Super Bowl, sports talkers chatter about how well the two teams are matched up. After the game, they talk about how the winner managed to win. Why? Because the game is over. They now know what worked and what didn't.

I'm not sure it's really fair to call this "bias." Once a contest is over, and you know who won, you also have a better idea of which tactics won. In the case of the 2012 election, reporters have concluded that defining Romney early worked and that Obama's ground game made a difference. If he had lost, they would have concluded the opposite. They might be wrong in those conclusions—hell, historians are still arguing about why the South lost Gettysburg even after 150 years of study—but there's nothing irrational about it. I happen to agree that reporters tend to overdo this, paying too little attention to things like economic fundamentals and the power of incumbency, but still, once you know how something turns out, it's perfectly sensible to conclude that the winner's tactics were effective and the loser's tactics weren't.

President Obama's Brand New Tax Plan That's a Year Old

| Wed Nov. 14, 2012 1:24 AM EST

Back in 2011, when President Obama was negotiating with John Boehner over extension of the debt ceiling, he offered up a deal that included $800 billion in tax increases (over ten years). While Boehner was waffling, a bipartisan committee produced a deal that would raise taxes by $1.2 trillion. Obama went back to Boehner and said he couldn't stick with the old deal when a bunch of Republicans had already agreed to $1.2 trillion, so that was his new offer. Boehner turned him down and talks collapsed.

Now a year and a half has passed and Obama just won reelection. So what's his offer now? $1.6 trillion over ten years. Take that, Republicans! The reaction from liberals has been generally positive: they're impressed that Obama is opening with a strong hand and upping the ante now that he has a mandate from the public.

But there's really no news here. Obama's proposal is the same one he campaigned on. A brief description is here, and a more detailed description from the Tax Policy Center is here. Here are the big ticket items:

  • Allow the Bush tax cuts on high earners to expire. $849 billion
  • Limit itemized deductions to 28 percent, close some loopholes and deductions on high earners, eliminate tax breaks for oil and gas companies, eliminate the carried interest loophole, plus a few other items. $584 billion
  • Create a special "Buffett Rule" tax rate for millionaires. $47 billion
  • Restore the estate tax to 2009 levels. $143 billion
  • Limit corporate income shifting to low-tax countries. $148 billion
  • Other miscellaneous tax increases and reductions. About -$200 billion
  • Total: $1.6 trillion

Bottom line: there's nothing special about this proposal. It's pretty much the same as the one in his 2013 budget, and it's pretty much the same one he's been running on for the past year. It surely didn't come as any surprise to Boehner or the rest of the Republican caucus, and it shouldn't be a surprise to anyone else either.

The Feds Should Quietly Allow Colorado and Washington to Experiment with Marijuana Legalization

| Tue Nov. 13, 2012 9:39 PM EST

Colorado and Washington both passed ballot measures legalizing marijuana in last week's election, and in both cases the new laws include product-labeling requirements, a ban on sale to minors, and substantial taxes. Mark Kleiman, co-author of Marijuana Legalization: What Everyone Needs to Know, says he'd like to know how this kind of a regulatory regime works out, and all the studies in the world won't tell us. You just have to try it and find out what happens. So he hopes that President Obama will quietly allow the two states to give it a try:

The federal government could shut down both of those experiments, if it were determined to do so....But it would make it impossible to learn anything useful from the Colorado and Washington experiments.

So why shouldn’t the federal government cut Colorado and Washington some slack? As long as those states prevent marijuana grown under their laws from crossing state lines and thereby subverting marijuana prohibition in the rest of the states, the Justice Department could step back and let the consequences of the new policies play themselves out. They might succeed, or they might fail. In either case, the rest of us could learn from their experience.

I doubt that either state can effectively prevent locally-grown marijuana from crossing state lines, but hell, they can't prevent it now either. So I'm with Mark: there's no need to announce any public change of policy, but Obama should tell DEA to lie low for a while and see how Colorado and Washington do. A controlled experiment like this is the best way of finding out the effect of full legalization of marijuana. Does it lead to higher consumption? Is it a gateway drug? Will it reduce consumption of alcohol?

