Kevin Drum - August 2013

Apple Losing Its Mojo in the Smartphone Market

| Wed Aug. 7, 2013 5:20 PM EDT

The Wall Street Journal ran the chart on the right today, showing that Apple's iPhone is losing ground to Android. But Matt Yglesias says this isn't bad news for Apple: after all, 13 percent of 236 million is a lot more than 17 percent of 156 million. Apple is selling more phones than ever, and making lots of money on them.

This is true. But I'd say it's still bad news for Apple. Until now, one of Apple's big advantages in the market has been the depth and quality of its app ecosystem. But as its market share keeps decreasing, that will go away. Developers will write apps for Android first, and then port their code over to iOS later. All the newest and coolest stuff will be available on Android phones first, and as that happens the all-important teen demo will slip away. Apple's obsessively tight control over what you're allowed to do with your phone will start to seem creepy, not smart, and their single-minded dedication to a single form factor will become an albatross.

Not right away, of course. It will take a while. But there's a tipping point where declining market share turns into a death spiral. If that happens, the iPhone will become cousin to the Mac: a niche product that spins off some money but not much else. And that might be OK. Maybe Apple has never counted on the iPhone being an industry-leading product forever, and figures that the next big thing will power its next growth phase, all funded by stagnant but steady profits from the iPhone. Maybe.

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The Sale of the Washington Post Really Isn't That Big a Deal

| Wed Aug. 7, 2013 2:33 PM EDT

Ed Kilgore:

Gotta say, the quantity of writing about the WaPo sale--particularly at WaPo--is pretty astounding. Don't know if it's the slow news day or some editorial effort to show the paper's independence, or some sort of collective mid-life crisis. But nobody's going to say this story is under-reported.

No kidding. My blogging has been light lately because I've been fighting off a cold for the past few days, and on Monday in particular I just gave up. By mid-afternoon, not only was I bleary-eyed from the invasion of rhinoviruses, but everywhere I looked nobody was talking about anything but the sale of the Post. So I called it a day and took a nap.

But seriously: who cares? Rich people have been buying newspapers for a long time, and that's only accelerated over the past few years. Rupert Murdoch bought the Journal. Sam Zell bought the LA Times. John Henry just bought the Boston Globe. Now Jeff Bezos has purchased the Post. It's really not that big a deal. The decline of big city dailies has been ongoing for decades; the reasons for the decline are well known; and this has produced an ownership game of musical chairs that shows no signs of slowing down. The Post sale took everyone by surprise, but aside from that it's just more of the same.

So can we shut up about it already? Pretty please?

Everyone Wants to Live Longer, But Lots of People Don't Want to Admit It

| Wed Aug. 7, 2013 2:15 PM EDT

As proof that timing is everything (except in real estate, of course, where it's location), Pew Research is getting lots of attention today for a new survey about American attitudes toward radical life extension. What's so great about the timing? Well, it's August, and every blogger in the country is having a hard time finding anything to write about. So the Pew survey is getting lots of attention.

As near as I can tell, the main takeaway from the whole thing is that most people lack even the tiniest spark of imagination. Take a look at the response on the right. Nearly everyone thinks the ideal lifespan is between 79 and 100. What an amazing coincidence! No one wants a shorter life than they live now, and no one wants a life that's much longer either. If Pew had surveyed fruit flies, they all would have said the perfect lifespan was around 38 days or so.

The headline result of the survey is that more than half of the respondents said they wouldn't want treatments to "slow the aging process and live to be 120 or more." I guarantee you that nearly all of them are mistaken. Or lying. If such a treatment actually existed, every baby boomer in the country would be lining up at their local hospitals to get it, and would be demanding that Medicare pay for it. There would be a few exceptions for the chronically depressed and those suffering from debilitating illnesses, but that's about it. The rest of us, given an opportunity to live healthy lives for an extra 40 or 50 years, would jump at it.

How Will the Other Networks React If GOP Bans NBC From Debate Coverage?

| Wed Aug. 7, 2013 12:11 PM EDT

As we all know, RNC chairman Reince Priebus has threatened to exclude NBC from hosting Republican primary debates if they continue with their plans for a Hillary Clinton miniseries. The whole thing is basically a no-lose proposition for Priebus, since it rallies the base today and does him no harm tomorrow. If NBC caves, all well and good. If it doesn't, who cares? Priebus wants fewer debates in 2016 anyway.

