Kevin Drum - April 2013

Guess Who Waits Longest to Vote?

| Tue Apr. 9, 2013 11:31 AM EDT

Via Steve Benen, I see that we have a new study from MIT political science professor Charles Stewart about waiting times to vote in the 2012 election. Two factors seem to play the biggest roles in wait times: where you live and where you live. Of the ten places with the longest waits, nine are southern or border states.1 And within states, areas with dense populations have the highest wait times. Here's the net result:

At the individual level, the factor that stands out is race. Viewed nationally, African Americans waited an average of 23 minutes to vote, compared to 12 minutes for whites; Hispanics waited 19 minutes.

While there are other individual-level demographic difference present in the responses, none stands out as much as race. For instance, the average wait time among those with household incomes less than $30,000 was 12 minutes, compared to 14 minutes for those in households with incomes greater than $100,000. Strong Democrats waited an average of 16 minutes, compared to an average of 11 minutes for strong Republicans.

Is this racial disparity deliberate? It's impossible to say. But it's there; it's been there for a long time; and no one seems to be in much of a hurry to fix it. I report, you decide.

1Tennessee, Louisiana, Georgia, Oklahoma, Michigan, South Carolina, Virginia, Washington DC, Maryland, and Florida. And yes, I know that Washington DC isn't actually a state.

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Left and Right Team Up to Propose New Bank Regulations

| Tue Apr. 9, 2013 10:53 AM EDT

As we all know—because what could be more fascinating than reading about statutory capital requirements for systemically important banks?—one of the best ways of insuring that big banks are less likely to fail is to require them to hold more capital. The more capital they hold, the bigger the losses they can suffer without going belly up and destroying the global financial system.

After our most recent brush with financial death in 2008, the world's central bankers all started beavering away on new capital requirements. They eventually produced Basel III, hoping that it would do a better job of ensuring bank safety than the ill-fated Basel II. Unfortunately, although there are some good ideas in Basel III, the capital requirements are only modestly more stringent than the old standards, which proved to be so catastrophically inadequate during the Great Meltdown.

So lefty senator Sherrod Brown and right-wing senator David Vitter have teamed up to propose tighter capital requirements for U.S. banks. Under their bill, all banks would have a minimum capital requirement of 10 percent, and big banks would have even higher requirements. Hooray! But Mike Konczal reports that it's not all roses:

It is interesting that the Brown-Vitter bill would replace, rather than supplement or modify, Basel III. Basel III has a leverage requirement that does similar work to the extra equity requirements Brown-Vitter recommends. That rule is only set at 4 percent, instead of 10 percent, but could be raised while keeping the rest of the Basel rules intact.

....Basel III isn't just capital ratios, though. Another important element is its new liquidity requirements. Liquidity here refers to the ability of banks to have enough funding to make payments in the short term, especially if there's a crisis. Basel III includes a "liquidity coverage ratio," which requires banks to keep enough liquid funding to survive a crisis.

Financial institutions have been lobbying against an aggressive implementation of Basel IIl's liquidity requirements. They saw a small victory when some of the requirements were pulled back in the final rule in January. Brown-Vitter would remove them entirely — a remarkable win for the financial sector if the proposal passes.

Basel III is a floor, not a ceiling. National regulators all have the authority to require higher capital ratios, or to tighten up the quality of capital banks are required to hold. In fact, doing that would be, by far, the easiest way to deal with bank safety.

So why throw out the whole framework? For one thing, capital ratios are calculated as capital / assets, and Brown-Vitter raises the ratio by requiring more capital and by changing the way assets are valued. Maybe that's a good thing. There's a lot of justifiable suspicion that "risk weighting" of assets just allows banks to play complicated regulatory games to meet their capital requirements. It might be a good idea to do away with that completely, rather than simply reforming it, as Basel III does.

I probably need to noodle on this some more, but my insta-reaction is that we'd be better off leaving Basel III alone, risk weighting and all, and simply raising the capital ratios. My instinct tells me that global finance is simply too complex these days to pretend that all assets are created equal. We should let Basel III play out on that front and see how it does. We should also keep Basel III's liquidity requirements, since liquidity problems were a core part of the bank failures of 2008.

So: Just raise the ratios and demand that banks hold more high-quality capital. That's simple and effective. Better to do that than to try to rewrite Basel III from scratch.

POSTSCRIPT: There's an easy metric that should give us a pretty reliable idea of whether the Brown-Vitter approach is a good one. Just wait for reaction from banks. If they're cautiously supportive, it's a bad idea. If they attack it, then maybe it's a good idea. Wait and see.

Quote of the Day: Big Brother Loves You

| Tue Apr. 9, 2013 9:53 AM EDT

From Tracy Hurley, dean of the school of business at Texas A&M:

It’s Big Brother, sort of, but with a good intent.

It always is, isn't it? In this case, he's referring to software that tracks whether students are actually doing their required reading.

Hating on the Deficit

| Tue Apr. 9, 2013 12:09 AM EDT

Over at Wonkblog, Dylan Matthews has a long post titled "Why do people hate deficits?" It's a good summary that runs through all the various reasons people give for thinking that deficits are bad.

