Kevin Drum - April 2013

Obama's Chained CPI Offer is a Bad Idea

| Wed Apr. 10, 2013 7:46 PM PDT

This is a bit of an obvious point, but I want to make it anyway: pretty much every liberal, even those who generally support the idea of adopting chained CPI as a more accurate measure of inflation, should be opposed to President Obama's proposal to adopt chained CPI.

The reason is simple: chained CPI represents a cut in the growth rate of Social Security benefits. It's arguably something that's worth accepting as part of a larger bargain that would cut benefits a bit and raise taxes a bit in order to improve Social Security's finances, but it makes no sense on its own. Social Security is separate from the rest of the federal budget, and its benefits should never be horse-traded away for miscellaneous changes elsewhere.

If Republicans are ever in a mood to consider a serious Social Security deal that's designed to improve its solvency in a balanced way, that's fine. I'm ready to listen. But that's not on the table. Until it is, chained CPI shouldn't be on the table either.

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Hold on to Your Bitwallets, Folks

| Wed Apr. 10, 2013 2:40 PM PDT

The Guardian reports on the latest Bitcoin follies:

Bitcoin, the digital currency, lost more than $160 (£104) in value on Wednesday, just hours after hitting a record high. The currency hit a new high of $266 before falling to $105 and then bouncing back to $130. The fall is unlikely to put off speculators. Two months ago, a Bitcoin was worth $20.

....Wednesday's wild ride came as someone gave away thousands of dollars worth of Bitcoins on Reddit, the social news site. News blog Business Insider calculated a Reddit user under the name "Bitcoinbillionaire" had given away $13,627.69896 worth of Bitcoins to Reddit users over the day. The mystery donor signed off with a quote from Ron Paul, libertarian politician and one-time would-be presidential candidate: "It's no coincidence that the century of total war coincided with the century of central banking."

So the monetary base of the Bitcoin empire dropped by about a billion dollars because someone gave away $13,000 on Reddit. And this is something we're supposed to take seriously as the future of money? Seems a wee bit fragile, no?

For more on the techno-idiocy that is Bitcoin, Adam Serwer and Dana Liebelson answer all your questions here.

Paul Ryan Ducks Yet Again on Social Security Reform

| Wed Apr. 10, 2013 12:20 PM PDT

Andrew Stiles reports that Paul Ryan is willing to "take a look" at President Obama's proposal to adopt chained CPI as a way of reducing the growth of Social Security benefits:

Ryan, however, is not endorsing the proposal, noting that House Republicans have favored an approach that would fundamentally reform entitlement programs without affecting current seniors, unlike Obama’s plan. “It’s statistical reform,” he told reporters at National Review’s office in Washington, D.C. “You can’t claim it’s great entitlement reform.”

I've got a few comments on this. First, this is pretty rich coming from a guy who recently released a 91-page budget plan with the following as the sum total of his proposal to reform Social Security:

In a shared call for leadership, this budget calls for action on Social Security by requiring both the President and Congress to put forward specific ideas and legislation to ensure the sustainable solvency of this critical program. Both parties must work together to chart a path forward on common-sense reforms, and this budget provides the nation’s leaders with the tools to get there.

What a bold truth teller! Ryan himself is unwilling to put his name squarely behind a plan, but nonetheless sniffs at Obama's proposal as mere "statistical reform." I'm not sure how to read this as anything other than a complaint that, sure, Obama is cutting benefits, but he's not being gleeful enough about it.

Second, it's pretty clear that Ryan wants Obama to own this proposal. He isn't willing to endorse it himself because he wants to make sure that seniors blame Obama for trying to cut their benefits, not Republicans.

And third, there's the perennial pandering about reforming entitlements "without affecting current seniors." I find this loathsome. If you truly believe that Social Security is too expensive and needs to be reined in, why shouldn't everyone pitch in? Why exempt the very group—baby boomers—that's responsible for the increased cost of the program in the first place?

The fact that chained CPI affects everyone is a feature, not a bug. If you truly believe that sacrifices need to be made, then everyone should share in the sacrifice. And if you're gung ho on cutting benefits, you should be willing to suck it up and bravely tell current seniors that they're going to have to help out too. Ryan has always been wholly unwilling to do that.

