Kevin Drum - February 2013

"Friends of Hamas": World's Dumbest Front Group?

| Thu Feb. 14, 2013 6:42 PM EST

Apparently I missed the news that the latest right-wing conspiracy theory about Chuck Hagel is that he once received funding from an organization called "Friends of Hamas." If you have a room temperature IQ, your first thought is that this is a distinctly unlikely name for a terrorist front group, sort of like the Third International trying to launder rubles into the hands of closeted communist sympathizers via a group called "Friends of Joe Stalin." Probably not going to work.

But Dave Weigel, bless his hardworking heart, actually dug into this just to make sure. This is why he's one of my favorite bloggers, though I worry sometimes about how long he can keep this up before his brain turns to tapioca. In any case, the answer seems to be just what you think it is: there's no such group; the rumors appear to be just flatly made up; and they were first reported by (of course) Ben Shapiro. After that, all the usual suspects just decided to pile on because—well, because, why not? If it doesn't work, they'll just decide Hagel took money from "Friends of Pedophiles" or something.

Really, you can just say anything these days, can't you? If you're a conservative, anyway.

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The Politics of Tech is Usually Pretty Simple

| Thu Feb. 14, 2013 6:16 PM EST

Whenever you read about some kind of political dispute over a tech issue, you should be aware that it's almost certainly really a fight among two or more of the following four groups:

  • Telcos
  • Cable companies
  • Hollywood
  • Silicon Valley

Everything else is just fluff. There are occasional exceptions, but these four are usually all that matter.

This is apropos of nothing in particular. I just felt like passing it along. You may now go about your regular business.

GOP Not in Kansas Anymore

| Thu Feb. 14, 2013 3:47 PM EST

Over at the New York Times Magazine, Robert Draper has a long piece about the woes of the Republican Party. A lot of it focuses on their inability to embrace the kind of technology favored by young people, but Ed Kilgore points out that the problem goes way, way deeper than technology. Here's an excerpt about a focus group conducted recently by a GOP pollster named Kristen Soltis Anderson:

About an hour into the session, Anderson walked up to a whiteboard and took out a magic marker. “I’m going to write down a word, and you guys free-associate with whatever comes to mind,” she said. The first word she wrote was “Democrat.”

“Young people,” one woman called out. “Liberal,” another said. Followed by: “Diverse.” “Bill Clinton.”“Change.”“Open-minded.”“Spending.”“Handouts.”“Green.”“More science-based.”

When Anderson then wrote “Republican,” the outburst was immediate and vehement: “Corporate greed.”“Old.”“Middle-aged white men.” “Rich.” “Religious.” “Conservative.” “Hypocritical.” “Military retirees.” “Narrow-minded.” “Rigid.” “Not progressive.” “Polarizing.” “Stuck in their ways.” “Farmers.”

....The session with the young men was equally jarring. None of them expressed great enthusiasm for Obama. But their depiction of Republicans was even more lacerating than the women’s had been. “Racist,” “out of touch” and “hateful” made the list — “and put ‘1950s’ on there too!” one called out.

Ed sums up: "If you had to choose one theme that underlies the arguments Draper's hearing from the cool kids of the GOP, it's that the Christian Right has gotta go."

For years, Democrats complained about the fact that so many working class voters had abandoned them on pocketbook issues and instead began voting on social issues. These voters didn't like hippies or abortion or busing, so they voted Republican even though the GOP was the party of rich people.

But now the worm is turning. The Reagan Democrats who started this trend are now senior citizens, or close to it. They're no longer natural Democratic voters who are defecting to the Republican column, they're just natural Republican voters who are voting for Republicans. That doesn't really help the GOP.

What's worse, social issues are no longer a trump card with 20- and 30-something working class voters. So now Republicans are feeling some of the same frustration that Democrats did during the Reagan era, because they probably think they have a decent pocketbook case to make to younger voters: Democrats want to raise your taxes; Obamacare forces you to buy insurance you don't want, and raises your premiums in order to subsidize older folks; liberals won't let you send your kids to better schools; they're wrecking the economy with higher entitlement spending and a refusal to save Social Security.

Obviously liberals have answers to all this. Still, Republicans probably feel like they have a reasonable case to make. And they do. Not a slam dunk case, but a reasonable one.

