Kevin Drum - July 2013

The Emerald City Comes to Afghanistan

| Wed Jul. 10, 2013 1:21 PM EDT

Dan Drezner recounts the joys of scaring the crap out of his undergrads:

My students never believe me when I tell them the myriad ways the United States nearly launched nuclear weapons by accident during the Cuban Missile Crisis. My students never believe me when I tell them that Ronald Reagan sent an inscribed Bible and a cake shaped like a key to Iran as a way to release American hostages held in Lebanon. My students really do turn white as a sheet when I talk about the Eurozone crisis.

That must be a helluva lecture he gives about the eurozone crisis. I think I'm up to speed on the whole thing, but I've never turned white as a sheet over it. Maybe I need to sit in on one of Dan's classes.

Anyway, this turns out to be mostly an excuse to link to Rajiv Chandrasekaran's piece in the Washington Post about all the useless stuff we built in Afghanistan even though there was no real chance we'd ever use it. According to an inspector general's report about a $34 million headquarters building in Helmand province, it is "the best constructed building I have seen in my travels to Afghanistan. Unfortunately, it is unused, unoccupied, and presumably will never be used for its intended purpose." And that's over and above the $771 million in aircraft that DoD wants to give the Afghans even though they can neither operate nor maintain them. As the bloggers like to say, read the whole thing.

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Lots of People Have Never Finished "Ulysses"

| Wed Jul. 10, 2013 12:37 PM EDT

Via Tyler Cowen, here are the top five most abandoned classic books, as chosen by Goodreads:

Oddly enough, I've read all five, and the only one I abandoned was Ulysses.1 200 pages was all I could take. Maybe someday I'll try again with one of those annotated versions that explains the half dozen obscure allusions on every page. If I do, maybe next I'll take up Bleak House and Foucault's Pendulum, the only other remaining titles on my list of books that defeated me.2 Probably not, though.

1OK, I never plowed through the whole John Galt radio address in Atlas Shrugged. But come on. That doesn't count, does it?

2Moby-Dick fell off the list in 2009. The Brothers Karamazov was conquered last year. Three remain!

Republicans Are Running Out of Filibuster Threats

| Wed Jul. 10, 2013 10:59 AM EDT

Democrats are maybe, possibly threatening to change the filibuster rules for confirmation of executive branch nominees, and naturally Republicans are threatening in return to bring the Senate to a grinding halt if any action is taken that reduces their power to, um, bring the Senate to a grinding halt. But Ed Kilgore wonders if this threat even has any meaning these days:

It's not at all clear that if Democrats invoked the "nuclear trigger" and Republicans went absolutely insane in retaliatory wrath, we'd even be able to tell the difference. What can Senate Republicans threaten to do that they're not already doing in the way of impeding the traditional functioning of Congress and of the federal government in general? Sabotage the implementation of major legislation already enacted (check)? Gum up federal agency operations (check)? Risk a debt default (check)?

Oh, I dunno. There's still the business of objecting to committee meetings that go beyond the first two hours of the day. And Republicans could start filibustering Mother's Day resolutions, I suppose. But that stuff is juvenile enough that even Mitch McConnell might be worried about the bad press it would produce. So yeah: what's left in the obstructionist toolkit, anyway?

There is one thing, of course: a threat to do away with filibusters on judges the next time Republicans are in charge of the Senate and the White House. The problem is that Democrats widely believe that Republicans plan to do this anyway at the first opportunity. So I'm not sure that's much of a threat either.

Your Legislative Strategy Lesson For the Day: Don't Get Cute

| Wed Jul. 10, 2013 10:23 AM EDT

Here in California we have a law called MICRA that caps payouts for pain and suffering in medical malpractice cases. I'm no big fan of laws like this, but let's set that aside for the moment. There's something I've always wondered about MICRA: it sets the payout cap at $250,000, and it's not indexed for inflation. How did that happen? I mean, this law was passed in 1975, when inflation was practically a national obsession (remember all those WIN buttons?). It was obvious the cap would get whittled away to nothing before long, and sure enough, that's exactly what's happened. The cap today is less than a quarter of its value in 1975, making it so low that it's nearly impossible to get a lawyer to take on lots of legitimate malpractice cases. The payout is too low to justify the amount of work it takes.