Needed: Dave Weigel's Latest Take on the Obamaphone

| Wed Apr. 10, 2013 10:25 AM PDT

In the Washington Post today, Karen Tumulty writes about the latest conservative pet rock: Obamaphones. The actual name for the program in question is "Lifeline," which uses fees added to telephone bills to provide discounts on phone service for poor people. It began in 1984 under Reagan, was expanded to cover cell phones in 1996 under Clinton, and was expanded yet again to cover prepaid cell service in 2008 under George Bush. A year later it entered kooky conspiracy theory land:

Lifeline made its way onto the radar screens of the right with an anonymous e-mail, which began circulating in 2009. It warned that free “Obama phones” were being given to welfare recipients, along with 70 minutes of service a month. “The very foundations that this country was built on are being shaken,” the e-mailer wrote.

From there, the conspiracy theories sprouted. Conservative talk radio last year was abuzz with speculation that “Obama phones” had become a means for the president’s tech-savvy reelection campaign to get poor people and minorities to vote.

Some of it was fueled by a video of an Obama supporter that went viral about six weeks before the election and has been viewed almost 8 million times. “Everybody in Cleveland, low minority got Obama phone,” a woman yells on the video. “Keep Obama in president, you know? He gave us a phone.”

That narrative has lived on for some Obama critics as an allegory that explains the president’s worldview. “The president offers you free stuff, but his policies keep you poor,” Sen. Rand Paul (R-Ky.) said in the tea party response to Obama’s State of the Union address. “For those who are struggling, we want to you to have something infinitely more valuable than a free phone.”

And it has become woven into the current fiscal arguments. House Speaker John A. Boehner (R-Ohio) tweeted on Feb. 19: “Nobody should be talking about tax hikes when govt is spending taxpayer dollars on free cell phones.”

What I really want is the Dave Weigel version of this story. The whole Obamaphone thing has been circulating practically since Obama took office. So why is it that it suddenly got legs just last year? Is it purely an election-related thing? But if that's the case, why did it continue to have legs after the election, finally getting mainstream attention from the likes of Rand Paul and John Boehner?

One possibility is that it's mostly advertising-driven. Not political ads, but aggressive marketing from cell phone companies making a buck off the Lifeline service:

TracFone was the first carrier the FCC approved to offer free cell service, instead of just discounted service, as the Associated Press reported on August 15, 2008....Soon, a whole bunch of other wireless carriers got in on the program — by 2010, Virgin Mobile, Verizon, Sprint, i-Wireless, Head Start, Consumer Cellular, Midwestern Telecom, Allied Wireless, and others had free phone plans. That's why you can find all these "free cell phone" websites that look kind of shady, like or

....TracFone spokesman Jose Fuentes told Bloomberg in February, "We’ve had a lot of fly-by-night companies come in." Fuentes estimated that more than 1,700 wireless companies were part of Lifeline. Between 2008 and 2012, the number of people with Lifeline phones grew from 7.1 million to 12.5 million. These companies may be fly-by-night at providing cell phone service, but they are pretty good at marketing, and as the rush of merchandise tied to his inauguration showed, Obama's name seems to move product. But they could have chosen another hook. is still available if you want to try to reach out to the Fox News demo.

I guess the chronology makes sense. TracFone starts the prepaid gold rush in 2008, and in 2009 the weirdo conspiracy theories sprout up. The aggressive marketing, however, begins around 2011 and into 2012, and that's when people really start to notice. Ironically, it's also exactly the time when the FCC started up an investigation designed to rein in fraud in the Lifeline program. But irony isn't a highly prized commodity in Washington DC, and politicians make hay with whatever's at hand. So Obamaphones got a second lease on life.

I guess. But I still want to hear Dave Weigel's take on this.

Why Republicans Hate the Post Office

| Wed Apr. 10, 2013 9:07 AM PDT

The Post Office has caved in on its attempted power play to bypass Congress and stop Saturday mail delivery. Atrios comments on the bigger picture:

I've been a bit puzzled by this one. I doubt Republicans really want to kill the post office. Or, at least, they would also miss it when it's gone. They're not always so good at understanding the consequences of their actions.

