Kevin Drum - February 2013

Telling the Truth About Education—and About Ed Reform

| Thu Feb. 21, 2013 10:51 AM PST

In a recent column about the limitations of data, David Brooks wrote this about the debate over how effective economic stimulus has been: "As far as I know not a single major player in this debate has been persuaded by data to switch sides." This got Bob Somerby's attention. Had he ever changed his mind based on data? He says yes: the first time he actually looked for himself at NAEP testing data on schoolchildren and discovered what it actually showed:

We were stunned by what we saw there. We saw that, according to this gold standard program, black kids had been making large progress in reading and math down through the years. (Hispanic kids too.)

Like everyone else who reads newspapers, we had never heard this. Like everyone else who reads newspapers, we had endlessly heard that our schools were awful and getting worse—that absolutely nothing was working.

....That progress, if real, is astounding. But thanks to the mountain of liberal indifference, the public has never been told. Very few people have ever heard that our low-income and minority kids seem to be doing much better in school.

This is one of the reasons why Obama will face great odds if he tries to sell universal preschool. To this day, the public is constantly told that nothing works. Why would they want to pay for universal preschool if nothing else ever has worked?

I guess I sort of plead guilty to this. Like Bob, I was also surprised the first time I really started to dig into test score data: it showed pretty clearly that we've made consistent progress over the past three decades, especially at the elementary school level. It turns out that American schools aren't in terminal decline. At the same time, years of dipping into the ed reform literature has made me very cynical about faddish interventions. Virtually none of them really seem to hold up when you test them with bigger sample sizes, longer time series, or better studies.

I feel differently about pre-K interventions for a couple of reasons. First, we aren't talking about marginal improvements to an existing system. In many cases, we're talking about replacing nothing with something. The returns are much more likely to be large when you're starting from zero.

Second, the evidence in favor of pre-K seems to be stronger, even though it suffers from some of the same limitations of K-12 programs. It's true that we won't know for sure what (if anything) works until we perform rigorous testing on large-scale programs that have been run for years, but the evidence we have so far suggests to me that we're likely to see measurable benefits. It also, frankly, just seems like the right thing to do. Rich and middle-class parents already provide this kind of thing for their kids, and in a country as wealthy as ours, I see no excuse for not giving poorer parents at least the same opportunities for their kids.

So yes: I suppose that cynicism about K-12 interventions doesn't help to gain public support for pre-K programs. Mea culpa. But the answer isn't to lower our evidentiary standards. The answer is to make sure we do rigorous analysis of K-12 and pre-K programs. In the end, the public will never be willing to consistently fund these programs unless we do.

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Today's Advice: The Doctor Will Not See You Now

| Thu Feb. 21, 2013 9:40 AM PST

So what's in my morning copy of the LA Times today? Let's take a look.

Page A1: Stomach stapling is a crock. "A new study has found that the surgery does not reduce patients' medical costs over the six years after they are wheeled out of the operating room." Actually, it's worse than that: according to the accompanying chart, medical costs were higher for patients who got bariatric surgery.

Page A7: A group of doctors has made a list of nearly 100 medical procedures that are overused in the United States. "The medical interventions — including early caesarean deliveries, CT scans for head injuries in children and annual Pap tests for middle-aged women — may be necessary in some cases, the physician groups said. But often they are not beneficial and may even cause harm."

Page A17: Bullying women into getting routine, annual mammograms is a bad idea. "There's no question that diagnostic mammograms should be performed on women who have discovered a lump. But a growing number of primary-care physicians, surgeons, epidemiologists and women affected by the process have begun to question the value of telling all women they need to be checked regularly with screening mammograms." And just so you don't think we're picking on women here, the same is true for PSA tests for prostate cancer.

Maybe I can get better news elsewhere? Nope. My email this morning has a link to a recent article in Harvard Magazine, in which David Jones tells us that nearly all angioplasties and heart bypass surgeries are useless. "As Jones painstakingly explains, it took years to show whether the procedures prolonged lives; in both cases, subsequent research deflated those early hopes. The interventions—major procedures, with potentially significant side effects—provided little or no improvement in survival rates over standard medical and lifestyle treatment except in the very sickest patients."

As near as I can tell, aspirin works. Blood pressure meds work. Beyond that, I'm beginning to wonder.