Today, Michael Hiltzik satisfies my curiosity. He talked to former California Assemblyman Barry Keene, who sponsored the bill and now has regrets, and he explained what happened:

Keene, now 74 and long retired from the Legislature, is tormented by the failure to protect the $250,000 cap from inflation.

As he explained to me in an email, he proposed an inflation-indexed cap in an amendment to his original bill, assuming it would pass routinely. Instead the trial lawyers lobby, which adamantly opposed MICRA, came out against the inflation index in order to make the bill as noxious as possible to guarantee its rejection.

They misplayed their hand. To their shock, MICRA passed the Legislature without the inflation provision, got signed by then-Gov. Jerry Brown and then was upheld by the state Supreme Court.

This is your legislative strategy lesson for the day: Don't get cute. Most of the time, 11-dimensional chess doesn't work. Just fight your fights.

In any case, Hiltzik has more in his column, including all the reasons that payout caps aren't really a good idea. The California legislature will take up a proposal to amend MICRA later this year, and if they fail to do anything, a ballot initiative is reportedly on our way in 2014. It should be a doozy.

Feds Move to Raise Capital Requirements For Big Banks

| Wed Jul. 10, 2013 9:49 AM EDT

The Wall Street Journal reports that federal regulators want to increase the capital requirements for America's biggest banks:

Eight big bank-holding companies would have to increase their so-called leverage ratios to 5%, while their FDIC-insured bank subsidiaries would have to increase them to 6%—well above the 3% agreed upon by global regulators

....Reluctant to put a hard cap on bank size, regulators are instead trying to ensure any bank that chooses to remain big will have deep reservoirs of capital to absorb any losses and prevent the need for a taxpayer bailout. Over the next several months, regulators are expected to propose requiring the largest banks to hold significantly more long-term debt and to pay a special surcharge.

In addition, they are considering an added capital levy for heavy reliance on the kinds of volatile, short-term funding that were at the center of 2008 crisis.

As you can imagine, I'm all in favor of this. My only complaint is that the requirements should be even stricter and should apply to even more banks. But it's better than nothing, and will accomplish two things. First, since it applies only to big banks, it will eliminate some of the funding advantage they have thanks to the widespread belief that they're safer than small banks because the government will always step in to bail out a big bank that's in trouble. Second, it will make big banks safer. During a crisis, they'll be less likely to fail in the first place.

Critics complain that this proposal will tie up money that could otherwise be used for making loans. They also complain that it will raise the interest rates these banks charge. These concerns are overblown, but there's certainly some truth to them. That's the whole point, after all. Big banks that are overextended are dangerous to everyone, and higher capital requirements require them to operate a little more conservatively.

And if you're wondering, "What is capital, anyway?" then join the crowd. There are times when this becomes almost a metaphysical concept, but Matt Yglesias has the nickel explanation here. I think I'd disagree with him about capital not being a "cushion" (part of the role of capital is to act as a backstop against losses, which is a fairly cushion-y sort of thing), but the rest of it is a pretty good primer.

The Death Rattle of Immigration Reform is Nigh

| Tue Jul. 9, 2013 5:21 PM EDT

A while back I downgraded my estimate of immigration reform's chances from 50-50 to about one-third. In terms that Standard & Poor's would understand, my objective, independent, rating of the bill dropped from BBB to B-. This week, however, it looks as though it's entering junk bill territory:

The already narrow path to enacting comprehensive immigration reform pretty much disappeared in the past 24 hours.

At the Capitol, House Speaker John Boehner stated a specific policy preference Tuesday that will alienate the entire Democratic Party if he adheres to it....It amounts to a de facto endorsement of the conservative view that any steps to legalize existing immigrants should be contingent upon implementation of draconian border policies. As is Boehner’s custom, it also eschews the word “citizenship,” suggesting that even if Democrats agree to a trigger, he won’t guarantee that it would be aimed at a full amnesty program, and, thus, eventual voting rights for immigrants already in the U.S.