I have two words for you: labor unions. This represents the sum total of Republican animus toward the Postal Service. Any other questions?

Deal Reached on Guns, But It Looks Fairly Weak

| Wed Apr. 10, 2013 8:59 AM PDT

Apparently we have a deal on background checks:

A bipartisan group of senators has struck a deal to expand gun background checks to all commercial sales — whether at gun shows, via the Internet or in any circumstance involving paid advertising, according to Senate aides familiar with the talks. The amendment to the guns legislation already proposed in the Senate would not cover private transactions between individuals, unless there was advertising or an online service involved.

....Under the terms of the Manchin-Toomey deal all background checks would be conducted by federally licensed gun firearm dealers, who would need to verify the validity of a purchaser’s gun license and record that a check was performed. Background checks would need to be completed within three days, except at gun shows, where they would have to be completed within two days for the next four years, and then within 24 hours. In order to avoid processing delays, the FBI would be required to complete background checks requested at gun shows before those requested elsewhere.

....Under the Manchin-Toomey deal, records of the newly covered transactions would be kept by federally licensed arms dealers, according to a person familiar with the agreement. Currently, licensed arms dealers keep records of gun sales that take place in gun stores.

On the bright side, the deal seems to require that records of background checks be maintained in the same way as current background checks. This is a key provision, since without recordkeeping the law is essentially worthless. On the not-so-bright side, the exemption for private transactions seems to be pretty broad. This goes well beyond the limited exemption for family members previously under consideration, and would cover anyone using, say, Craigslist to sell a gun.

I suspect that this is a very modest step forward, since the loopholes still seem to be big enough to cover pretty much anyone who wants to sell a gun without doing a check. But I'll wait for more knowledgeable folks to weigh in on this before I say more.

UPDATE: Apparently Craigslist doesn't allow sales of guns, so that was a bad example. However, the general point stands.

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Social Security is Probably Pretty Safe For Now

| Wed Apr. 10, 2013 8:16 AM PDT

The White House has officially released its 2014 budget proposal, and it's pretty much what everyone expected. In particular, it cuts the growth of Social Security benefits by adopting chained CPI and raises taxes on the wealthy by reducing the size of their tax deductions. So does this mean that Social Security is in danger? Ezra Klein comments:

As the White House sees it, there are two possible outcomes to this budget. One is that it actually leads to a grand bargain, either now or in a couple of months. Another is that it proves to the press and the public that Republican intransigence is what's standing in the way of a grand bargain.

We'll see. But I'll put my marker on the table right now: the answer is behind Door #2. There will be no grand bargain, not now and not in a couple of months. In fact, as time passes, a grand bargain gets less and less likely. There was a brief period after the election when it seemed as if the adults in the Republican Party might exert a little control over the tea party wing and try to reach a deal with Obama. But that moment passed, the tax jihadists have reasserted their dominance, and there's zero chance that they'll agree to any kind of tax hikes. So: no grand bargain, and no cuts to Social Security.

Obviously I could be wrong. But anyone who thinks so had better be prepared to explain just how and why I'm wrong—and if you point feebly to Obama's "outreach" dinners for those Republican senators, you might as well just concede the point now. They'll eat dinner with Obama, but they aren't going to vote for any tax increases, and even if they do, the House won't follow their lead. So take your pick: either the modern GOP really is as intractable and deranged as we keep saying it is, or Social Security is in danger of being cut. It's hard to have it both ways.

For what it's worth, this is why I'm comfortable taking a fairly academic approach to the whole issue of chained CPI. I don't doubt that Obama's offer is sincere, but it doesn't matter. Republicans aren't going to take it. Obama will get his proof that Republicans simply aren't willing to negotiate seriously, and who knows? Maybe it will do him some good. But that's all he'll get.