How Taxpayers Subsidize America's Biggest Banks

| Thu Feb. 21, 2013 9:01 AM PST

What's the benefit of being a gigantic bank? Well, for one thing, everyone assumes that if you get into trouble you'll get bailed out by the feds. That makes you safer, and that in turn means you have lower borrowing costs. Bloomberg editors, keying off an IMF report from last year, figure that this implicit subsidy amounts to about 0.8 percent per year:

Small as it might sound, 0.8 percentage point makes a big difference. Multiplied by the total liabilities of the 10 largest U.S. banks by assets, it amounts to a taxpayer subsidy of $83 billion a year. To put the figure in perspective, it’s tantamount to the government giving the banks about 3 cents of every tax dollar collected.

The top five banks — JPMorgan, Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and Goldman Sachs Group Inc. — account for $64 billion of the total subsidy, an amount roughly equal to their typical annual profits (see tables for data on individual banks). In other words, the banks occupying the commanding heights of the U.S. financial industry — with almost $9 trillion in assets, more than half the size of the U.S. economy — would just about break even in the absence of corporate welfare. In large part, the profits they report are essentially transfers from taxpayers to their shareholders.

The chart above shows this graphically. With the exception of Wells Fargo, the biggest banks in America would all be essentially profitless if it weren't for the implicit subsidy that being Too Big To Fail gives them.

Bloomberg recommends that this situation be addressed by requiring big banks to hold far more capital than they do now; putting an end to all speculative trading; and requiring bondholders to take losses when banks run into trouble. These are good ideas, but the latter two, especially, are hard to implement reliably. But there's a fourth option: split up the banks. If they're too big to fail, and everyone knows it, the only real answer is to make them small enough that they can fail. Creditors would then take care of all the rest.

Rick Scott's Surprising U-Turn

| Wed Feb. 20, 2013 4:15 PM PST

In the current issue of MoJo, Stephanie Mencimer walks us through the destruction wreaked by Florida governor Rick Scott during his past two years of tea party-inspired budget slashing. At the same time that he cut Florida's corporate tax rate, Scott has slashed billions of dollars from education, tried to require welfare recipients to submit to drug tests, turned down federal funds for a high-speed rail project, killed a deal to protect the Everglades, and objected to taking money from any federal program even remotely connected to Obamacare. Naturally that also includes programs directly connected to Obamacare:

Of all the big pots of federal money that Florida has rejected, none quite compares with Scott's moves to block Obamacare's expansion of Medicaid to the working poor. Today, a single parent with two children can't qualify for Medicaid in Florida if she makes more than $3,200 a year—one of the nation's lowest eligibility levels.

....If Florida rejects the Medicaid expansion, state hospitals stand to lose about $654 million a year in federal payments for care to the uninsured—payments that were reduced in Obamacare on the assumption that hospitals would gain revenue by caring for the newly insured. The hospitals, particularly public ones that have already lost $1.5 billion to state budget cuts over the past eight years, have been lobbying hard for the expansion, but tea partiers have been equally vocal, and in June, Scott announced that he would be rejecting the Medicaid expansion. "We don't need to expand a big-government program to provide for everyone's needs," he said. "What we need is to shrink the cost of health care and expand opportunities for people to get a job so more people can afford it."

All of this has made Scott the least popular governor in the country, and Stephanie reports that because of this, "Scott has softened a bit." Today brings the surprising news that apparently Scott has softened more than just a bit:

Gov. Rick Scott announced Wednesday a proposed three-year expansion of Florida's Medicaid program — enrolling an additional one million poor and disabled Floridians beginning next year — after the Obama administration gave the state tentative approval to privatize Medicaid services.

If the Legislature approves, Scott's announcement means the state will extend eligibility in the federal-state program to single people and families earning up to 138 percent of poverty. The state plans to enroll almost all of them, along with the 3.3 million people currently being served by Medicaid, in private HMOs or other doctor-operated networks.

"While the federal government is committed to paying 100 percent of the cost of new people in Medicaid, I cannot, in good conscience, deny the uninsured access to care," Scott said at a press conference. He added that the expansion would have to be renewed in three years.

This is only a three-year commitment, and it was conditional on Scott's plan to privatize Medicaid. But it's still a surprise for a guy whose approach until now has been modeled after a chain saw. In the end, Florida's hospital industry apparently had more clout than Florida's tea partiers.

Google Knows All, Sees All, Especially if You're Stupid

| Wed Feb. 20, 2013 3:39 PM PST

Here's a tip: If you break the law, don't go back to the scene of the crime. You probably already know this from watching cop shows on TV.

Here's a 21st century tip: If you break the law, don't go back to the scene of the crime even virtually. In other words, don't do Google searches for your own misdeeds. Or if you do, go to a public library and do it anonymously. The police, it turns out, apparently have pretty easy access to Google search data and they will use it to collar you. Felix Salmon has more.

