Kevin Drum - January 2013

Government Spending is Down in the Obama Era

| Tue Jan. 22, 2013 5:22 PM PST

The chart below has been making the rounds today, so I thought I'd colorize it and annotate it to drive home its point a little more clearly. Republicans like to say we have a spending problem, not a taxing problem, but the evidence doesn't back that up. Total government spending didn't go up much during the Clinton era, and it's actually declined during the Obama era. In the last two decades, it's only gone up significantly during the Bush era, the same era in which taxes were cut dramatically.

What we have isn't a spending problem. That's under control. What we have is a problem with Republicans not wanting to pay the bills they themselves were largely responsible for running up.

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A Sports Rant That Isn't

| Tue Jan. 22, 2013 11:27 AM PST

And in local news today:

The Dodgers have agreed with Time Warner Cable on a new television contract that will provide the team with a channel of its own, according to two people familiar with the deal but not authorized to discuss it.

Great. I suppose that means my cable bill is going up again even though I never watch the Dodgers. This just warms the cockles of my heart.

I feel like I have an epic rant about modern sports seething around inside me, but it always just fizzles out into nothing. Yeah, it's a business and the owners are assholes. Yeah, football is dangerous. Yeah, sports leagues are all effective monopolies. Yeah, the entire public is forced to pay for obscene contracts and profits, via both direct tax subsidies as well as sports programming that's shoehorned into basic cable rates. Yeah, sportsmanship has gone the way of the dodo. Yeah, the NCAA is practically a criminal enterprise.

Yeah, yeah, yeah. But when I'm bored, I still turn on the TV and surf over to ESPN. Old habits die hard.

Leverage is Back! But This Time It's Different.

| Tue Jan. 22, 2013 10:56 AM PST

From the Wall Street Journal today:

Pension funds across the U.S. are desperate to overcome low interest rates and churn out returns big enough to pay future retirees. Now some hedge funds and money managers are pitching something they see as a Holy Grail: a strategy that often uses leverage to boost returns of bonds that usually occupy the low-risk, low-return portion of pension-fund investment portfolios.

What could possibly go wrong? Apparently nothing. Proponents of this strategy say that their brand of leverage is nothing at all like that nasty old-school kind of leverage that produced a global economic crisis five years ago:

Money managers such as Bridgewater Associates, the world's largest hedge-fund firm, and a growing number of pension funds say this type of leverage is different. By using leverage through derivatives, such as bond futures, and by investing in commodities, some pension funds believe they can reduce their typically large exposure to the turbulent stock market and still earn solid returns. Other proponents of this strategy, known as "risk parity," include AQR Capital Management and Clifton Group, a Minneapolis-based investment firm.

....Pension officials that employ risk parity say they are using a modest amount of leverage, and nowhere near what investment banks used leading up to the crisis. They also are trading in large, liquid markets, and say they have ample liquidity should they ever need to settle trading losses with cash...."Ironically, by increasing your risk in the bonds you are going to lower your risk in your overall portfolio,'' he said in an interview.

Uh huh. It's just a little bit of leverage. Trading is in large, liquid markets. Stocks and bonds always move in opposite directions. It's just common sense!

It simply astonishes me that, as near as I can tell, the rulers of our financial world learned exactly nothing from the events of 2008. They literally seem to believe that their actions had nothing to do with anything. The financial crash was just one of those black swans that nobody could have prevented. Next time we'll get it right.

No mattter how many fairy tales we tell ourselves, apparently we are all still just hairless apes and we are all idiots.

Is Obama Finally Serious About Climate Change?

| Tue Jan. 22, 2013 10:10 AM PST

President Obama was much more direct about the impact of climate change than usual in his inaugural address yesterday:

We will respond to the threat of climate change, knowing that the failure to do so would betray our children and future generations. Some may still deny the overwhelming judgment of science, but none can avoid the devastating impact of raging fires, and crippling drought, and more powerful storms. The path towards sustainable energy sources will be long and sometimes difficult. But American cannot resist this transition. We must lead it.

