Kevin Drum - May 2013

Quote of the Day: House Republicans Have Completely Melted Down

| Wed May. 1, 2013 9:22 AM PDT

From Jake Sherman of Politico, on the chaotic state of the House Republican caucus these days:

The inability to find unifying principles is sometimes in plain view: House Republicans spent two days last week passing legislation that extended the authority of the government’s helium reserves, which Democrats would’ve allowed them to pass by unanimous voice vote.

Here's a bit more:

The GOP leadership is dealing with an unprecedented level of frustration in running the House, according to conversations with more than a dozen aides and lawmakers in and around leadership. Leadership is talking past each other. The conference is split by warring factions. And influential outside groups are fighting them.

....The House simply isn’t interested in the agendas being pushed by the president and Democratic Senate. Most Republicans aren’t looking for a big legislative push on gun control. GOP leaders are skeptical that they can arrive at a framework to negotiate a budget agreement with Senate Democrats. And tax reform and an immigration overhaul, while broadly supported, are still seen as long shots.

Members of leadership have trouble staying on the same page. Cantor is anxious to move on his agenda, but McCarthy needs to gather support in a House Republican Conference that’s filled with lawmakers constantly divided on leadership’s priorities.

Much to the chagrin of GOP leadership, outside groups — Club for Growth and Heritage Action — oppose top Republicans at every turn. Those groups claim they don’t ever hear from Boehner, Cantor and McCarthy. The conservative groups — natural allies who could give cover to the House Republican Conference — feel they have no buy-in to their agenda from the House GOP leadership.

Apparently there are now two groups of Republicans in the House. First, there's a group of firebrand conservatives headed by Eric Cantor, which, as near as I can tell, is mostly dedicated to finding slightly more slippery language to sell its usual right-wing agenda of school vouchers, block granting Medicaid, increased tax credits, and gutting labor laws. Second, there's a group of insane, frothing-at-the-mouth conservatives who think of Cantor as Nancy Pelosi's lapdog and are basically uninterested in anything other than repealing Obamacare, slashing taxes even more, ending the welfare state, and making speeches about how Obama is destroying America. It's quite a little group that John Boehner has up there.

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Keep Calm and Go F*** Yourself

| Wed May. 1, 2013 8:46 AM PDT

I guess this is old news in Britain, but I learned about it for the first time this morning:

Thirteen years ago, Stuart Manley stumbled upon a slightly faded red poster tucked at the bottom of a box of books he had bought at auction. Unfolding it, he found himself staring at a relic of World War II, a long-forgotten piece of government propaganda bearing the logo of the British crown and this pithy message:

Keep calm and carry on.

....The Manleys and other traders are caught in a spat with an enterprising Englishman who, after launching his own line of "Keep calm and carry on" products, trademarked the phrase with European authorities two years ago....The businessman, a former TV producer named Mark Coop, insists he's simply protecting the interests and brand of the company he has worked hard to build since 2007. His foes accuse him of trying to monopolize a piece of history.

....After Coop was granted his trademark, an online petition campaign quickly sprang up calling for it to be revoked — and for nasty fates to befall him...."The trouble and everything it's caused has not been worth it," Coop says. "I didn't expect that people would react in such a venomous, vicious way."

Right. Who could have guessed that anyone would react negatively to such an obviously predatory bit of trademark abuse?

In any case, I have decided to popularize and widely market a set of kitschy objects emblazoned with the slogan "Tippecanoe and Tyler Too." I figure I can make millions, and thanks to my upcoming trademark of the phrase, all the rest of you are forbidden from ever using it again. Don't like it? Well, you should have come up with the brilliant idea of putting it on toilet seat covers first. But you didn't, did you?

401(k) Retirement Funds Are a Rip-Off

| Wed May. 1, 2013 8:14 AM PDT

Matt Yglesias has a dyspeptic take on how the 401(k) retirement industry works:

  • Poor people get absolutely nothing.
  • Wealthy people who would have had large savings anyway get a nice tax cut that offers no meaningful incentive effect.
  • For people in the middle, the quantity of subsidy you receive is linked to the marginal tax rate you pay—in other words it's inverse to need.
  • A small minority of middle class people manage to file the paperwork to save an adequate amount and then select a prudent low-fee broadly diversified fund as their savings vehicle.
  • Most middle class savers end up either undersaving, overtrading, investing in excessively high-fee vehicles or some combination of the three.
  • A small number of highly compensated folks now have lucrative careers offering bad investment products to a middle class mass market based on their ability to swindle people.

Dyspeptic but basically accurate! The first four bullets are, unfortunately, just business as usual in America. It's the last two that really rub salt in the wounds. But it's simply a fact that a great number of 401(k) funds are extremely poorly suited as retirement vehicles and suck up far more in fees than can possibly be justified.

But the news is even worse than that! Last year the Labor Department issued new rules that forced funds to disclose their fees in an easily understood manner. The idea was that if they're going to rip you off, at least now you'll know how much they're ripping you off and maybe switch to a more honest fund. But it didn't do much good:

After the new fee disclosure statements went out, roughly the same percentage—half!—of participants said that they still do not know how much they pay in plan annual fees and expenses, according to a recent survey by LIMRA, an association of insurance and financial services organizations.

....For those 401(k) participants who said they thought they knew how much they paid in fees, most of them were way off base. One out of four participants thought they paid 25% or more in fees, 16% thought they paid between 10% to 24% in fees, and 30% thought they paid between 2% and 9% in fees. Only 28% of participants thought their fees were less than 2%.

That group is the closest to reality. On average fees and expenses range between 1 to 2 percent, depending on the size of the plan (how many employees are covered) and the employees’ allocation choices (index funds versus actively managed funds), says LIMRA.

Basically, this suggests that people have no idea what "fees" even means, which bodes ill for the power of disclosure to have any effect. If you think that 2 percent is really low, then you're getting ripped off even though you do know the fee structure of your fund.

The era of the defined-benefit corporate pension is gone, and it's not coming back. People switch jobs too frequently for it to work anyway. The only real options are either private plans like 401(k)s, which ought to be reformed to make them better, more honest retirement vehicles, or higher Social Security payments. Most likely, both. The former would help the middle class and the latter would help the poor and the working class. The upper middle class and the wealthy can fend for themselves. They're doing pretty well already.