And then there's this:

This morning, William Kristol and Rich Lowry, the editors of the two most important conservative magazines (the Weekly Standard and National Review) joined together to write an unusual joint editorial titled "Kill the Bill," coming down in opposition to the "Gang of Eight" immigration bill that passed the Senate. The substance of their argument is familiar to anyone following this debate—the Obama administration can't be trusted, it won't stop all future illegal immigration, the bill is too long—but the substance isn't really important. What's important is that these two figures, about as establishment as establishment gets, are siding firmly with the anti-reform side.

Why are Republicans backing away from immigration reform? Probably because they never really liked it in the first place. But why are Republicans saying they're backing away? Partly they've taken solace in Sean Trende's "missing white vote" theory, which suggests that Republicans can gain more by increasing their vote share among whites than they can by appealing to Hispanics. And who knows? That might even be true in the short term. But in the last couple of days, critics have latched onto yet another argument: if President Obama can delay the employer mandate in Obamacare, then he can probably sabotage an immigration bill too if he feels like it. Steve Benen provides the summary:

The talking point appears to have started in earnest with this Washington Examiner piece from Conn Carroll, who argued that the Obama administration delayed implementation of the employer mandate in the Affordable Care Act — a move the right should, in theory, love — which proves the White House shows discretion when it comes to enforcing parts of major laws, which proves Obama might not enforce the border-security elements of immigration reform, which proves Republicans can't trust him, which proves Congress should kill the bipartisan bill.

....[Rep. John Fleming] went on quite a rant yesterday, arguing, "Whatever we pass into law, we know he's going to cherry-pick. How do we know that? ... ObamaCare; he's picking and choosing the parts of the law that he wants to implement. This president is doing something I have never seen a president do before: in a tripartite government with its checks and balances, we have lost the balances. We have a president that picks and chooses the laws that he wants to obey and enforce. That makes him a ruler. He's not a president, he's a ruler."

All the signs of doom are here. Boehner is falling deeper into the tea party rabbit hole every day; the establishment has decided to cut its losses; the intellectual superstructure of opposition is gaining ground; and the hot-air crowd is finding ever more deranged conspiracy theories to rally the troops.

Immigration reform now has a C rating: "Currently highly vulnerable obligations and other defined circumstances." It's a hair's breadth away from a D: "Payment default on financial commitments." Let the death watch commence.

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Chart of the Day: Even in a Recovery, Wages Are Declining

| Tue Jul. 9, 2013 2:03 PM EDT

Via Felix Salmon, here are the results of a study from the National Employment Law Project that examined average wages in 785 occupations:

From the study:

Averaged across all occupations, we estimate that real median wages declined by 2.8 percent from 2009 to 2012. This is a striking decline, given that productivity increased by 4.5 percent over this same time period....Moreover, as shown in Figure 1, lower-wage and mid-wage occupations saw significantly bigger declines in their real wages than did higher-wage occupations. Occupations in the top two quintiles saw their median wages decline by less than 2 percent on average (and nearly a third of those occupations actually saw real wage growth). By contrast, occupations in the bottom three quintiles saw their median wages decline by 3 percent or more. 

Keep in mind that the recession officially ended in June 2009, so these wage losses are all coming during the period that we laughably refer to as a "recovery." Some recovery.

Trade Pact With Europe Might Gain Us Two Months of GDP By 2027

| Tue Jul. 9, 2013 12:24 PM EDT

Shorter Dean Baker: If we pass the Transatlantic Trade and Investment Partnership, U.S. GDP will rise to $24 trillion in January 2027. If it doesn't pass, we won't reach that level until.....

March 2027.

And that's the most optimistic possible scenario. In the less optimistic scenario, passing TTIP only gains us a single month of GDP by 2027.

TTIP may well be worth doing anyway. It depends on what the final deal looks like, and just how badly IP law gets even further screwed up by it. Still, it's worth seeing the benefits displayed this way, instead of in raw numbers, because it gives you a sense of just how small the economic gains are. There might well be some benefits to harmonizing business regulations, but that's mostly what this is about. Trade between the United States and Europe is already pretty wide open, so the actual trade benefits of TTIP are modest.

Obama is Learning the Limits of American Foreign Policy. When Will Republicans?

| Tue Jul. 9, 2013 11:32 AM EDT

Jonah Goldberg is critical of President Obama's opportunistic cast of mind when he deals with foreign policy:

The most plausible interpretation of Obama's zigzagging approach to foreign policy is that he is simply "winging it," as Robert W. Merry, editor of the National Interest, writes.