Does this mean we're actually going to do something serious? We'd better. Thomas Lovejoy wrote yesterday in the New York Times that even a rise of two degrees C, the limit most often mooted, would be catastrophic:

Two degrees is actually too much for ecosystems....A 2-degree world will be one without coral reefs....At current global warming of 0.8-0.9 degrees, the fingerprints of climate change can be seen virtually everywhere in nature. The coniferous forests of western North America are currently experiencing massive tree mortality because climate change has tipped the balance in favor of native bark beetles. The Amazon seems to be edging close to dieback in the southern and southeastern portions of the great forest.

At essentially double that current temperature increase, there undoubtedly will be massive extinctions and widespread ecosystem collapse. The difficulty of trying to buffer and manage change will increase exponentially with only small increments of warming. In addition, the last time the planet was 2 degrees warmer, the oceans were four to six (perhaps eight) meters higher.

More than a 2-degree increase should be unimaginable. Yet to stop at 2 degrees, global emissions have to peak in 2016.

2016. We're pretty obviously not on track to make that happen, but further inaction would be disastrous. Stuart Staniford reproduced the chart on the right today, which shows the likely amount of warming based on when we start cutting carbon emissions and how fast we cut them. I've added the dashed blue lines, which show where we'll be if carbon emissions peak in 2030 and then decline steadily at 2 percent per year. Answer: 3 degrees C.

That would be catastrophic, leading to sea level rises of 5-10 feet this century, massive die-offs, and the virtual depopulation of significant areas of the planet. And yet, at current rates, 2030 looks to be about the best we can hope for. The political will for more just doesn't exist right now.

If President Obama achieves nothing in his next term except to change that, it would be, by far, the most significant thing he does. We're not just running out of time. We've already run out of time. Hurricane Sandy was only a tiny taste of what our grandchildren are in for if we keep twiddling our thumbs for another couple of decades just because acknowledging climate change is inconvenient for a particular political ideology.

High School Graduation Rates Still Increasing

| Tue Jan. 22, 2013 8:52 AM PST

A few days ago I mentioned that high school graduation rates were up, and suggested that reduced exposure to lead might be part of the reason. Today, the Department of Education announced that the upward trend has continued:

Based on data collected from the states for the Class of 2010, the National Center for Education Statistics estimated that 78 percent of students across the country earned a diploma within four years of starting high school. The graduation rate was last at that level in 1974, officials said.

....Notable in 2010 was the rise in the percentage of Hispanic students who graduate on time, with a 10-point jump over the past five years, to 71.4 percent. Hispanics are the nation’s largest minority group, making up more than 50 million people, or about 16.5 percent of the U.S. population, according to the Pew Hispanic Center.

....Graduation rates improved for every race and ethnicity in 2010, but gaps among racial groups persist. Asian students had the highest graduation rate, with 93 percent of students finishing high school on time. White students followed with an 83 percent graduation rate, American Indians and Alaska Natives with 69.1 percent and African Americans with 66.1 percent.

I know it's easy to sound Pollyannaish about this stuff, but the evidence of the last few decades suggests that standardized test scores are up; international comparisons are in pretty good shape; and that high school completion rates are up. This doesn't mean that we can declare victory, or that America's schools are paragons of educational excellence. There's plenty of room for improvement.

At the same time, the conventional narrative of steady decline just doesn't seem to be true. Especially when you consider the size and diversity of America's primary education system, our results are decent and getting better. The data on this score is clear enough that this really needs to become the new conventional narrative.

Ending the Evening on a High Note

| Mon Jan. 21, 2013 11:20 PM PST

I'm going to end the evening with a trio of nice things. Why? Just because. First off, here's the sunset out of my window today:

A few hours later, here are the moon and Jupiter hugging each other in the night sky:

And finally, here's Kelly Clarkson singing "My Country, 'Tis of Thee" at the inauguration today. I had to call my sister to ask who this was (I know: pathetic), but I'm now her new biggest fan. This was a great performance, and the Marine band was pretty spectacular too. Enjoy.

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Quote of the Day: Prenatal Financial Markets Are the Next Frontier

| Mon Jan. 21, 2013 10:34 PM PST

From Roger E. A. Farmer, on why financial markets might not be as efficient as we think:

The inability of our children to trade in prenatal financial markets is sufficient to invalidate the first welfare theorem of economics.

Hmmm. Prenatal financial markets. There's gotta be a way that Goldman Sachs can get a piece of that action. Just give 'em a little time to think it through.