Want to Tackle Income Inequality? You Need to Go After Capital Gains.

| Wed Feb. 20, 2013 12:57 PM PST

Greg Sargent calls our attention to a new study on rising income inequality today. The question at hand isn't how much inequality has increased over the past couple of decades, it's where the increase has come from. The study is from Thomas Hungerford, an analyst with the Congressional Research Service, and the chart on the right tells the story:

  • Wages, interest, and taxes have contributed to a lowering of income inequality.
  • Business income and retirement income have contributed to an increase in income inequality.
  • Capital gains and dividends have contributed more to the rise of income inequality than everything else put together.

As Hungerford put it in an interview, "The reason income inequality has been increasing has been the rising income going to the top one percent. Most of that has come in capital gains and dividends." Sargent relates this to the current sequester talks:

This finding is directly relevant to the current debate, because Obama and Democrats want to offset the sequester in part by closing loopholes enjoyed by the wealthy, such as the one that keeps tax rates on capital gains and dividends low. Dems want to do this in order to prevent a scenario where the sequester is averted only by deep spending cuts to social programs that could hurt a whole lot of poor and middle class Americans. Republicans oppose closing any such loopholes and want to avert the sequester with only deep spending cuts.

If higher rates on capital gains were bad for growth, Obama's proposal might be a bad idea. Maybe higher inequality is just the price we pay for a vibrant economy. The problem is that there's very little evidence that low rates on capital gains have any effect on economic growth at all. In fact, you can make an argument that current rates are too low. It's possible that higher rates might benefit the economy.

Bottom line: If you care about rising income inequality, you should care about capital gains because that's mostly where the skyrocketing income increases of the past couple of decades have come from. And while the fiscal cliff deal raised rates on capital gains and dividends slightly, there's still plenty of room for them to go up more. Done within reason, this is very unlikely to have a negative impact on economic growth, and it would be about the fairest possible way to increase revenues.

Hungerford's full paper is here.

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The Best Plan for the Sequester: Just Kill It

| Wed Feb. 20, 2013 10:28 AM PST

Just in case I've never been clear about this, let me sign up with Paul Waldman on how Congress ought to handle the sequester fight:

For the record, there is a simple solution to the problem of the sequester: Congress should pass a law eliminating it. Not replacing it with a bunch of other budget cuts, not engaging in a new game of chicken, not putting it off for a month or two, not having a bunch of proposals and counter-proposals, just cancelling it, period. Then once that's done, you can start the budget process for real, not because there's a disaster of Congress' own making looming in a week, but through the ordinary legislative process. If you're holding a gun to the American economy's head, the first thing to do is put down the gun.

Yep. There shouldn't be any budget cuts this year. We should be spending more. Ditto for next year, probably. The deficit conversation should be entirely about setting goals for long-term deficit reduction. Obviously that's not trivial, since it's hard to bind the hand of future Congresses, but it's not impossible to make serious progress. Changes in formulas for mandatory programs, for example, will stay in place unless they get repealed by both the House and a filibuster-proof majority in the Senate. That's not inconceivable, but it's pretty damn unlikely. Ditto for taxes. Discretionary spending is harder to nail down, but then, discretionary spending really isn't much of a problem anyway.

Pretty plainly, then, this is what we should do. Even Beltway centrists mostly agree, though they're loath to come right out and admit it. Unfortunately, precisely because it actually makes sense, it will never happen.

Today's Big Fight: Centrist Opinion vs. Centrist Opinion

| Wed Feb. 20, 2013 9:44 AM PST

Jonathan Chait is annoyed with the Washington Post editorial board, which says today that "neither party has staked out anything like a serious negotiating position" in the sequester talks. For some reason, though, they seem to have forgotten entirely that President Obama has, in fact, staked out a serious position. This is from the Post's own news pages a few weeks ago:

During the negotiations between Obama and Boehner, the president offered about $900 billion in spending cuts....At the same time, Obama insists tax revenue must be further increased in exchange for spending cuts. The bill approved by Congress this week raised slightly more than $600 billion of revenue over 10 years by raising tax rates. Obama now wants to raise about $600 billion more by limiting tax breaks.

