Kevin Drum - February 2013

The End of Immigration?

| Fri Feb. 8, 2013 11:44 AM EST

Jonathan Last says that fears over immigration are overblown. As fertility rates drop in developing countries around the world, they're going to send fewer immigrants our way no matter what policies we adopt:

When it comes to immigration, demographers have a general rule of thumb: Countries with fertility rates below the replacement level tend to attract immigrants, not send them. And so, when a country's fertility rate collapses, it often ceases to be a source of immigration

....Many Latin American countries have already fallen below the replacement level. It's not a coincidence that sub-replacement countries — such as Uruguay, Chile, Brazil and Costa Rica — send the U.S. barely any immigrants at all. The vast majority of our immigrants come from above-replacement countries, such as Honduras, El Salvador, Colombia, Guatemala and Mexico.

But even though they're still above-replacement, those countries are witnessing epic fertility declines too. Consider Mexico, which over the last 30 years has sent roughly two-thirds of all the immigrants — legal and illegal — who came to the United States. In 1970, the Mexican fertility rate was 6.72. Today, it's hovering at the 2.1 mark — a drop of nearly 70% in just two generations. And it's still falling.

The result is that from 2005 to 2010, the U.S. received a net of zero immigrants from Mexico.

I had a funny feeling as I was reading this: I felt like I should have heard about this before. Or that I should have already known this. And yet, I'm pretty sure this is the first time I've seen anyone make this point.

It's a seductive one. I have an enormous fondness for explanations that rely on big, broad trends: demographics, money flows, growth of computing power, etc. That naturally means I'm a sucker for Last's argument here, despite the fact that I don't really buy his whole "demographic doom" schtick about America's falling birth rate (which he's on a book tour promoting at the moment).

Still, the fact that Last has successfully pushed one of my buttons doesn't mean he's right. It just means I'm intrigued by his argument. I think I need to read more about this.

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Benghazi is the Conspiracy Theory That Just Won't Go Away

| Fri Feb. 8, 2013 10:31 AM EST

When Republicans get hold of a pet rock these days, they just can't give it up. Yes, I'm talking about Benghazi:

James M. Inhofe of Oklahoma said his panel would focus on the military’s response to the assault. But, he said, “as bad as everything that I’ve stated is, what I think is worse is the cover-up.”

“It was obvious from the information we had on Sept. 11 that the second wave ... of attacks on the annex was unequivocally a terrorist attack, and we knew it right at the time,” he said, accusing the U.S. ambassador to the United Nations, Susan E. Rice, of lying to the American people.

Here's what I don't get: what exactly does Inhofe think Obama gained from this nefarious plot to wait a week before admitting Benghazi was a terrorist attack? The best explanation I've gotten when I asked this before revolves around the weird idea that Obama's reelection chances all hinged on the public believing that he was the guy who won the war on terror once and for all. So if he admitted that Benghazi was a terrorist attack, then poof—Mitt Romney is the 45th president of the United States.

This makes even less sense than the claim that Susan Rice lied in the first place. What's more, it's obviously a political loser regardless of whether or not it's true. In fact, it's been a loser ever since Obama pwned Romney in the second debate last year. Outside the tea party fever swamp, where everything Obama does is automatically part of a cunning plot to accomplish....something, no one cares. And it's not as if Inhofe is up for reelection next year and needs to polish up his crackpot bona fides.

What the hell is up with this?

CHART: Will Boomers and Gen Xers Be Able to Retire?

| Fri Feb. 8, 2013 6:11 AM EST

Last month I wrote a post showing that retiree income had risen 75 percent between 1971 and 2011. Conversely, the median income of middle-aged workers has grown a bit less than 8 percent. This is one reason that I'm not super-excited about increasing taxes on the working-age population in order to prevent even the tiniest reduction in the future growth rate of Social Security benefits.

As you can imagine, I got some pushback on this. The strongest criticism was pretty simple: In the private sector, old-style defined-benefit pensions began fading away three decades ago, replaced by less generous 401(k)-style plans that don't provide the same level of retirement security. But that's not going to show up as a noticeable fall in retiree income until workers who turned 30 in the mid-'80s start to turn 65. Instead of looking at historical data, then, I need to look ahead to retiree income in 2020 and beyond. That turned out to be harder than I thought it would be, but I've found a few useful comparisons. Here they are.