Today Brings Us a Tale of Sleazy Porn Trolls Pleading the Fifth Amendment

| Tue Apr. 9, 2013 8:35 PM PDT

From the annals of stories you know you can't resist reading:

The Prenda saga already had everything a red-blooded legal observer might treasure: Pornography. Intimations of offshore money laundering. Alleged forgery and identity theft.

Then it got even stranger.

Yes it did. Because this is a story about some really creepy copyright trolling, and it stars a team of lawyers—not defendants, lawyers—eventually pleading the Fifth Amendment. Go ahead. I dare you not to click.

Let's Spend Some Money and Find Out Once and for All Whether Chained CPI Cheats the Elderly

| Tue Apr. 9, 2013 7:07 PM PDT

Measuring inflation is really hard. Products sprout new features, quality goes up and down, and consumer tastes change. A banana today might be the same as a banana ten years ago, but if you buy a car, a computer, or an iPod, how do you even begin to compare it to a basket of goods you might have purchased ten years ago? At times, it's a question that becomes almost metaphysical.

The boffins at the BLS spend a lot of time trying to figure this stuff out, and some time ago they decided that their classic CPI measurement probably wasn't accurate. It was overstating actual inflation because it didn't properly account for the fact that people change their buying habits when prices go up. If beef gets more expensive, for example, people buy more chicken. So if you just blindly plug the increased price of beef into your spreadsheet, you'll end up generating an inflation number that doesn't accurately reflect the actual consumption patterns of ordinary consumers.

To fix this, about a decade ago the BLS began tracking a measure called chained CPI. But there's yet another problem with measuring inflation: it's different for different groups of people. If you're a child and you spend half your income on comic books, a rise in the price of comic books represents a gigantic increase in the inflation rate. For adults, not so much.

So if we switch to a new measure of CPI, it's likely to affect different groups of people differently. In particular, although adopting chained CPI as the new official measure of inflation would more accurately reflect inflation for consumers who have a lot of freedom to change their buying patterns, it might be less accurate for consumers who are more constrained. One example of a group that's more constrained is the elderly. Bob Greenstein acknowledges this in a short note that tots up the pros and cons of adopting chained CPI:

Most analysts who have studied the issue have concluded that the chained CPI — which has risen about one-quarter of a percentage point more slowly per year than the regular CPI over the last ten years — more accurately measures overall inflation than the regular CPI. But that judgment applies to the population as a whole. The chained CPI probably does not more accurately measure inflation for the elderly; in fact, it may well be less accurate.

This was a long windup to get to a simple question: Why only "probably"? Why don't we know whether chained CPI is more accurate for the elderly? This has been a significant issue for years, since it directly impacts annual COLA increases for Social Security recipients. If chained CPI is more accurate even for the elderly, there's good reason to adopt it. If it's less accurate—because seniors spend a big chunk of their income on housing and medical care, and have little freedom to change that—then it would effectively produce COLA increases that didn't keep up with inflation as experienced by seniors.

So why don't we know? The BLS has an experimental measure called CPI-E that tries to measure consumer prices for the elderly, but it has a number of flaws and shows inconclusive results. And anyway, it reflects only the different buying patterns of the elderly, not whether chaining would unfairly assume that those buying patterns are more variable than they really are.

I assume it would cost a few million dollars to conduct a full-scale study of the effect of chained CPI on the elderly. But the effect on the elderly amounts to hundreds of billions of dollars. So what's stopping us from putting in the time and money it would take to find out for sure?

Conservatives Part Ways on Sequester Cuts

| Tue Apr. 9, 2013 2:58 PM PDT

The American Conservative Union thinks the federal government spends too much. Still, there are business lobbies out there that are unhappy with some of the sequester cuts, and that represents a fundraising opportunity. So to the dismay of tea partiers everywhere, the ACU is now pitching a new program to defense and transportation lobbyists, called the American Strength Program, to fight cuts in programs these lobbyists support. That's not the official pitch, of course. The official pitch is that defense and roadbuilding are explicitly mentioned in the Constitution, so constitutional conservatives should be happy to shovel as much money as possible into those areas.

Anything for a buck, I guess. Nick Confessore has the full story here. On the bright side, at least the ACU is planning to be discreet about the whole thing.