This sounds perfectly serious, unless you consider the very idea of closing loopholes to raise revenue to be self-evidently unserious. And yet, as Chait points out, the Post editorial board doesn't consider the idea unserious. In fact, they're basically on board with the idea:

When you hear that “neither party” is addressing an issue, you probably think that one of the parties is the president....In fact, as such places as the Washington Post have reported, Obama is offering to replace the sequester with $600 billion in increased tax revenue plus $900 billion in spending cuts. The Post does not argue that this offer amounts to dangerous, high-tax liberalism. It does not argue that it’s a fair proposal but Obama should go further for the sake of placating Republicans. It doesn’t say Obama’s offer is great but couldn’t pass Congress, or that Obama should instead be making his offer in person, or by handwritten letter, or while gently massaging John Boehner’s bunions. The editorial says nothing at all. It accuses Obama of seeming content to blame Republicans.

"We're done with revenue," say the Republicans. They seem to believe that agreeing to extend the Bush tax cuts permanently for everyone except a tiny sliver of rich people just flat-out exhausts any further potential for raising revenue. Obama obviously disagrees, and standard Beltway centrist opinion—for example, the Washington Post editorial board—is basically on Obama's side. For some reason, though, standard centrist outlets—for example, the Washington Post editorial board—are unwilling to come right out and say so. Why is this? Obama's position is basically the same as theirs with only the change of a few minor details. Why expend so much effort to pretend otherwise?

"Friends of Hamas" Even Stupider Than You Thought

| Wed Feb. 20, 2013 9:00 AM PST

Karl Marx remarked that history repeats itself, first as tragedy, then as farce. Apparently this is still true. The conservative demagoguery that took down Susan Rice was a tragedy. The demagoguery attempting to take down Chuck Hagel is now officially a farce.

Remember "Friends of Hamas," the absurd terrorist front group that Hagel supposedly received funding from? Turns out it's even more absurd than we thought. New York Daily News reporter Dan Friedman says he unwittingly made up the whole thing:

Here’s what happened: When rumors swirled that Hagel received speaking fees from controversial organizations, I attempted to check them out. On Feb. 6, I called a Republican aide on Capitol Hill with a question: Did Hagel’s Senate critics know of controversial groups that he had addressed?

Hagel was in hot water for alleged hostility to Israel. So, I asked my source, had Hagel given a speech to, say, the “Junior League of Hezbollah, in France”? And: What about “Friends of Hamas”? The names were so over-the-top, so linked to terrorism in the Middle East, that it was clear I was talking hypothetically and hyperbolically. No one could take seriously the idea that organizations with those names existed — let alone that a former senator would speak to them.

Read the whole thing for more. Apparently the aide somehow mentioned this to someone else, who mentioned it to Ben Shapiro at Breitbart.com, who swallowed it whole, and from there it caught fire with the entire conservative movement. That's all it took.

There is No Possible Sequester Deal to be Made

| Tue Feb. 19, 2013 6:44 PM PST

I've successfully avoided writing about the sequester over the last few days, but I'm curious: does anyone seriously think a deal is even possible? I don't quite see how. Here are the possibilities:

  • Eliminate the sequester entirely. Zero chance of Republicans agreeing to this.
  • Ditch the defense cuts, replace them with domestic cuts plus a tax increase. Zero chance of Republicans agreeing to this.
  • Ditch the defense cuts, double the domestic cuts. Zero chance of Democrats agreeing to this.
  • Ditch the defense cuts, keep the domestic cuts. Approximately zero chance of Democrats agreeing to this.
  • Kick the can down the road with some kind of small-ball deal. Possible, I guess.

Am I leaving out some possible permutation here? I can just barely imagine a small-ball deal, maybe one that's 100 percent spending cuts, maybe one that includes some kind of semi-hidden revenue increase. But that's about it. Every other possibility is substantially worse than the status quo to either Democrats or Republicans.

But for some reason we keep talking as if a deal is possible. So what am I missing here? As far as I can tell, neither side is genuinely trying to negotiate. They're just trying to make sure the other side gets the blame when sequestration kicks in, as it inevitably will.

So who's winning that game? A friend emails to say that this paragraph from Gloria Borger, a reliable barometer of DC conventional wisdom, suggests that Republicans are:

The president proposes what he calls a "balanced" approach: closing tax loopholes on the rich and budget cuts. It's something he knows Republicans will never go for. They raised taxes six weeks ago, and they're not going to do it again now. They already gave at the office. And Republicans also say, with some merit, that taxes were never meant to be a part of the discussion of across-the-board cuts. It's about spending.

Sure enough, Borger unquestioningly accepts the Republican framing that (a) further tax increases are an absurdity and (b) the debt ceiling deal wasn't about reducing the deficit, it was about reducing spending. If this view is common deep in the lizard brains of the DC press corps, Obama has his work cut out for him.