Kevin Drum - February 2013

Do Republicans Have Ratio-Myopia?

| Mon Feb. 25, 2013 3:16 PM EST

Ezra Klein is confused about why Republicans are holding out on a sequester deal that cuts spending but also raises revenues by limiting deductions for high earners. After all, nobody believes Republicans will get bigger spending cuts by holding out, nor does anyone believe that Obama will eventually agree to some future deal that pairs up deductions and lower tax rates without a net increase in revenues. So maybe it's this?

A third answer is that the anti-tax pledge holds that cutting deductions to reduce the deficit is a tax increase, and Republicans won't vote for a tax increase, even if it results in a policy outcome they vastly prefer. In other words, it's ratio-myopia.

And perhaps that's the real answer. But it's a bit hard to believe. Perhaps I'm missing something?

I'm confused about the confusion. Republicans have been the anti-tax party for more than 30 years now. They've never been willing to trade tax increases for spending cuts, and they've been vocally, implacably dedicated to this during every budget showdown of the past three years. A deal that includes both spending cuts and tax increases is very much not a policy outcome they vastly prefer.

So yeah, #3 is the real answer. I don't quite get why this is hard to believe.

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Deficit Hawkery and DC Journalism

| Mon Feb. 25, 2013 2:12 PM EST

Here is Dave Weigel's conclusion after writing about the Republican Party's recent losing streak vs. Barack Obama on grand bargains, fiscal cliffs, debt ceilings, and now the sequester:

They still aren't in a good position to win the argument! I don't think this is [Eric] Cantor's fault, really. The idea that you can be a deficit hawk while ruling out any tax increase, ever, is politically and mathematically untenable.

Mathematically untenable? Yes. Politically untenable? I'm not so sure. But don't forget about journalistic tenability! That's no problem at all. DC reporters and columnists are endlessly willing to pretend that someone whose only real-world devotion is to cutting social welfare spending is a "deficit hawk." That's one of the single biggest reasons that this position remains politically tenable even though it's mathematically absurd.

Citi's Odd Bonus Payment to Jack Lew

| Mon Feb. 25, 2013 12:40 PM EST

It's amusing to watch the Wall Street Journal editorial page try to pretend that the revolving door between Wall Street and the federal government is somehow a scandal restricted to the Democratic Party, but still, you have to admit that this tidbit about Jack Lew is damn odd:

The terms of Mr. Lew's original employment contract with Citi included a bonus guarantee if he left the bank for a "high level position with the United States government or regulatory body."

Most companies include incentives for top employees not to leave, but in this case the contract was written to reward Mr. Lew for treating the bank like a revolving door. Citi says it likes to accommodate employees who do public service or work at nonprofits. But the Lew contract was specific about a senior job in the federal government. There would be no special payout if he left to run the Red Cross or the New York state budget office.

Lew is a certified budget genius with many years of government experience, so it's hardly a surprise that Citi expected that he might leave at some point. Still, what innocent explanation is there for actively encouraging him to leave? I'd certainly like to hear the reasoning behind this.

UPDATE: This might not be as sinister as it sounds. Possible innocent explanation is here.

RAW DATA: Debt Levels of Families Approaching Retirement

| Mon Feb. 25, 2013 12:23 PM EST

A couple of weeks I put up a post showing projections of future retirement income, but these were long-term projections and didn't provide any insight into the specific effect of the Great Recession on those who are currently nearing retirement. There are two big things we're interested in: (a) the effect on retirement savings [401(k)s, IRAs, etc], and (b) debt levels as a percent of income. EBRI provided some rough data on the former here, and today they provide us with a look at the latter. Here's their quick summary for all families with a head of household over 55:

The percentage of American families with heads age 55 or older that have debt held steady at around 63 percent from 2007–2010. Furthermore, the percentage of these families with debt payments greater than 40 percent of income—a traditional threshold measure of debt load trouble—decreased in 2010 to 8.5 percent from 9.9 percent in 2007. However, total debt payments as a percentage of income increased from 10.8 percent in 2007 to 11.4 percent in 2010.

This includes both near-retirees and retirees. In order to get a clearer look just at people nearing retirement, the chart below shows debt payments for families with a head of household age 55-64 (red line). As a comparison, it also shows debt payment levels for all families, taken from Fed data (blue line):

There's much more in the full report, including data on families already in retirement, as well as breakdowns between housing debt and other consumer debt.