Barack Obama's Surprisingly Barbed Inaugural Address

| Mon Jan. 21, 2013 9:22 PM PST

Over at The Corner, Kathryn Jean Lopez writes that the "untold story" of today's inauguration is the number of conservatives who have "resisted the urge to rain on the president’s parade today." Her colleagues, apparently infuriated by this act of appeasement, immediately proceeded to unleash a virtual deluge on the president's parade.

I was amused by that, but then, I'm easily amused. And anyway, I don't blame them. I've heard a lot of chatter today from liberals about how Obama's inaugural address was "Lincolnesque," but I think that's just a wishful reading of what he actually said. Sure, there were plenty of soaring phrases about "we the people" and America's limitless possibilities, and it was nice to hear the first ever shout-out to "our gay brothers and sisters" on inauguration day, but overall it was pretty familiar stuff for a modern inaugural address.

What wasn't so familiar was the number of very sharp, very specific barbs aimed at Obama's political opponents. Here's a taste:

To Mitt Romney: "The commitments we make to each other through Medicare and Medicaid and Social Security....do not make us a nation of takers."

To the climate change denialists: "Some may still deny the overwhelming judgment of science, but none can avoid the devastating impact of raging fires, and crippling drought, and more powerful storms."

To the neocons: "We, the people, still believe that enduring security and lasting peace do not require perpetual war."

To the voter suppression gangs in Pennsylvania, Ohio, and elsewhere: "Our journey is not complete until no citizen is forced to wait for hours to exercise the right to vote."

To the NRA: "Our journey is not complete until all our children, from the streets of Detroit to the hills of Appalachia to the quiet lanes of Newtown, know that they are cared for and cherished and always safe from harm."

To the entire tea party wing of the GOP: "We cannot mistake absolutism for principle or substitute spectacle for politics, or treat name-calling as reasoned debate."

Did conservatives take these lines as obvious, personal attacks? You betcha. I would too, if I were them. And while this stuff may have warmed the cockles of my heart, I don't pretend to have the boundless political generosity of Abraham Lincoln. It appears that Obama, if he ever did, doesn't have it anymore either.

Virginia Republicans Give Blacks the Finger on MLK Day

| Mon Jan. 21, 2013 7:02 PM PST

The Virginia state senate is evenly divided between Democrats and Republicans, 20-20. Republicans really hate this, but what can they do? Answer: wait for a Democratic state senator to be absent and jam through a mid-decade redistricting plan that switches one seat from D to R by creating a new pack-and-crack majority black district just south of Richmond. The vote was 20-19.

But wait! That's not all. The deed was done on Martin Luther King Jr. Day, and at the end of the session Republicans adjourned in memory of Confederate general Stonewall Jackson, whose birthday is today.

Oh, and did I mention that the state senator who was absent is a veteran of the civil rights movement? And that he was in Washington to attend the inauguration of our country's first black president?

Republican Gov. Bob McDonnell, who has obvious presidential ambitions, said he was surprised by the move, but didn't denounce it and didn't promise to veto it. Quite the contrary: his spokesman said the governor would "review it in great detail" once the bill got to his desk.

It's truly a mystery why so few African-Americans support the Republican Party, isn't it? A real chin-stroker.

Was 1861 Really a Peaceful Transition of Power?

| Mon Jan. 21, 2013 2:20 PM PST

I wasn't going to bother blogging about Lamar Alexander's peculiar boast that today's "peaceful, orderly" transfer of power was uniquely American, figuring that it's just standard patriotic puffery and nothing to complain about. But Dylan Matthews reproduces the chart on the right to show that lots of countries have peaceful transfers of power, and that got my attention. I'm not sure where it came from, but the author appears to think the United States has had 43 peaceful transitions.

It's true that Barack Obama is the 44th president of the United States. But I'd say that 1861 was a decidedly non-peaceful transfer of power, leading as it did to a secession by half the country and four years of brutal civil war. Since then we've had 28 peaceful transfers—generously counting Andrew Johnson's takeover as "peaceful"—which puts us just ahead of Canada and a bit behind Australia.

Not bad, really. But as it turns out, even less out of the ordinary than it looks at first glance—though we might look better if we counted years instead of changes of government. After all, I'm not sure Italy should really get a lot of props just because their government changes every six months or so.