Kevin Drum - April 2013

Japan Vows to Give the Expectations Channel a Workout

| Thu Apr. 4, 2013 11:14 AM EDT

Japan has been suffering from deflation for most of the past decade, and prime minister Shinzo Abe ran last year on a platform of turning this around. Today, the incoming head of the Bank of Japan announced its new monetary policy:

Following his inaugural policy board meeting, Haruhiko Kuroda said the central bank is pulling out all the stops to get the economy out of deflation, referring to the nine-member panel's unanimous decision to vastly expand government bond purchases, including buying longer-term debt. The BOJ also tossed aside some self-imposed limits that previous leadership had stuck to.

I will not use my fighting power in an incremental manner," Mr. Kuroda told a news conference following the two-day meeting, one of the most closely watched in the central bank's recent history. "Our stance is to take all the policy measures imaginable at this point to achieve the 2% price stability target in two years."

...."I'd give it a 100 on a scale of one to 100, or actually 120," said Dai Sato, a senior dealer at Mizuho Corporate Bank. "In all aspects, the BOJ exceeded our expectations," he said.

There's more in this vein, but the bottom line is simple: Kuroda has made it absolutely clear that BOJ is willing to do anything, and for as long as it takes, to get inflation back up to 2 percent. He's committed to doubling the money supply, and will do even more if that's not enough.

This is a fascinating experiment. One of the cornerstones of the market monetarists who believe the Fed should target NGDP levels—i.e., that it should commit to keeping nominal GDP growing at a preset rate, and should play catch-up if it doesn't—is that the simple act of making that commitment will raise inflation. This is the "expectations channel" of monetary policy.

Well, BOJ has now put the expectations channel into play in about the most dramatic way possible. Its announcement was surprisingly strong, it was unequivocal, it was credible, and it clearly has strong political support. If it doesn't work, it will demonstrate serious limitations for managing monetary policy via expectations. If it does work, it will give a boost to the NGDP crowd. It won't be a decisive demonstration either way, since there's more going on than just expectations, but it will definitely be a strong data point. It should be interesting to watch.

UPDATE: Sorry. My brain abandoned me this morning and I wrote "MMT theorists who believe the Fed should target NGDP levels." I meant "market monetarists who believe the Fed should target NGDP levels." I've fixed this in the text.

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Our Math Deficit Doesn't Add Up

| Thu Apr. 4, 2013 12:52 AM EDT

Here's a story you've probably heard before: General Plastics Manufacturing of Tacoma, Washington, needs factory workers to make foam products. So they give all their applicants a math test that asks them to convert inches to feet, calculate the density of a block of foam, and a few other things:

Basic middle school math, right?

But what troubles General Plastics executive Eric Hahn is that although the company considers only prospective workers who have a high school education, only one in 10 who take the test pass. And that’s not just bad luck at a single factory or in a single industry.

Hahn, vice president of organizational development, said that the poor scores on his company’s math test have been evident for the past six years. He also sits on an aerospace workforce training committee and said that most other Washington state suppliers in his industry have been seeing the same problem.

OK, now look at the chart on the right. It shows results from the NAEP math test—a national assessment that's generally considered highly reliable—for 17-year-olds. And basically, it shows nothing. If you take a look at the 25th and 50th percentiles, which is where most factory workers come from, scores have been pretty flat for the past two decades. If anything, they're up slightly.

So how do we square this with Eric Hahn's contention that General Plastics has had trouble over the past few years finding qualified workers? I can think of a few possibilities:

  1. Hahn is just wrong. He remembers the past as rosier than it was.
  2. Jobs at General Plastics require higher skills than in the past, but they're refusing to pay any more than they used to. So they're not getting suitable applicants.
  3. Ever since the NCLB "test 'em til they drop" era started, kids have been learning rote math that's good for getting high test scores but not so good for solving actual real-world problems.
  4. Scores have fallen off a cliff over the past five years, but we don't see it in the chart because it only goes up to 2008.
  5. Washington is doing worse than other states.

There's evidence that #3 isn't the answer. To the extent that kids are taught to the test, they're taught to state tests, since those are the ones used to measure performance. The NAEP is a federal test that nobody teaches to because (a) it doesn't count for anything, and (b) it's given to only a tiny fraction of students nationwide (less than 1 percent of all K-12 students). What's more, the long-term NAEP, which is what I showed above, has been carefully constructed to stay the same from year to year. It's testing exactly the same thing today that it tested in 1978.