First off: There's no question that defined-benefit pensions have all but disappeared in the private sector. The Employee Benefit Research Institute (EBRI) tracks this stuff, and their findings are stark. In the private sector, DB plans used to cover 38 percent of all workers but now cover only about 15 percent. At the same time, the number of workers with 401(k)-style defined-contribution plans has skyrocketed from 17 percent to 43 percent. This is a sea change in worker pensions.

By itself, though, it doesn't tell us much. What we want to know is how much the old DB plans paid out on average compared to newer 401(k) plans. In fact, what we really want to know is total retiree income from all sources, projected into the future. This is a little tricky, so bear with me.

The most common way of forecasting retirement income is via an index that tracks something called "retirement readiness." The usual takeaway from these kinds of metrics is that fewer and fewer workers are likely to have enough income to replicate their pre-retirement lifestyle. But again, this doesn't tell us very much. For one thing, these indexes are usually a little opaque. For another, they don't tell us how far people are falling short. Are there a lot of people who used to be 1 percent above the readiness cutoff and are now 1 percent below, or is it more serious?

A couple of months ago EBRI came to the rescue with something a little more useful. For various age groups, they showed how many workers are close to retirement readiness vs. well below retirement readiness. Here's the table:

This suggests that there's not actually a lot of change projected for the future. Gen Xers, who will begin retiring in 2030, appear to be in about the same overall shape as Boomers.

But those three categories still have a fair amount of play in them. After all, there's a big difference between being at 119 percent of readiness vs. 81 percent. What I'd really like to see are projections of retirement income going into the future. EBRI's Jack VanDerhei suggested I might find this in the MINT simulations from the Social Security Administration, and Howard Iams of the SSA was kind enough to send along the relevant report. Its conclusion was two-sided:

Future retirees are projected to have higher incomes and lower poverty rates, and so their prospects look better than current retirees in absolute terms. However, future retirees are also projected to have lower replacement rates, and so their prospects are actually worse than current retirees in relative terms.

"Replacement rate" is the percentage of your pre-retirement income that you get when you retire. The typical Depression-era worker had a replacement rate of 95 percent, while the typical Gen Xer is expected to have a replacement rate of only 84 percent. So in that sense, today's workers really are worse off than previous generations.

But there's more to this. Gen Xers might have lower replacement rates, but the incomes they're replacing are much higher. This means that in dollar terms (adjusted for inflation), their retirement incomes are considerably larger than previous generations. To show what this looks like, I've very roughly combined historical income data with projected income data (from Table 3 in the MINT report) to produce the chart on the right. It's the same chart from my post last month, but with MINT's forecasts added. The top line shows the fairly stagnant incomes of middle-aged workers. The bottom line shows the steady increase in income among retirees, which has risen from $20,000 in 1971 to about $38,000 today, and is projected to rise to $46,000 by 2041. This is income from all sources: defined-benefit plans, 401(k) plans, Social Security, earnings, and investments.

If these projections are right, future retirees are in pretty good shape in pure dollar terms. At the same time, their retirement incomes are going to be a lower percentage of their pre-retirement income than in previous generations. You can paint either a grim picture or a happy one if you cherry pick only one of these findings.

For myself, I keep looking at that middle-aged income line. Unless things change pretty dramatically, it looks to me as if working-age incomes are going to continue being pretty flat. I'm not happy about this state of affairs, but there's not much reason to think it's going to change. At the same time, retiree incomes are continuing to rise, and this puts me right back where I started: Because current workers are doing relatively worse than retirees, I'm not too excited about increasing their taxes in order to prevent even a tiny slowdown in the growth of future Social Security benefits. This is especially true for higher-income retirees.

So what choices does that leave us? One option is to make Social Security solvent solely by raising taxes on the rich. But that would require a whopping big tax increase. A second option is to do nothing and just see how things play out. Five years ago I would have been okay with that, but recent trust fund projections make me nervous about this. A third option is to raise taxes on middle-income workers, and I've already explained why I'm not too excited about that prospect. Given all this, and given the relative prosperity of retirees above the median, my preference for addressing the solvency of Social Security is to (a) raise the payroll tax income cap somewhat but not raise rates, (b) keep benefits the same or higher at low income levels, and (c) modestly cut the growth rate of benefits at income levels above the median.