Three years ago, in a story given the most peculiar headline ever by my editors, I predicted that the answers would be (a) yes, moderately; (b) no; and (c) quite possibly. And since substitution of alcohol consumption with marijuana use would probably be a net positive, it's well worth a try.

I also predicted this would take a while: "Ten years from now," I concluded, "as the flower power generation enters its 70s, you might finally be able to smoke a fully legal, taxed, and regulated joint." If the feds agree to back off, I will have been seven years off. At least for some of us.

Advertise on MotherJones.com

The Democrats' Southern White Problem

| Tue Nov. 13, 2012 6:46 PM EST

One of the key takeaways from the 2012 election is the fact that President Obama did well among blacks, Hispanics, and Asians, but poorly among whites. According to the national exit polls, Obama won only 39 percent of the white vote. That compares to 43 percent in 2008 and 41 percent for John Kerry in 2004.

But that's misleading. I don't have access to the internals of the exit polls, but Pew did a survey shortly before the election that showed Obama winning by three percentage points. This is pretty close to the final result, so their detailed breakdowns are probably pretty accurate too. So what do they say about the white vote? Here it is in colorful bar chart format.

One of these bars is not like the other. Obviously Democrats could stand to do better with white voters in the West and Midwest, but the real reason for their poor national showing among whites is the South. Overall, Obama won about 46 percent of the white vote outside the South and 27 percent of the white vote in the South. That's a difference of nearly 20 points. In other words: Democrats don't have a white problem. They have a Southern white problem, and that's a whole different thing. The press should be more careful about how they report this.

Fear of Obamacare Plummets After Election

| Tue Nov. 13, 2012 3:11 PM EST

Sarah Kliff—who really should be working the fiscal cliff beat, no?—highlights an interesting survey result today. In its latest healthcare tracking poll, the Kaiser Family Foundation finds that 49 percent of the public wants to keep or expand Obamacare, while 33 percent want to repeal it. This is down considerably from August (the most recent previous poll), when 40 percent of the public wanted to repeal Obamacare. Likewise, overall unfavorability ratings are also down, from 43 percent to 39 percent.

As the chart below shows, this mostly happened all at once. The sentiment for repeal stayed pretty steady at around 40 percent for two solid years, and then suddenly dropped right after the election. The mere fact that Obama won, and therefore Obamacare was here to stay, apparently changed a lot of minds. Elections really do have consequences.

It's Time for the Republican Freakout Over Susan Rice to Stop

| Tue Nov. 13, 2012 1:19 PM EST

The Washington Post, in a piece about how President Obama's national security team is likely to shake out in the wake of David Petraeus's departure and the expected resignation of Hillary Clinton, says that Susan Rice is his top pick to take over the State Department. But there might be trouble brewing:

Rice, one of an inner circle of aides who have been with Obama since his first presidential campaign in 2007, is under particular fire over the Benghazi incident, in which U.S. Ambassador J. Christopher Stevens and three other Americans were killed.

Some Republican lawmakers have suggested that she was part of what they suspect was an initial election-related attempt to portray the attack as a peaceful demonstration that turned violent, rather than what the administration now acknowledges was an organized terrorist assault.

Rice’s description, days after the attack, of a protest gone wrong indicated that she either intentionally misled the country or was incompetent, Sen. Lindsey O. Graham (R-S.C.) said Sunday. Rice, he said, “would have an incredibly difficult time” winning Senate confirmation as secretary of state.

But several White House officials said Obama is prepared to dig in his heels over her nomination to replace Hillary Rodham Clinton, who has long said she will serve only one term.