But it doesn't actually answer the question, at least not as I take it. Dylan's list provides us with two things: (a) technical reasons that some economists dislike big, persistent deficits, and (b) talking points used by politicians who are railing against the deficit and need to toss out some plausible sounding arguments. What we'd really like to know is why so many ordinary people dislike deficits. Here are a few possibilities:

  • They listen to politicians and pundits railing against the deficit and simply assume that deficits must therefore be bad. After all, everyone says they are.
  • They don't really care about deficits, they just hate welfare spending. Opposing the deficit is a convenient proxy.
  • They think that countries are like households, and getting in debt inevitably means an endless, grinding stuggle to pay the bills.
  • Liberals have done an abysmal job of explaining why deficits are good during periods of high unemployment, so ordinary citizens have no reason to think deficits are anything other than bad.

I imagine all of these things play a role, but I'd place a lot of weight on the last one. Sure, some of the reasons to dislike deficits are dumb and some are downright dishonest. But that's just the nature of political discourse. A movement that can't fight back against slippery arguments had better steel itself to lose lots of battles.

Like it or not, the truth is that deficit hawkery is a pretty obvious default position to have unless someone gives you a really compelling reason to believe otherwise. So if we're unhappy that the public is too hawkish about the deficit, we have only ourselves to blame.

Chart of the Day: 2001 Was a Great Year For Patents

| Mon Apr. 8, 2013 8:26 PM EDT

Tim Lee has an interesting piece at Ars Technica today about a new (?) study that attempts to figure out how rigorous the patent office is at approving patents. Long story short, the authors take the uncorrected approval rate, and then adjust it for various factors to get a true idea of just how many patent applications are approved. The headline result is that the patent office got steadily more selective during the Bush administration, and then suddenly reversed course in 2009 and started approving way more applications.

But something else caught my eye. The basic chart is on the right. The bottom line is the raw uncorrected approval rate. The lines above it each correct for a different factor until finally you reach the purple line at the top, which tells us the real rate of patent approvals. If this line is correct, the Patent Office approved about 99.5 percent of all patent applications in 2001.

So, um, what's the deal with that? Can it really be true that virtually every single patent application that year eventually got approved?

Here is the Obama Version of Eating Soup With a Knife

| Mon Apr. 8, 2013 4:12 PM EDT

Jackie Calmes writes today about President Obama's big problem with Republicans:

In the past, when he has stayed aloof from legislative action, Republicans and others have accused him of a lack of leadership; when he has gotten involved, they have complained that they could not support any bill so closely identified with Mr. Obama without risking the contempt of conservative voters. Representative Chris Van Hollen, Democrat of Maryland, called this predicament Mr. Obama’s “Catch-22.”

....Other than the stimulus experience in early 2009, the moment that most captured that polarization for the White House occurred a year later. In early 2010 Republican senators, including the minority leader, Senator Mitch McConnell of Kentucky, demanded that Mr. Obama endorse bipartisan legislation to create a deficit-reduction commission. But when he finally did so, they voted against the bill, killing it.

Well, that's what the opposition does: it opposes. If Obama is spending too much, you scream about the deficit. If he cuts spending, you scream that he's endangering the safety of the country. If he refuses to reform Medicare, you scream that entitlements are out of control. If he cuts Medicare spending, you run campaign ads screaming that he's sacrificing Granny on the altar of Obamacare. If he raises taxes, you scream that he's engaged in class warfare. If he lowers taxes, you scream that he's draining the Social Security trust fund.

In other words, any port in a storm. Opposition parties routinely use whatever arguments are at hand. This is hypocritical, of course, but no one cares about hypocrisy unless it's the other guys engaging in it. When your guys do it, you beaver away figuring out clever reasons why this episode isn't really at all like that previous episode. Everyone does this.

It's still pretty annoying, though, isn't it?

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Here's Why "Good Looking" Is Wrong and Damaging

| Mon Apr. 8, 2013 1:11 PM EDT

Speaking at a fundraiser last Thursday, Barack Obama called California attorney general Kamala Harris "by far the best-looking attorney general in the country." On Friday, after taking considerable heat for this, he apologized. That pretty much closed out the issue for me. It was a modest mistake, quickly corrected.

But how much difference does this kind of thing make, anyway? Today, the Name It, Change It campaign released a survey conducted earlier this year on exactly this subject. In the survey, Jane Smith and Dan Jones are pitted against each other in a race for Congress. Both have similar backgrounds, and after reading their bios the survey respondents prefer Jane slightly, 49-48.

Then they read a second story. In one version of the story, there's no physical description of either candidate, and Jane's lead stays pretty much the same. In a second version, there's a neutral description of Jane's appearance. Suddenly she's 5 points behind Dan. In a third version, there's a positive description of her appearance. Now she's 13 points behind Dan. A fourth version that contains a negative description has about the same effect.

In other words, any description hurts Jane. And any non-neutral description, even a positive one, just kills her. This is why even a complimentary comment like Obama's is both inappropriate and damaging in a professional setting. It primes people to think of a woman's appearance, and that's apparently enough to keep them from thinking about her actual qualifications. You will be unsurprised to learn that this effect is strongest among men. The full report is here. (Via ThinkProgress.)