NOTE: The lines in the chart above are necessarily rough because the historical data comes from a different source than the projections. This makes it hard to do a true apples-to-apples comparison. If I come across something more rigorous, I'll let you know.

NOTE #2: This post is about long-term trends in retirement incomes. It doesn't address the problems of sixtysomethings who are very near to retirement right now, some of whom have suffered reversals in their retirement accounts due to the Great Recession. I don't have any data at hand about how big a problem that is. It's a post for another time.

Keeping Score in Today's Republican Cage Match

| Thu Feb. 7, 2013 4:45 PM EST

Jonathan Collegio, one of Karl Rove's minions at his new Conservative Victory Project, raised some eyebrows yesterday when he called Brent Bozell, founder of the conservative Media Research Center, a "hater." Unsurprisingly, this touched off a round of vitriol on the right, which I'm going to ignore. Instead, let's focus on the real question: Was Collegio right? Is Bozell a hater? Paul Waldman fills us in:

So, is Brent Bozell a "hater"? Oh heavens, yes. In case you aren't familiar with him, Bozell may well be Washington's angriest man, and one of the least effective spokespeople Republicans could find for their cause....With one or two exceptions (Bill Donohue of the Catholic League comes to mind), there's almost no one in public life more consumed by hate than Bozell. He positively vibrates with hate. I had my own encounter with him in 2004, when we appeared on "The O'Reilly Factor" and had what I thought was a perfectly run-of-the-mill disagreement about the presidential race; afterward he stormed into the greenroom, shouted that John Kerry and I were both liars, and when I asked him (politely and calmly, I assure you) what specifically he was referring to, he sputtered, "Uh...fuck you!" and stormed out.

So there you have it. Obligatory apologies aside, it sounds like Collegio picked his target pretty carefully.

Racial Resentment and Fox News

| Thu Feb. 7, 2013 2:16 PM EST

In the New York Times today, Thomas Edsall presents some evidence that racial resentment has increased in the Obama era, especially among Republicans. Jamelle Bouie comments:

Edsall sees this as a crucial through-line in the ongoing story of GOP extremism. Growing racial resentment has deepened the conservatism of right-wing Republicans, and contributed to their total rejection of President Obama and the Democratic Party in 2010 and 2012.

It’s worth noting the real disputes over the racial resentment scale. Over the years, a growing group of political scientists have questioned the actual influence of ideology on anti-black attitudes....In this narrative, opposition to race-conscious policies has less to do with outright animus, and more with a belief in equal opportunity and a desire to treat people fairly.

But the divide between racism and ideology isn’t so neat—as has been true throughout American history, beliefs about race are hard to separate from political ideology.

No, it's not neat at all, and Jamelle's post is worth a read. But I'd like to suggest a subtly different explanation for the apparent rise in racial resentment over the past few years. This comes from a long email a friend sent me about various options the conservative movement has for boosting its electoral fortunes, and in particular, various options Fox News has for helping out on this score:

Certainly one suggestion would be to replace the morning crew (they're stale, unreformed, a standard SNL joke, and a limitless font of offensiveness) and cut out the -ist comments that emanate daily from their shows. And maybe stop being a one-stop shop for inane stories featurning everyday black people doing or saying dumb things. This is a huge attraction to Fox. (When conservative colleagues / family mention Fox to me, it's usually in the context of a wide-eyed explanation of a story on Fox showing how stupid minorities or minority individuals are.)

This stuff really animates the base and Fox knows it. It's bigotry porn. And it just helps to makes conservatives radioactive to the groups that Republicans need to broaden their appeal. So, if you want to rebrand and broaden the appeal of Fox (and the Republicans) while keeping it conservative, aggressively ditching the cheap and not so veiled bigotry might be a productive place to start. I'm open to hearing arguments that bigotry is not an intrinsic value of the conservative ideology (and God knows Goldberg, Lowry, Ponnuru, Douthat, Brooks, Frum and others breathlessly try to advance this argument despite actual and continuing evidence to the contrary), but that's a big sales job. But a necessary one.