But here's a thought. I figure there's one way in which this could come back to bite him: if all the other networks refuse to host Republican debates as long as NBC remains blackballed. I don't mean Fox News, of course. They'll host debates regardless. But what if CBS and ABC and CNN all decline to participate on the grounds that the RNC is abusing its power to influence press and entertainment coverage on the networks? That has the potential to hurt. Priebus may want fewer debates, but he does want them televised and I'll bet he doesn't want 100 percent of them on Fox.

Anyway, just a thought. Remember back in 2009, when all the other networks came to Fox's defense when the White House tried to exclude them from a pool interview with executive-pay czar Kenneth Feinberg? I wonder if the same thing could happen this time?

As Expected, Student Test Scores Have Plummeted in New York City

| Wed Aug. 7, 2013 10:59 AM EDT

Just to follow up on a post from a couple of days ago, the scores on New York's new, more difficult school tests are in. Here's how New York City did:

Across the city, 26 percent of students in third through eighth grade passed the state exams in English, and 30 percent passed in math, according to the New York State Education Department....Under the old exams last year, the city fared better: 47 percent of students passed in English, and 60 percent passed in math.

....The results galvanized critics of Mayor Michael R. Bloomberg, who has often pointed to improvements in test scores as evidence that his stewardship of city schools has been a success.

....Anticipating the outcry, the city and state arranged for the United States secretary of education, Arne Duncan, to participate in a conference call with reporters on Tuesday. In his remarks, Mr. Duncan said the shift to Common Core was a necessary recalibration that would better prepare students for college and the work force.

“Too many school systems lied to children, families and communities,” Mr. Duncan said. “Finally, we are holding ourselves accountable as educators.”

This is all pretty silly. The only thing it proves is that you can pass or fail as many kids as you want by fiddling with a test. Make it hard enough, and even a national merit scholar will fail. Make it easy enough, and even a moron will pass. You can set the bar anywhere you like.

Is the new test a "better" measure of how much students know? Maybe. Maybe not. But it's different, which means it tells you exactly nothing about how good Bloomberg's stewardship of New York City schools has been over time. If you think test scores are a good way of measuring student performance, we already know the answer to that question: he's done OK, but not great.

Twitter Slowly Becoming More Cool Than Facebook

| Tue Aug. 6, 2013 5:18 PM EDT

Over at Balloon Juice, mistermix highlights this paragraph from a story about bullying at an Ohio high school:

At Hudson High School, Facebook is yesterday’s news — "Most of Facebook is just people saying, 'Is anyone still on Facebook?'" one student says — and increasingly, students are interacting on Twitter. In the five months since it was created, an account named Hudson Confessions (@HudConfessions) has amassed more than a thousand followers, or about two-thirds of the size of Hudson’s current student body.

Hmmm. Just a year or two ago, I remember reading that despite its aura of coolness, kids didn't really use Twitter much. It was mostly us oldsters who used it, while Facebook reigned supreme among teens. But mistermix says that although the lamestream media doesn't report much about Facebook's decline, "it's been true for a while."

But I want numbers. I want Science™. What is America's youth really up to? A Pew report from last May has this to say:

Teen Twitter use has grown significantly: 24% of online teens use Twitter, up from 16% in 2011....Focus group discussions with teens show that they have waning enthusiasm for Facebook, disliking the increasing adult presence, people sharing excessively, and stressful “drama,” but they keep using it because participation is an important part of overall teenage socializing.

So there you have it. Oddly enough, the social networking site beloved of political junkies and journalists is now spreading its tentacles into the Justin Bieber set. I'll bet that's not something that happens very often. For now, though, we old folks can pride ourselves on being social media trendsetters.

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Has Larry Summers Changed His Regulatory Spots?

| Tue Aug. 6, 2013 2:46 PM EDT

I mentioned a couple of weeks ago that my main objection to Larry Summers as chairman of the Fed was his record on financial regulation. Today, Cass Sunstein uses his Bloomberg column to tell me I have nothing to worry about:

I worked with Summers in the Obama administration, and I can report that in internal discussions, he was one of the most uncompromising advocates for financial regulation. Of course, he supports the free-market system and wants to avoid unnecessary regulatory burdens. But time and again, he insisted that the events of 2008 required everyone, including him, to re-evaluate their views about regulating the financial industry. He contended that banks can’t police themselves any more than polluters can be trusted to protect the environment or pharmaceutical companies can be trusted to ensure that drugs are safe.