I hope Obama does dig in his heels over this if he really thinks Rice is the right person for the job. The Republican freakout over Benghazi has been shameful, and their insane scapegoating of Rice's appearances on the Sunday chat shows a week after the attacks has been doubly so. Republicans—aided and abetted at times by reports in the mainstream media—decided to pretend that Rice had blamed the Benghazi attack entirely on a YouTube video, which they took as dark evidence of a coverup designed to protect Obama. But the truth is that Rice flatly did nothing wrong, a point that bears repeating. She did nothing wrong. Here's an instant replay of what happened, which I originally posted three weeks ago:

  • The CIA's collective judgment on Saturday the 15th, when Rice taped her interviews, was that the protests earlier in the week in Cairo — which had been inspired by the video — had also inspired protests in Benghazi. Later, extremist elements hijacked those protests to storm the consulate. The CIA subsequently backed off its belief that there had been protests in Benghazi, but that only happened later. On Saturday, the CIA told Rice there had been protests, and that's what she said on TV.
  • The evidence to this day suggests that, in fact, the YouTube video did play a role in the attacks. It's simply not true that Rice invented or exaggerated about that.
  • Rice was, in fact, properly cautious in her TV appearances. The transcripts here are crystal clear. On Face the Nation, for example, she carefully told Bob Schieffer that she couldn't yet offer any "definitive conclusions," but that "based on the best information we have to date" it appeared that there had been a spontaneous protest in Benghazi "as a reaction to what had transpired some hours earlier in Cairo where [...] there was a violent protest outside of our embassy sparked by this hateful video." She then immediately added: "But soon after that spontaneous protest began outside of our consulate in Benghazi, we believe that it looks like extremist elements, individuals, joined in that effort with heavy weapons of the sort that are, unfortunately, readily now available in Libya post-revolution. And that it spun from there into something much, much more violent." When Schieffer pressed her on whether the attack had been preplanned, or whether al-Qaeda was involved, she said directly that we simply didn't know yet.

Graham and the rest of the Republican caucus appear to still be in election season attack dog mode, and it's time for this to stop. They have every right to investigate Benghazi, which might very well have been handled poorly in some respects and which might have been a case of poor anticipation of an attack that should have been expected. But Rice's conduct was fine. She very carefully, and very professionally, passed along what was, at the time, the considered judgment of the intelligence community. Some of it was wrong, but there was no coverup. There was just new information and new analysis over time, which is exactly what you'd expect following an incident like this. It's long past time for conservatives to acknowledge this.

The FBI Can Trawl Through Your Email Archives Anytime it Wants

| Tue Nov. 13, 2012 12:52 PM EST

Here's a surveillance state factlet that I think I knew at one point, but have since forgotten:

Under the 1986 Electronic Communications Privacy Act, federal authorities need only a subpoena approved by a federal prosecutor — not a judge — to obtain electronic messages that are six months old or older. To get more recent communications, a warrant from a judge is required. This is a higher standard that requires proof of probable cause that a crime is being committed.

....The chairman of the Senate Judiciary Committee, Patrick Leahy, has proposed changing the law to require a warrant for all Internet communications regardless of their age. But law enforcement officials have resisted because they said it would undercut their ability to catch criminals.

As it happens, news reports suggest that the FBI did indeed get a warrant in order to trawl through the emails from Paula Broadwell and David Petraeus that are at the center of the current FBI/CIA scandal. But that shouldn't change anything. The six-month rule simply has no reasonable basis. The FBI needs a warrant to look through my physical belongings regardless of how old they are, and that's how it should be. Email shouldn't be any different.

UPDATE: Julian Sanchez tweets some additional context: "Technically accurate but misleading: Subpoena for e-mail ALWAYS requires prior notice to user, opportunity to quash....For access without notice, judicial order always acquired—though not necessarily a probable-cause warrant."

UPDATE 2: Never mind. Julian Sanchez tweets again to say prior notice isn't required after all: "I was mistaken. The provision is confusingly framed, with "delayed notice" attatched to the "court order" subsection....But on a second look, 2705 allows delay for either orders or subpoenas. Embarrassing goof on my part; apologies....Though my understanding is that many providers will balk at turning over contents in response to a subpoena."