But it doesn't matter, because a growing block of voters is still voting on social issues. The problem is that the social issues they're voting on aren't hippies and abortion. The issues are global warming, gay rights, gun extremism, contraception, immigration, and a generally toxic attitude toward anyone non-white. And in this generation, all of these issues help Democrats. Even centrist 30-somethings largely don't have a problem with gay marriage, are appalled at objections to contraception, and are offended when Fox News goes on one of its xenophobic jags. They want no part of this, even if they're not super thrilled with the Democratic Party's economic agenda.

So who's going to write the conservative version of What's the Matter With Kansas? I'm not sure. But someone sure needs to write it. My own guess is that for a lot of voters who are only marginally engaged with politics, they simply don't believe that either party is really likely to help them financially. So no matter how much they tell pollsters that their #1 issue is jobs, it often doesn't affect their actual vote that much. Social issues are all that's left, and these days, outside the Christian Right, that mostly helps Democrats, not Republicans.

Deregulation May Not Have Lowered Air Fares After All

| Thu Feb. 14, 2013 1:14 PM EST

American Airlines has now officially announced its merger with US Airways, which brings to an end the era of massive consolidation in the domestic airline industry. This era was sparked by the 1979 deregulation of the industry, and Steven Pearlstein declares it a success:

While consumers are already grumbling that prices are rising, a longer-term look shows that, on an inflation adjusted basis, prices (including those pesky fees) are still well below what they were in the old regulated environment, and even below what they were in during the late 1990s when the consolidation process was only partially complete. Here are the numbers, in chart form:

And sure enough, there's a chart showing that average fares today are half what they were in 1979.

And yet....a few months ago, Phillip Longman and Lina Khan wrote a piece in the Washington Monthly setting out the case that airline deregulation was a miserable failure. I was not entirely convinced. But one of the strongest claims they made was that, far from reducing fares, deregulation may have been bad for fares:

A study published in the Journal of the Transportation Research Forum in 2007 confirms that the pattern continued. Except for a period after 9/11, when airlines deeply discounted fares to attract panicked customers, real air prices have fallen more slowly since the elimination of the CAB than before.

This seems so counter to conventional wisdom that it's hard to credit. Deregulation actually slowed the decline of air fares? And yet, that's what the author of the JTRF study, David Richards, claims. If you take a look at a chart that starts in 1979, you see a steady decline in fares. But guess what? If you take a look at a chart that starts in 1950, you also see a steady decline in fares. Deregulation appears to have had no noticeable effect at all. (Note that "yield" is revenue per passenger mile.)

These calculations are complex, and appear to be extremely sensitive to the assumptions that go into them. For that reason, I'm hesitant to draw any firm conclusions. What's more, it's possible that the fare declines of the 60s and 70s would have tapered off without deregulation, as passenger volumes flattened and airplane technology stabilized. The counterfactuals here aren't easy to construct.

Nonetheless, this chart has been gnawing at me ever since I saw it, and today I have an excuse to publish it. At the very least, it should cause us to question the conventional wisdom that no matter how much you hate airlines, at least the deregulation of the industry has been a boon for low prices.

WTF Is Going On With Chuck Hagel?

| Thu Feb. 14, 2013 12:05 PM EST

I've been on a semi-news blackout for the past couple of days, but yesterday at lunch we were shooting the breeze about whether Republicans really planned to filibuster Chuck Hagel. This is one of those topics where I'm so gobsmacked by the whole thing that I'm not even sure what to say about it.

It's not that a filibuster would be crazy because Chuck Hagel is himself a Republican. The truth is that he's been an apostate Republican for a while and has very few fans left among his former colleagues. The reason it's crazy is just because it's crazy. If that doesn't seem like the most cogent argument you've ever heard, it's because words sort of fail me here. The scale of the collective temper tantrum from congressional Republicans has simply been off the charts ever since the election. It started with the insane lynch mob that went after Susan Rice, progressed through the fiscal cliff, then more Benghazi craziness, the debt ceiling, the sequester, and now Chuck Hagel. Hell, even Jack Lew—who, you might recall, has been nominated as Treasury Secretary—is getting grilled over what he knew about Benghazi and when he knew it.