There's also evidence that #4 isn't the answer. We don't have national results for 17-year olds that are more recent than 2008, but we do have results for 8th graders on the main NAEP. Their math scores rose between 2007 and 2011. A sudden and unprecedented collapse between 8th and 12th grades seems unlikely.

There's also evidence that #5 isn't the answer. In fact, Washington has done a bit better than the national average over the past decade.

I might have missed a possibility. For now, though, my money is on #2.

We Don't Need No Stinkin' Democrats on the DC Circuit Court

| Wed Apr. 3, 2013 5:40 PM EDT

As we all know, Republicans filibustered President Obama's nomination of Caitlin Halligan to the DC Circuit Court last month, so now we're moving on to the second of his nominees to fill one of the court's vacancies: Sri Srinivasan, an attorney who's not just respected by both liberals and conservatives, but even worked in the George W. Bush administration. That didn't do him any good when he was first nominated in 2012, but he's back now, and getting a lot of love from right-wingers. Sahil Kapur reports:

Their support would normally bode well for a key judicial pick by a Democratic president. But Senate Republicans have indicated a desire to maintain the court’s notoriously high vacancy rate — at least as long as Obama’s president. Earlier this year, they filibustered a different, widely respected Obama nominee to the same court. And so the broad ideological consensus behind Srinivasan makes it harder for Republicans to oppose his nomination without appearing as though they’re abusing their advise and consent power for partisan purposes.

Harder? Sure. Impossible? No! A while back I was digging into this subject a little bit, trying to find out what the official objection to Obama's nominees was. The party-line answer, it turned out, was pretty straightforward: The DC Circuit doesn't really have a very heavy caseload, so it doesn't need any more judges. As you can imagine, this is a very handy argument indeed, since it means that Republicans don't really need to cast around for a pretend reason to oppose Srinivasan or any of Obama's other nominees. They can just oppose them all.

Now that David Sentelle has retired and the court has four vacancies, maybe this argument won't fly any longer. Then again, maybe it will. Stay tuned.

The Antichrist Is Always With Us

| Wed Apr. 3, 2013 2:20 PM EDT

Ed Kilgore comments on the news that 13 percent of voters think Barack Obama is the antichrist:

Extrapolated to the national electorate, it suggests that over 13 million Americans believe the President of the United States is a demonic supernatural being sent into the world to set up an infernal kingdom until it's all washed away by the End of Days.

This reminds me of something that I sort of accidentally got involved in a couple of decades ago. I'll skip the details, but I ended up learning that among at least a subset of evangelical Christians, there's always an antichrist. For a while it was Muammar Qaddafi. Then it was Saddam Hussein. I assume Osama bin Laden took on the role after 9/11. So the fact that some of them now pin that tag on Obama isn't super surprising. The antichrist is out there somewhere, and with the usual suspects now mostly dead, why not Obama?

Atlanta's Kids Have Done Pretty Well in School Over the Past Decade

| Wed Apr. 3, 2013 1:53 PM EDT

Former Atlanta superintendent of schools Beverly Hall is now the poster child for cheating on standardized tests. But Hall claims that Atlanta schools really did perform better under her leadership, and as evidence she points to gains on the national NAEP test, widely considered to be reliable and not easily gamed. Dana Goldstein comments:

Although NAEP security procedures are generally considered more stringent than those used in state and district-level testing, there are reasons to be skeptical of Atlanta’s gains on the national exam as well. Between 2002 and 2009, the demographics of Atlanta NAEP test-takers changed considerably; the number of white students taking the test doubled, and the number of Hispanic students also went up. In Atlanta, white and Hispanic children tend to score higher than black children, which led Professor Mark Musick, a former NAEP chairman, to estimate that as much as 40 percent of Atlanta’s gains could be due to changes in which students sat for the exam.

I don't quite get this. Why not just look at the NAEP results for black, white, and Hispanic kids separately and see how they did? I don't feel like doing that for every combination of kids and tests, but a quick look tells me that reading scores for black 8th graders increased from 233 to 249 during Hall's tenure, and math scores increased from 241 to 262. That's no defense of Hall, but it seems pretty straightforward to figure out how Atlanta's kids did and how that compares to other big cities. Why estimate?

A Brief Morning Whine

| Wed Apr. 3, 2013 1:22 PM EDT

I've got a problem. I figure nearly everyone is just going to laugh at me for this—though for different reasons on left and right—so I'm a little hesitant to even bother whining about it. But here it is.