Thatcher vs. Reagan, Tories vs. Republicans

| Mon Apr. 8, 2013 11:55 AM EDT

Speaking of Margaret Thatcher, it's safe to say that I'm hardly her biggest fan. But not her biggest critic either. She was on the right side of the Cold War; she was on the right side of de-nationalization; and she was on the right side of keeping out of the euro. But regardless of whether you love her or hate her, I think Michael Tomasky makes an astute point comparing her political legacy to Ronald Reagan's:

The other difference between Thatcher and Reagan is that the Tories haven't gone mad and made Thatcher look like a milquetoast moderate. In this sense her legacy has been more durable than Reagan's. She re-centered British politics to a place where it's more or less stayed, while today's American right has completely left Reagan in the dust.

He's right: today's Conservative Party would be reasonably recognizable to Thatcher. She could run for the party leadership tomorrow and have a good chance of winning it. But today's Republican Party wouldn't elect Reagan dogcatcher, let alone president. Despite the endless hagiography of Reagan from conservatives, the plain truth is that if he were reincarnated today, Ted Cruz would denounce him as a socialist and the tea party would disown him.

For Britain's conservatives, Margaret Thatcher was a corrective. Once the corrective had been applied, their policies more-or-less stabilized. But for American conservatives, Ronald Reagan was just a start. They've kept moving farther right ever since.

Why is this? Discuss.

Today's Obligatory Nutpicking Post About Someone Who Recently Died

| Mon Apr. 8, 2013 11:11 AM EDT

Over at The Corner, Andrew Johnson writes what's become an almost obligatory nutpicking post whenever someone famous dies:

While many mourn the loss of the Iron Lady, liberals have been quick to celebrate her passing....

This is followed by a grand total of six tweets, one of which refers to a piece written a year ago and another of which isn't even nasty. Frankly, I think Thatcher would be pretty disappointed if this is all the venom she inspires these days.

Anyway, two thoughts. First, I'm sure the outraged right will show all the proper decorum when Jimmy Carter dies. Certainly none of them will so much as tweet a suggestion that the world is well rid of this meddlesome, Israel-hating diplomatic rogue, will they?

Second, what's the problem here? When a polarizing figure dies, why shouldn't the reaction be polarized too? The British, bless their hearts, have a tradition of being a bit more bluntly truthful in their obituaries than us Americans, and I'm all for it. Margaret Thatcher led a very public, very contentious life, and was never one to clutch her pearls when she was attacked—and if she could take the abuse while she lived, I think her supporters can take it after she's died. This doesn't mean that literally anything goes—George Galloway's "Tramp the dirt down" is typically over the top—but it does mean that if yesterday you thought her legacy was a terrible one, there's no good reason not to say so today. And no reason to be too scrupulously polite about it, either.

Thatcher loved a good fight, and she always, always, always gave as good as she got. Let's not pretend otherwise.

Do Disability Payments Explain Why People Are Leaving the Labor Force?

| Mon Apr. 8, 2013 10:35 AM EDT

This is from the Wall Street Journal today:

Michael Feroli, chief U.S. economist for J.P. Morgan, estimates that since the recession, the worker flight to the Social Security Disability Insurance program accounts for as much as a quarter of the puzzling drop in participation rates, a labor exodus with far-reaching economic consequences.

Is this true? I don't know: as I type this, I haven't looked at the numbers yet. So let's look!

In 1985, the Social Security Administration forecast that 7.6 million workers would be receiving disability payments in 2009. The actual number turned out to be 7.8 million. So that's our baseline: we started out 183,000 higher than forecast.

The original forecast for 2012 was 8.5 million. The actual number turned out to be 9.4 million. That's a difference of 885,000. Subtract the baseline number, and the unexpected spike since the recession has been 702,000 workers.

Since 2009, about 3 million workers have exited the labor force. It's not entirely clear that we can call this "puzzling," since the labor force participation rate peaked in 2000 and has been dropping ever since. Still, the participation rate did spike downward even more steeply than usual following the recession, and 700,000 is about a quarter of 3 million. So Feroli's contention is plausible: the upward spike in disability awards might account for about a quarter of the post-recession downward spike in labor participation.

That's not a sure thing, since he might have the causality backward. It's equally likely that other factors forced the labor participation rate downward, and workers who found themselves with little prospect of ever getting a job were more aggressive about applying for disability coverage. In fact, I find that explanation more likely. Nonetheless, I promised myself I'd post the results of this crude analysis regardless of what they showed, so here they are.

For more, see my post this weekend about the rise in disability payments, which has become a huge topic of discussion ever since that Planet Money story a few weeks ago. Nickel summary: it's true that disability awards have spiked upward a bit since the recession, but generally speaking, the increase in disability recipients since 2000 has nothing to do with massive waves of cheating or indolence. The vast majority of the growth was predicted way back in 1995 using simple demographic projections, and we've followed the predicted path ever since. There's really only a very small story here.