Building on these analogies, Summers vigorously argued on behalf of a consumer financial protection agency, and he supported strong safeguards designed to reduce the risk of another economic meltdown. Intensely focused on the problem of “too big to fail,” he was one of the earliest and most forceful advocates of promoting financial stability by requiring banks to have enough capital to withstand an economic downturn.

All of this might be true. Perhaps Summers really has changed his tune after living through the 2008 financial crisis. I'm not a White House insider, so there's no way for me to know.

But I will say this: over the past decade I've become far, far more skeptical of reports based on private knowledge. It seems like there are always plenty of people around to tell us what the great and the good are "really" thinking based on conversations at Davos or Jackson Hole or the West Wing of the White House. Sometimes they're right. But more often, if you want to know what someone really thinks, the best guide by far is their past actions and statements. There's seldom any good reason to make things more complicated than that.

Now, it so happens that Janet Yellen, the other main candidate for the position, doesn't have much of a track record on financial regulation. So it's not as if this is a black-and-white competition. Nonetheless, I'd be very cautious about thinking that someone with long experience and well-considered views is likely to become a born-again regulator. With the immediate crisis out of the way, Summers' regulatory temperament is probably about the same as it's always been.

That said, and despite the remarkable amount of heat this appointment has generated, I can't say that I have super strong feelings about the whole thing. I think Yellen has more relevant experience and a better track record of being right on the big questions, while Summers has well-known social problems and a dubious track record on financial regulation. That makes Yellen a better choice. But honestly, they aren't very far apart on the big issues, and it's unlikely that either one is head and shoulders above the other. If Obama nominates Summers, it would be just another case of him choosing someone I thought was second best. A minor disappointment, but that's about it.

The Federal Government Should No Longer Subsidize 30-Year Fixed-Rate Mortgages

| Tue Aug. 6, 2013 1:17 PM EDT

President Obama is set to outline his plan for reforming the federal role in the home mortgage market today. Here's one of his requirements:

An acceptable measure also must specify the government’s role and liabilities for Fannie Mae and Freddie Mac, the officials said, and — unlike legislation in the Republican-controlled House — must ensure Americans’ continued access to a 30-year mortgage at a fixed interest rate.

Dean Baker is unimpressed:

In fact, government backing is not necessary for 30-year mortgages, as is shown by the existence of the 30-year jumbo mortgages which are too large to be eligible for government guarantees. The interest rate on these mortgages is typically 0.25-0.50 percentage points higher than the interest rate on conforming loans that can be purchased by Fannie Mae and Freddie Mac.

So the story here is not really about the existence of 30-year mortgages, but rather the price. The program being pushed by President Obama effectively subsdizes mortgage interest rates by subsidizing mortgage backed securities. If the goal to make homeownership more affordable for moderate income people, this is an extremely inefficient way of doing so.

Under the Obama administration's proposal the vast majority of the subsidy would go to higher income homeowners since there will be a bigger subsidy for people who take out bigger mortgages.

A few years ago I think I would have believed that the 30-year fixed-rate mortgage was worth saving. But I now suspect I was just being a slave to path dependence. I grew up with the 30-year fixed-rate mortgage as the "standard" mortgage, so it naturally seemed worth saving. But other countries get along fine without it, and as Baker points out, the jumbo mortgage market gets along fine without any federal guarantees. You can still get a jumbo 30-year fixed, but you'll have to pay a bit more for the security.

The same would likely happen in the conforming market if federal guarantees were ended: 30-year fixed loans would continue to be available, but they'd cost a bit more than ARMs. And even if they did go away completely, it's not clear what harm would be done. As with so many other things, we'd just have to get used to living in a world where pretty much everything is indexed to inflation.

Speaking for myself, I'd get the feds out of the business of deciding which kinds of mortgages should be available. This is something where the market works perfectly adequately. Instead, federal regulations should be all about minimizing fraud, maximizing transparency, and setting rules necessary to keep the broad mortgage market stable (down payment minimums, HELOC regulation, balloon payments, ability to pay, etc.). That's where the real bang for the buck lies.