This is just insane. If there's one thing practically everyone agrees about, it's that presidents should basically get to pick their own cabinets. You organize an earnest party-line effort to derail someone only if there's some pretty serious evidence of malfeasance or incompetence. Hagel probably won't go down in history as a great Secretary of Defense, but he easily passes that bar. He's a standard issue DC pol with no skeletons in his closet, no bizarre views, and no scandals in his background. You wouldn't normally even object to someone like that, and you certainly wouldn't filibuster him, which is entirely without precedent going back at least 40 years.

So why are Republicans doing this? I can't quite figure it out. Is it a pure pander to the Israel lobby? A way of ginning up the tea party base? Revenge against Hagel for betraying them? Knee-jerk opposition to anything Obama wants? An expression of sheer, uncontrollable rage?

I don't know. I'm beyond understanding this. It's crazy.

Quote of the Day: Taco Bell's Improbable Strategy

| Thu Feb. 14, 2013 11:35 AM EST

From Matt Yglesias, on Taco Bell's attempt to move upscale a bit to compete with Chipotle:

It's just very difficult to simultaneously be the place people think of when they're thinking "I wish I could have a hard-shell taco with the shell made out of Doritos" and the place where people think "I wish chef Lorena Garcia would whip up some fresh flavors out of high-quality ingredients."

This is all but impossible to argue with. And speaking of fast food Mexican places, did you know that Del Taco has surprisingly good fries? Well, it does. (Though please note the low bar for "surprisingly good.")

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The Biggest Value of Pre-K Can't Be Found in Test Scores

| Thu Feb. 14, 2013 11:10 AM EST

Suzy Khimm has an interesting piece today about Oklahoma's universal pre-K program, which started up after it was passed in a 1998 law. Here's an excerpt:

In studies published in Science and the Policy Studies Journal, Gormley and his co-authors found that the pre-K programs in Tulsa significantly improved young children's ability to identify letters, spell and solve problems—leaping an average of five months ahead in pre-math and nine months ahead in pre-reading skills. "Those are really big gains," Gormley said. "Oklahoma decided that it was a waste of time and money to have a low quality program, so it decided to have high quality programs which can produce really big improvement in school readiness for a wide range of children."

....However, there's still limited evidence of the long-term impact of a strong pre-K education for certain groups of children—and whether it's really the best kind of intervention....The Heritage Foundation points out, for instance, that fourth-grade reading scores in Oklahoma have actually declined since universal pre-K has been implemented. "Oklahoma was the only state to see a significant score decrease on the NAEP fourth-grade reading assessment and is the only state to see its reading scores decline over the 15 years from 1992 though 2007 out of all of the states that participated in the fourth-grade reading test in 1992," Heritage fellow Lindsey Burke wrote in 2009.

I'll try to have more to say about this later, but just as a quick comment, I'd warn against paying too much attention to raw academic achievement results. That stuff is important, but a lot of the research on pre-K suggests that, in fact, its long-term effect on reading and math test scores is fairly weak. However, pre-K does seem to increase high school completion rates; reduce rates of substance abuse; reduce felony rates; increase lifetime income; and improve non-IQ cognitive traits like the ability to delay gratification, the ability to hold a job, and the ability to control your temper. And that stuff is probably more important than an increase of a few points on the NAEP test. More here.

9 Bucks and Age 4

| Wed Feb. 13, 2013 10:29 AM EST

In the end, I didn't get to hear Obama's SOTU speech at all. Things just didn't work out, somehow. Still, I note this morning that he was unusually  non-fuzzy about a few things. First, he wants to raise the minimum wage to $9 and index it to inflation. Bravo! When it comes to anti-poverty measures, I'm in favor of doing lots of little things, rather than putting all my eggs in a few baskets. An economist might sniff that the minimum wage isn't the most efficient way to help low-income workers, and it probably isn't. So what? At modest levels (and $9 is a modest level), it helps a lot of people and almost certainly does little or no harm to the broader economy. It's also very visible, very easy to understand, viewed as very fair, and politically popular. That stuff matters a lot.

Keying it to inflation is also interesting, but for a subtle reason: Obama is putting good policy ahead of good politics. Indexing the minimum wage to inflation will help the working poor, but it comes at the cost of allowing Democrats a cheap and easy issue to bang on every few years. Typical Obama.