Things I Didn't Know, Part 9,763

| Mon Feb. 25, 2013 11:01 AM EST

From a CNN piece on today's Italian election:

Polls are banned within two weeks of the elections, but the most recent ones had Bersani holding onto a slender lead over Berlusconi. Grillow was a distant third.

No polls in the final two weeks of the campaign! I wonder what effect something like that would have had on our election last year? Would fewer analysts have made fools of themselves? More? Would Nate Silver have spontaneously combusted?

Charts of the Day: Doctor Pay in America and Other Countries

| Sun Feb. 24, 2013 3:13 PM EST

In Steven Brill's monster health care article in Time this week, he argues that hospital executives are overpaid but doctors aren't. If we paid Medicare rates for all medical services, he says, "no doctor could hope for anything approaching the income he or she deserves." Felix Salmon pushes back:

Weirdly, in 24,000 words which include a lot of railing against the large salaries enjoyed by hospital executives, Brill never supports or clarifies this assertion: he never says how much money doctors deserve, how much they actually make, or how high physician salaries would need to be in order to make future doctors want to practice. That last one, in particular, seems very unconvincing to me: the world is full of highly-qualified doctors who would love to be able to practice in the U.S. for much less than the current going rate.

In his conclusion, Brill says—again, without adducing any evidence whatsoever—that “we've squeezed the doctors who don't own their own clinics, don’t work as drug or device consultants or don’t otherwise game a system that is so game able”. It’s a bit weird, the degree to which Brill cares so greatly about keeping doctors’ salaries high: he certainly doesn’t think the same way about teachers.

You'd really like to see some data on this score, wouldn't you? Well, here it is. The two charts below are from an OECD report that compares the average remuneration of GPs and specialists in a selected set of countries. The data is from 2004, and the figures are in PPP-adjusted dollars:

The bottom line is that compared to other rich countries—all of which pay Medicare rates or less for medical services—American doctors are pretty well paid. The report also shows compensation as a ratio of the average wage in each country, and the story is similar (though GPs look a little closer to the OECD average when you compare their pay to average wages).

So is this more or less than US doctors "deserve"? On that score, it's worth pointing out that most American doctors have to pay their own medical school bills, a cost that's picked up by the government in most other countries. Despite that, it's a little hard to argue that American doctors, especially specialists, have been squeezed to the breaking point. I too would be interested in seeing Brill back up that contention. 

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A "Sequester" Is Not the Same Thing as a "Substitute for the Sequester"

| Sun Feb. 24, 2013 1:22 AM EST

Whose idea was the sequester? Bob Woodward wrote an op-ed yesterday that says it came from the White House. Apparently, in return for raising the debt ceiling, Republicans wanted some kind of automatic trigger that would force everyone to negotiate a future reduction in the deficit, and the only thing Obama's budget wonks could come up with was the sequester. So they suggested that, and both parties then overwhelmingly voted for it.

Fine. But then there's this:

The final deal reached between Vice President Biden and Senate Minority Leader Mitch McConnell (R-Ky.) in 2011 included an agreement that there would be no tax increases in the sequester....So when the president asks that a substitute for the sequester include not just spending cuts but also new revenue, he is moving the goal posts. His call for a balanced approach is reasonable, and he makes a strong case that those in the top income brackets could and should pay more. But that was not the deal he made.

This is just damn peculiar. Even phrased the way Woodward did, it's obvious that these aren't the same things. The fact that there were no tax increases in the sequester—i.e., in the mechanism used to goad both sides into a future deal—has nothing to do with what the two sides agreed would be in the substitute for the sequester. The details of the substitute were obviously a subject for future negotiation. For chapter and verse on the fact that both sides knew perfectly well that Democrats would propose tax increases as part of the substitute, see Ezra Klein, Brian Beutler, and Dave Weigel.

I'm perplexed by Woodward these days. He really seems to have some kind of weird jones against the Obama White House. I can't quite figure out where it comes from.

Firing Bad Teachers Has Surprisingly Meager Effects

| Sun Feb. 24, 2013 12:34 AM EST

Dylan Matthews has an interview with Thomas Kane today about ways in which we can measure teacher performance in the classroom. This comes at the very end:

Dylan Matthews: Now, the three components you measure predict future performance on achievement tests. But a lot of people dismiss that, even though there's growing evidence that achievement test scores are correlated with all kinds of important real-life outcomes. Why do these scores matter?