Fact-Checking Is a Doomed Enterprise: Federal Deficit Edition

| Tue Aug. 6, 2013 12:23 PM EDT

On Sunday, Eric Cantor told Fox News that Congress needed to stay focused on our "growing deficit." But Cantor is wrong: the deficit is shrinking, not growing. PolitiFact took a look at this and ruled that Cantor's statement was half true. Why? Because the deficit is shrinking now, but it might start growing again in 2016.

Steve Benen and Paul Krugman give PolitiFact the going over they deserve on this, but this affair mostly just confirms my belief that the whole fact-checking enterprise is misguided. As usual, the problem here isn't so much facts per se, but how you interpret them and which facts you think deserve the most attention. In Cantor's case, he initially brought up the deficit in the context of the "underlying problem" of "entitlement programs and unfunded liability." A few seconds later he mentioned again that the "real problem" is entitlements, and then a few seconds after that he said it was time for us all to come together "and try and tackle the real problem which is the entitlements."

It was only in his next reply that he talked about "the ultimate problem, which is this growing deficit." This is technically wrong, but in the context of Cantor's repeated concern with entitlements, it's not really a stretch to believe that by "ultimate" he was referring to the long-term deficit trajectory.

So what is PolitiFact's role here? If you think it's very narrow fact-checking, then Cantor is just dead wrong and he deserves their worst score. If you think they should try to take into account the context of his statement, then Cantor wasn't deliberately trying to mislead anyone but gets dinged for not being a little clearer.

Which is it? The problem is that once you get into context and interpretation, you can't really say you're fact-checking anymore. But if you take the narrow view, you're going to end up constantly nitpicking over trivia. Occasionally things will be easy and you'll catch a flat-out whopper, but most of the time political lies are more sophisticated than that. 

There's really no great answer here. I wrote a piece recently for the magazine (on newsstands soon!) about austerity and deficits, and one of the charts included with the story shows the deficit declining from 2010 through 2016. Is that misleading? Should I have included a chart that goes through 2023 so that everyone can see that deficits are likely to start increasing in a few years? I don't think so, because my piece wasn't about long-term deficits. It was about austerity right now and its effect on recovery from the 2008-09 recession, which meant I was only concerned with the trajectory of the deficit right now. But someone with a more hostile reading of my piece could say that I was cherry picking to make the deficit look less scary than it really is. In the end, it's a judgment call.

Not everything is a judgment call. Some stuff is just flat wrong. But most of the time, what's important is which facts you choose to highlight, which you choose to ignore, the context of the facts, the intent of the speaker, and the values both speaker and audience think are most important. That's not stuff you can fact-check, it's just stuff you can explain.

Word of the Day: Desheeting

| Tue Aug. 6, 2013 10:57 AM EDT

The rich are doing great these days. The rest of us, not so much. And yet, the rest of us still have to buy toilet paper even if our jobs are precarious and money is tight:

For them, Kimberly-Clark Corp. and other tissue makers have a special strategy:

“Desheeting.”

A word that top executives of personal-care conglomerates are proudly bandying about because it speaks of their corporate spirit of relentless innovation. And it cropped up during Kimberly-Clark’s second-quarter earnings call....Sales, at $5.267 billion, were down fractionally year over year....Yet Kimberly-Clark continues to eke out “adjusted earnings” growth — 8% per share in the second quarter. What gives? All manner of cost cutting, product-mix changes, and that word.

“Well, we took some desheeting in the quarter,” explained Mr. Buthman. The company was reducing the sheets on each roll of toilet paper and in each box of Kleenex. He called it an “innovation” that would lead to a “more positive” price. At the same time, volume, which the company counted in thousands of sheets, would decline. “Which net net, for us, works out to be a positive,” he said.

....Part of the innovation is to fluff up the tissue without adding more materials — 15% “bulkier,” it said on a box of Kleenex that had 13% fewer sheets in it, the Wall Street Journal discovered. In the Cottonelle line, sheet counts dropped by 5.7% to 9.6%. Fewer but fluffed up sheets, lower input costs for the company, and consumers who “don’t care about” that. A perfect solution — and a variation on an ancient theme — for hiding hefty price increases.

A regular reader passed this along today via email. "The American zeitgeist in one word," he said. Quite so.