Obama's other proposal dear to my heart was his call for universal pre-K.The truth is that age four is too late. Age two would be better. Age one would probably be better still. But starting at age four makes the most political sense. But if Congress does act on this (unlikely, I know, but humor me), I hope they put in place extensive experimentation requirements. What we really want to know is what kind of pre-K programs work best, and we'll only find out with a rigorous, fairly well-controlled program of experimentation. On this issue, I'm a Manzi-ite.

Housekeeping Note

| Mon Feb. 11, 2013 9:50 PM EST

I'm flying up to San Francisco tonight, and I'll be spending the next couple of days plotting global domination at MoJo's chrome and glass world headquarters on Sutter Street. Blogging will be either light or nonexistent depending on how well the planning goes, the vagaries of Wi-Fi, and the fluctuations of my mood. I'll probably have something about the State of the Union address tomorrow, but no promises beyond that. I'll be back on Thursday.

How to Make Money by Screwing Your Customers

| Mon Feb. 11, 2013 5:57 PM EST

The mortgage servicing industry has always been a bit of a black hole. Servicers aren't the folks who make loans, package loans, or invest in loans. Rather, they're the folks who collect payments and handle the routine administrative work after loans have been packaged up and sold off as securities. Basically, they do the gruntwork.

So they had little to do with creating the mortgage crisis of the aughts. However, despite their unglamorous middleman role, they've been one of the chief obstacles to fixing the mortgage crisis over the past few years. The reason is fairly simple: they make more money by screwing borrowers who are in trouble than they do by trying to come up with solutions. David Dayen explains:

In general, servicers are paid through a percentage of the unpaid principal balance on a loan. This creates problems when a borrower gets into trouble and can no longer afford their payments. There are many modifications to help a borrower in such a bind, the most sustainable, successful type being direct reductions of the principal, for obvious reasons. But forgiving principal cuts directly into servicer profits by cutting the unpaid principal balance, so most servicers shy away from it. Moreover, servicers collect structured fees — such as late fees — which make it profitable to put a borrower in default and keep him there. And foreclosures don’t hurt a servicer, because they make back their money owed, along with all fees, in a foreclosure sale, even before the investors for whom they service the loan. The investors take whatever losses result from a foreclosure; the servicer makes out just fine.

So there you have it. Servicers don't like simple principal reduction because that reduces their fees. Conversely, servicers do like it when borrowers get jerked around a lot because that increases their fees. And if it all ends up in foreclosure? That may be too bad for the investors, but servicers make lots of money from foreclosures. The bottom line is simple: servicers do best when distressed borrowers are (a) milked for a while and then (b) foreclosed on.

So naturally, that's what usually happens. The new Consumer Finance Protection Board has recently taken a crack at reforming this obviously absurd situation, but they probably don't have the legal authority to do much about it. However, David suggests that Fannie Mae and Freddie Mac probably do. Unfortunately, they aren't doing anything:

The FHFA/HUD servicer compensation process is showing few signs of life. They announced the initiative two years ago, and released a discussion paper in September 2011, inviting public comment on a couple broadly rendered alternatives, including a “fee for service” model where servicers would get paid a flat rate for performing loans, presumably encouraging them to keep the loans current. As is typical for these regulations, practically all of the public input on the discussion draft came from the mortgage industry. They objected to changing the system before they had new requirements in place, like the 2012 National Mortgage Settlement and the CFPB servicing standards. In addition, they made the usual complaints about undermining the market and increasing costs for borrowers.

Perhaps as a result, basically nothing has been done on servicer compensation since the fall of 2011. Officially, HUD spokesman Brian Sullivan calls the joint project a “work in progress.” An FHFA spokesman told me that “consideration of the servicing compensation issue will continue as FHFA moves forward with the Build portion of the Strategic Plan for the Conservatorships of Fannie Mae and Freddie Mac.” And in a speech last December, FHFA Acting Director Ed DeMarco remarked that they “have already completed a substantial amount of groundwork on this subject,” and that “it remains for me an important part of the work ahead.”

This has long been one of the most frustrating aspects of the mortgage crisis. Everyone understands that the incentives at work in the servicing industry are completely screwy, but no one has both the authority and the political will to change it. It's sort of a nutshell version of our entire political system these days.