Is this "ideology"? Is it pandering? Is it pure commercialism? It's not easy to say. In the end, it's sort of a mushy blend of all those things. But I'd submit that to the extent we've truly seen an increase in racial resentment, a good part of it is due not to either pure ideology or to pure racial animus per se, but to active editorial decisions made by Fox News. The summer of hate in 2010 was the most jaw-dropping example of this, but in more modest form it's been visible during Obama's entire first term. And of course, Drudge and Rush Limbaugh play the same game.

When does it end?

No Need to Panic About the Sequester Yet

| Thu Feb. 7, 2013 12:31 PM EST

The resolution of the fiscal cliff crisis drained so much energy from both Congress and the president that they agreed to punt on the sequester, a set of automatic $1 trillion spending cuts agreed to in 2011. But they didn't punt for long: the sequester was only delayed until March 1. Today is February 7.

This doesn't especially bother me. If there's a deal to be made on the sequester, it won't get made until February 28. Maybe even a few days later. By Washington standards, three weeks from a drop-dead date is essentially infinity, so the fact that no deal seems to be in sight is hardly surprising.

However, Stan Collender came back today from his monthly breakfast meeting of inside-the-beltway budget wonks and reports that the consensus of his group is that "the current situation is as complex, hard to read, and even harder to predict than any they’ve ever seen." In particular, here's why he thinks a resolution of the sequester showdown is unlikely:

This week’s proposal from the White House to delay the sequester and substitute a combination of revenue increases and other spending cuts in the meantime was rejected by House and Senate Republicans almost instantly. A Senate Republican preference to substitute more domestic reductions for the military cuts is a nonstarter with Senate Democrats. And the House Republican preference to substitute Medicare and Medicaid changes for the sequester reductions has been rejected by House and Senate Democrats.

A backup plan being discussed by Senate Republicans that would keep the sequester in place but give the departments and agencies flexibility in how they may be achieved is just as confusing but for a very different reason. The flexibility the Senate GOP wants is not acceptable to House Republicans because they’re afraid that the Obama administration will use the flexibility to cut programs, projects, and activities in Republican-held districts while adding funds in those represented by Democrats.

Meanwhile, the word from the White House is that it doesn't want the flexibility the Senate GOP wants to provide because that could leave it open to criticism from those whose programs are cut rather than saved. The administration’s reasoning apparently is that the very strict sequester spending cut formula will mean that it cannot be blamed for the results if sequestration happens.

In a nutshell, we seem to be in a situation where the sequester, as bad as it is, is less bad than all of the alternatives. Republicans don't want more defense cuts; Democrats don't want more domestic cuts; and neither side wants the president to have more flexibility. And of course, simply doing away with the sequester entirely for a couple of years, which is by far the smartest option, is completely off the table. The wise men of Washington, along with the flamethrowers in the GOP, simply can't be convinced that budget deficits are a good thing to have right now, even though all the evidence in the world points in that direction.

Still, although everyone may seem intransigent at the moment, there's actually good reason to suspect that there are growing cracks in the GOP position. It's not February 28th yet. No need to panic until then.

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Quote of the Day: Capitalism Red in Tooth and Claw

| Thu Feb. 7, 2013 11:40 AM EST

From Stuart Staniford:

This is capitalism doing what it does best: brutal competition to get more and more efficient, the weakest going to the wall, and a critically important technology becoming cheaper and cheaper.

Click the link to see what technology he's talking about.

How's Your 401(k) Doing?

| Thu Feb. 7, 2013 11:12 AM EST

The Great Recession took a big toll on 401(k) retirement plans. The chart below, from the Employee Benefit Research Institute, shows the general volatility of 401(k) accounts: they go up smartly during booms (1996-99, 2002-07) and plummet during busts (2000-02, 2007-08). The average account took a 30 percent hit when the housing bubble burst in 2008.

In general, average 401(k) account balances have grown fairly steadily over the past two decades. But 401(k)s have two big problems. The first is volatility. If you were 55 when the Great Recession hit, you've made up most of the losses from 2008 and your account balance is probably close to where it was in the mid-aughts. But if you turned 65 in 2008 and were planning to retire that year, you were screwed.