I like snark. I'm perfectly happy to trade elbows with the opposition. But really, my preference is to spend most of my time talking seriously (or semi-seriously) about policy, and that means engaging with conservatives. The problem is that it's just flatly hard to see the point of doing that these days. When I read even supposedly serious conservative policy proposals, I find them so egregiously empty that I feel like I'd be demonstrating terminal naivete by even taking them in good faith. So I don't.

Yesterday, for example, I wrote about the Ponnuru/Levin proposal for healthcare. "Wrote" is giving myself too much credit, though. Basically I just sighed. Today, Ezra Klein, who's a nicer guy than me, summarizes it as "less spending on health insurance for poor people, stingier health coverage for middle-class people, and lower taxes for rich people." He then goes on to write a couple thousand words about a similar proposal, which quite plainly wouldn't work, and wouldn't broaden health coverage even if it did.

So which approach is better? My better angels tell me I should assume good faith and spend the time it takes to write a long explanation of why this stuff won't work. But why bother? Does anyone really think that the people who write these plans are unaware of the grade-school level problems with their proposals? Of course they are. They've been pointed out a hundred times, and they keep writing up the exact same proposals anyway. They barely even bother to change the wording.

Or take yesterday. I caught a few minutes of Chris Hayes' new show, and he was talking with his panel about why South Carolina conservatives are apparently willing to forgive Mark "Appalachian Trail" Sanford. Everyone took the question seriously and offered serious ideas. As a result, they all tap danced around the real reason: conservatives are willing to forgive pretty much any conservative who goes through the whole Christian repentance kabuki. So which is better? To be serious, or to simply state the obvious truth and be taken for a partisan shill?

There are hundreds of examples like this. The annual Paul Ryan budget fest is probably the most obvious one. Every year we comb through his budget and produce lots of charts and tables and trendlines, and every year the bottom line is exactly the same: Paul Ryan wants to cut taxes on the rich and cut spending on the poor. That's it. That's what he wants. That's why his budget never changes, even after hundreds of detailed analyses showing exactly what it would mean for domestic spending. It's because slashing spending on the poor is the whole point of the plan, not merely a bug of some kind that maybe Ryan doesn't quite get.

So which is better? All the charts and tables and trendlines? Or refusing to even pretend to take it seriously?

I don't know. I swing back and forth, depending on my mood and the subject matter. Hell, I'm not even sure why I'm writing about this. I guess I just needed to get it off my chest or something. Regularly scheduled programming will now resume.

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Our Brave New World of Employment Background Checks

| Wed Apr. 3, 2013 11:05 AM EDT

With unemployment stubbornly high, even a small problem can be enough to keep you from getting a job. And thanks to modern technology, employers are a lot more likely to be aware of these problems. Obviously a prison record has always made it hard to find a job. A poor credit report can blackball you these days. And today the New York Times reports on a new breed of databases that track retail employees accused of stealing:

Retailers “don’t want to take a chance on hiring somebody that they might have a problem with,” said Richard Mellor, the [National Retail Federation's] vice president for loss prevention.

But the databases, which are legal, are facing scrutiny from labor lawyers and federal regulators, who worry they are so sweeping that innocent employees can be harmed. The lawyers say workers are often coerced into confessing, sometimes when they have done nothing wrong, without understanding that they will be branded as thieves.

....For Keesha Goode, $34.97 in missing merchandise was enough to destroy her future in retailing....She received a letter from Dollar General alerting her that she had been turned down for a job partly because of her listing in Esteem, and a copy of the report showed that she had a “verified admission” for “theft of merchandise.” She wrote LexisNexis, “I was accused of not reporting on a former employee who was stealing merchandise, but I did not steal anything myself.”

The company responded that it had reinvestigated and “verified” the accuracy of the information. Ms. Goode, who now works at a halfway house, has a lawsuit pending against LexisNexis, accusing the company of violating the Fair Credit Reporting Act.

Sure they reinvestigated. They probably pinged the original retailer and asked if the charge was true. The retailer sent back a routine confirmation and that was that.

It's pretty easy to understand the retail industry's interest in something like this. If I ran a store, I'd be pretty interested. But these private databases are springing up everywhere; there are no rules to ensure any kind of accuracy; most people don't even know they're in them; and there's usually no effective way to appeal a black mark if you do find out. It's like being caught in TSA hell.

The increasing reach of computer and network technology is making this increasingly widespread. Mistakes are rampant, coercion is likely common, and even where the charges are true, this brave new world means that a lot of people are being effectively shut out of the labor market for minor offenses that they could have put behind themselves in the past. I'm not sure what the answer is, but this stuff is growing like a weed. It needs some rules of the road before it gets entirely out of hand.