Thomas Kane: So I'm really heartened — even asking that question means you're aware of that Chetty/Friedman/Rockoff study....What they found was that the teachers who appeared to have high value-added while the students were in their classrooms, their value-added was predictive of students' income later. I'm optimistic about it but based largely on Raj's study.

I remember reading this study when it first came out, and I had a very different reaction. Basically, the researchers looked at data on teachers and test scores starting around 1990, and linked it up with the incomes of students later in life. They had a big dataset and they did all the usual controls. Then they estimated the gains to income from firing a terrible teacher (one in the bottom 5 percent) and replacing him with an average teacher. Long story short, once you account for real-world frictions (namely that we can't perfectly identify the terrible teachers), they estimate that making this change in a single grade level produces an income gain among students of slightly more than 1 percent at age 28.

Now, the first thing to say about this is that a result this small, even if it's statistically significant, should be treated with extreme caution. There are just a ton of confounding variables that could be at play here, and even a small missing factor could swamp this study's findings.

But it's worse than that. Even if you assume these results are correct, they struck me not as optimistic, but as shockingly low. We're not talking about a small change in teacher quality here. We're talking about a huge change: an entire year spent with a perfectly acceptable teacher instead of one who's the worst of the worst. And even at that, it only made a difference of 1 percent in future income. That's it?

Now, you could argue that the effect would be bigger if we got rid of bad teachers in all the grades. Wouldn't that make a bigger difference? Sure, except that about half of all students never get any bottom-5-percent teachers in the first place; a little less than half get a bottom-five-percent teacher once in their school careers; and only a handful of the very unluckiest students get one for more than one year. So you're stuck with the basic result: averaged across all students, the value of firing all the terrible teachers will probably be a future income increase of less than 1 percent. For an average person, that's a few hundred dollars per year.

Am I the only one who finds that surprisingly meager? I'm all for getting rid of horrible teachers, but if anything, this study makes me put a lower priority on this than I used to—especially considering how difficult it would be to carry out a policy like this. I was surprised that this study got such a euphoric reception when it was published, and I still am.

BuzzFeed and the Future of Advertising

| Fri Feb. 22, 2013 7:51 PM EST

Andrew Sullivan had a long, "passionate" debate at BuzzFeed last night about their habit of creating advertising content that's hard to tell apart from editorial content. This is from an after-action report written this afternoon:

When an ad page is designed not even to be seen much on the site’s homepage — where the color shading helps maintain the distinction between ads and edit — and is deliberately purposed to be viral, to pop up alone on your screen with “Buzzfeed” at the top of the page and a layout identical to Buzzfeed’s, the deliberate attempt to deceive readers is impossible to miss.

Am I thinking readers are too dumb to notice the by-line? Aren’t they more sophisticated than that? No and yes, they’re sophisticated, but not the way an industry insider is.

Roger that. Here's a little story that might shed some light on this. Several years ago, a friend of mine came over and noticed a three-ring binder sitting on my desk. It was full of stories clipped from the LA Times. "Why did you save these?" he asked. I told him to take a closer look. "Do you notice anything similar about them?"

Nope. Finally I pointed at the bylines. They were all by me, written when I interned at the Times during college. The moral of the story is that people who don't inhale news simply don't notice bylines. They're practically invisible. It's possible this is different at BuzzFeed, where reporters develop a loyal following, but I doubt it. I'll bet 90 percent of their readers never even notice their bylines.

And I'm pretty certain the folks at BuzzFeed know this perfectly well. They do everything they can to make advertising look staff-written, including in tone, style, and format, but leave themselves an out by putting corporate bylines on the ads and pretending that everyone will notice them. Hey, it says Sony Entertainment Network at the top! What more do you want?

I imagine this is a glimpse of our future. You have been warned.

Friday Cat Blogging - 22 February 2013

| Fri Feb. 22, 2013 3:02 PM EST

Blogging occasionally halts around here when I get jerked away by a high-priority interrupt. The interrupt service routine, typically written in Felix, usually involves the remote manipulation of digital sensory probes and feline auditory feedback. All other interrupts are inhibited during this activity. The photo below was taken nanoseconds before a recent instantiation of this maximum-priority ISR.