It is difficult to find much, if any, intellectual coherence to the president's foreign policy. He fought for a surge of troops in Afghanistan but then refused to rally public support for the war he escalated. Worse, he later rendered the surge moot by announcing to our enemies that we'd soon bug out, no matter what.

During Iran's Green Revolution, he stood pat as the mullahs crushed a democracy movement seeking to overthrow a regime hostile to U.S. interests. In Libya, he intervened to oust a dictator who had become a de facto ally, insisting he couldn't stand by as innocents were slaughtered. In Syria, a vassal of Iran, he has stood by as innocents were slaughtered.

Goldberg's tone aside, this is roughly right. The only problem is that he says it as if this is a bad thing. I say: Thank God for winging it. A consistent, ideological approach to foreign policy gave us Afghanistan and Iraq, wars we ended up fighting without any real hope of ever being able to win them. Obama, by contrast, intervened in Libya because there was a realistic chance of achieving his goals, and stayed out of Iran and Syria because there quite plainly wasn't. Likewise, although Obama's approach to Egypt has unquestionably been driven by the moment, that's mostly a reflection of reality: we simply don't have much leverage there.

This isn't to say that Obama couldn't have done better: I think a more consistent support for democratic norms probably would have served us well there. Still, the difference would have been small. $1.5 billion buys us a bit of leverage, but not really that much when there's revolution in the air. If Goldberg knows of something we could have done to force out Mubarak faster, or prevent the Muslim Brotherhood from winning Egypt's parliamentary elections, or stop the military from deposing Morsi, I'm all ears.

Besides, I wonder what Goldberg wants? For my money, I'd say Obama's biggest failures have come precisely when he chose to intervene. If there's a consistent foreign policy that would have been a relative winner, it probably would have been a foreign policy that simply withdrew from Afghanistan and never intervened in Libya in the first place. Obama's way might be messy, but the muscle-flexing interventionist approach favored by talk-radio fueled conservatives is flat-out disastrous. So what's the alternative?

Uber Fights the Taxi Industry in Los Angeles

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

"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public," Adam Smith wrote in the 18th century. Today in the LA Times, FCC commissioner Ajit Pai writes about the 21st century version of this. He starts off with the travails of Uber, the taxi service you can hail on your smartphone instead of vainly flailing your arms around and hoping that someone eventually notices:

Like many consumers, I love Uber. But not everyone does....Last month brought another roadblock. The city of Los Angeles ordered the company (along with Lyft and Sidecar) to stop operating. In the last few weeks, four of Uber's drivers have been arrested in undercover stings to catch "bandit taxicabs."....What's motivating all of this? Simply put, Uber and the other companies are a threat — a threat to entrenched incumbents.

....Tech start-ups in other industries face similar burdens. For example, Square has created a credit card reader for mobile devices. Small businesses love Square because it reduces costs and is convenient for customers. But some states want a piece of the action. Illinois, for example, has ordered Square to stop doing business in the Land of Lincoln until it gets a money transmitter license, even though the money flows through existing payment networks when Square processes credit cards. If Square had to get licenses in the 47 states with such laws, it could cost nearly half a million dollars, an extraordinary expense for a fledgling company.

Obstacles to entrepreneurship aren't limited to the tech world. Across the country, restaurant associations have tried to kick food trucks off the streets. Auto dealers have used franchise laws to prevent car company Tesla from cutting out the middleman and selling directly to customers. Professional boards, too, often fiercely defend the status quo, impeding telemedicine by requiring state-by-state licensing or in-person consultations and even restricting who can sell tooth-whitening services.

Smart libertarians often point out that complex government regulations are essentially a barrier to entry for small companies. Big corporations may complain, but in a lot of cases it's just kabuki: they have the legal support staff to comply with the new rules, and they know that small competitors don't. In the end, the regulations often work in their favor.

It's not always easy to tell which regs are genuine and which ones are mostly just fronts for established incumbents. Then again, sometimes it is, and the rules against Uber and its competitors are pretty obviously the latter. California's big cities should get the message and do what's right for their residents, not the taxi lobbyists who donate to their reelection campaigns.