NAF Proposes Big Expansion of Social Security

| Wed Apr. 3, 2013 8:30 AM EDT

It's time for liberals to fight back on Social Security! Today, the New America Foundation released a plan that not only declines to endorse any kind of compromise on Social Security that would cut benefits, but proposes that we add a brand new benefit:

We propose to replace most of the country’s current, inadequate, hybrid public and private retirement system with a two-part, wholly public system called Expanded Social Security. Expanded Social Security would have two distinct parts. The first part, Social Security A, would be similar to the current Social Security Old Age and Survivors Insurance (OASI) program, which provides a retirement benefit related to earnings. The second part of Expanded Social Security would be a new universal flat benefit, Social Security B, to supplement the traditional earnings-related benefit that would continue to be provided by Social Security A.

....If we assume that Social Security benefits are maintained at current levels and that there are no additional cuts to the program, we propose to set Social Security B at $11,669 per year for all elderly earners.

How much would this cost? A little over 1 percent of GDP to fully fund current Social Security with no benefits cuts, and about 3.7 percent of GDP to fund the new Social Security B. Altogether, call it about 5 percent of GDP. That's....a lot. The authors suggest that current Social Security would be fully funded via higher payroll taxes, while Social Security B would be funded by "either general revenues or a new dedicated tax or taxes, which might include portions of a federal value-added tax (VAT)." The chart on the right compares the benefits under current Social Security vs. the NAF plan.

The basic contention here is that old-style corporate pensions are pretty much gone, and 401(k)-style programs are a disaster. So we should just ditch them entirely and beef up Social Security so that it's a sufficient retirement program all by itself. I still haven't been able to quite convince myself that 401(k)s are the disaster area that a lot of people say they are, but the evidence on this score is certainly fairly hazy. It's quite possible that 401(k)s really are failures.

In any case, this is the first serious shot across the bow from the forces who not only don't want to compromise on Social Security, but want to expand it. I expect to hear a lot more along these lines in the near future.

More Education Just Teaches You How to Steal More Efficiently

| Tue Apr. 2, 2013 11:40 PM EDT

Lant Pritchett on why improved education doesn't always improve the performance of poor countries:

His research has shown that countries whose education system improves actually grow slower on average. He suggests that one reason for this may be that putting more educated people into a corrupt bureaucracy may result in more sophisticated corruption.

This sounds disturbingly plausible. And not just for poor countries, either.

"Illegal Immigrant" Is Now Out, But AP Doesn't Tell Us What's In

| Tue Apr. 2, 2013 7:31 PM EDT

The Associated Press has announced that it will no longer use the phrase "illegal immigrant" in its stories. Here's the new entry in the AP Stylebook:

Except in direct quotes essential to the story, use illegal only to refer to an action, not a person: illegal immigration, but not illegal immigrant. Acceptable variations include living in or entering a country illegally or without legal permission.

Except in direct quotations, do not use the terms illegal alien, an illegal, illegals or undocumented.

AP's announcement explains that they've been "ridding the Stylebook of labels," and that "this discussion about labeling people, instead of behavior, led us back to 'illegal immigrant' again. We concluded that to be consistent, we needed to change our guidance."

I've used "illegal immigrant" before, and I've always had a hard time buying the argument that it's an inherently insulting term. But times change, and I generally adhere to AP style since that's what I learned many decades ago. Cranky stubbornness aside, I certainly don't have any reason to make an exception here, so I won't. Illegal immigrant is now out.

But I do still have a problem. AP apparently now feels that there's no acceptable way to refer to people who are in the country illegally. Neither "undocumented immigrant" nor "unauthorized immigrant," is acceptable, and neither is anything else. Labels are flatly not allowed, despite the fact that we label people all the time. Kevin Drum is a blogger. Barack Obama is a politician. Etc.

This leaves us with constructions like "John Doe is a person who immigrated to the United States illegally." Or: "A bill pending in Congress would bar immigrants who are in the country illegally from receiving Medicaid." Clunkiness aside, I guess we can all get used to that, but I'm not sure how it especially serves the cause of accuracy.

Jose Antonio Vargas, who has been at the forefront of this battle, apparently thinks that "undocumented immigrant" is fine. Other campaigners against "illegal immigrant" seem to agree. I've never been too keen on that formulation, but I can live with it. Unless I get further guidance from the MoJo copy desk, that will probably be my usual descriptive phrase in the future.