Second, account balances just aren't very big. The chart below understates retirement readiness since it shows averages for all workers. The actual median account balance for workers in their sixties is in the neighborhood of $50,000 or so. But even that isn't much: it provides an annual annuity of only a few thousand dollars. That's nice to have, but it's hardly a windfall.

Of course, one other thing to keep in mind is that less than half the population has a pension of any kind, and that's always been true. Over the past three decades, defined-contribution plans like 401(k)s have grown while defined-benefit plans have mostly disappeared. But over that entire period, less than half of all private sector workers have had either kind of pension. For the rest, the big debate over pensions is strictly academic. They rely almost exclusively on Social Security and always have.

This is just one part of the retirement puzzle, of course. More on the bigger picture tomorrow.

Marco Rubio Agrees to Take One For the Team

| Wed Feb. 6, 2013 6:39 PM EST

Jonathan Bernstein asks the question of the day:

Marco Rubio is going to give the Republican response to Barack Obama’s State of the Union Address this year. My only question: Why? Why would he want to do that?

The SOTU response is, basically, a no-win proposition. It’s very difficult to give it well. After all, the president of the United States has such a huge advantage, speaking in the House chamber with a cheering audience, usually for an extended time. Out parties have tried a variety of formats, but none of them comes close to matching the democratic pageant of the SOTU — and by the time the response is given, no one really wants to sit still for another speech, anyway.

If I were a rising political star, I would run, not walk, if party leaders asked me to give the SOTU response. My kid has a piano recital that night. It's my anniversary. Anything. I think you'd have to be nuts to agree to do this.

That said, I'm curious to see what Rubio comes up with. As near as I can tell, he's lately decided that his niche is to be a smart, non-crazy brand of Republican. During the Benghazi hearings, he asked actual substantive questions, rather than joining the conspiracy theory fever swamp with the rest of the panel. On immigration, he's making the rounds of talk shows trying to build support for a compromise with Democrats. He seems to believe—rightly or wrongly, I'm not sure—that he's enough of a conservative darling that he can get away with this.

The SOTU response would be an ideal forum to push ahead with this program. It'll be a little hard to tell if he takes advantage of it, since SOTU responses tend not to be too fire-breathing in the first place, but there should be hints. Does he judiciously agree with a few of Obama's proposals? Does he go out of his way to propose compromises? Does he offer any hints of heterodoxy on a national stage? Reading the tea leaves on this should be interesting.

New Study Finds NYC's Crime Drop a Mystery. Is It?

| Wed Feb. 6, 2013 3:07 PM EST

Violent crime in New York City has dropped 75 percent since the early 90s. The most common explanations include the introduction of "broken windows" policing in 1994, which focuses on stopping small crimes before they spiral into big ones; hot spot policing implemented via the CompStat system; more cops on the street; and higher incarceration rates. David Greenberg of NYU took a look at all of these explanations and found them wanting:

The study, which appears in the journal Justice Quarterly, did not find a link between arrests on misdemeanor charges and drops in felonies, such as homicides, robberies, and assaults....The analysis also showed no relationship between the number of police officers per capita at the precinct level and the reduction of violent crime, nor did it find a link between admissions to prison and violent crime rates....The analysis showed that violent crime rates (homicide, aggravated assault, forcible rape, and robbery) and property crime rates did not significantly decrease after the implementation of CompStat—in fact, both continued on a consistent downward slope beginning in the early 1990s.

These are all topics that have been the subject of considerable debate for years, and since I don't have access to the full paper, I can't assess how good Greenberg's methodology is. Nonetheless, I suspect that he's more right than wrong. Even if all these things had some effect, the evidence mostly suggests the effect is nowhere big enough to account for the huge drop in crime that New York has seen. Still:

"The decline in crime was a real one during this period, but the question is 'Why?' " said Greenberg, adding that many other major cities, including San Diego and Los Angeles, experienced similar reductions during this period.

Yep. And Canadian cities too. Plus cities in Britain, Germany, Australia, and Finland. Broken windows policing certainly can't explain that. But I assume that all loyal readers of this blog know what can. Right?