Kevin Drum - October 2013

Is the Jig Finally Up for Mickey Mouse?

| Fri Oct. 25, 2013 9:22 AM PDT

As you all know, copyright terms have been steadily lengthened via congressional action. Currently, the term is the life of the author plus 70 years. For works authored by corporations—Superman, Mickey Mouse, etc.—the term is 95 years. Thanks to a retroactive clause passed in 1976, the magic cutoff year for corporate creations is currently 1922. Anything published in 1922 or before is in the public domain. Anything after that is still under copyright.

So what happens in 2018? That's only five years away! Well, it's 95 years from 1923, which means that works published in 1923 fall out of copyright. Every year after that, more and more old works enter the public domain. And in 2023 the boom falls: Mickey Mouse will no longer be under copyright.

Will Disney put up with this? Or will they team up with the usual suspects to get the term of copyright extended even further? Tim Lee gives us the lay of the land here.

UPDATE: Sorry, but I bolloxed up the explanation of why 1922 is the current cutoff year for copyright. It's fixed now.

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Grover Norquist Gives Pot Taxes a High Five

| Fri Oct. 25, 2013 8:39 AM PDT

Grover Norquist must be really, really eager for marijuana to be legalized. So eager that he's willing to throw his anti-tax pledge under the bus in order to help the cause:

Norquist tells National Journal that lawmakers who signed the pledge and want to legalize and tax cannabis are in the clear. "That's not a tax increase. It's legalizing an activity and having the traditional tax applied to it," he says.

He compares legalization to changes in alcohol regulation, as when a state legalizes the sale of liquor on Sundays or allows grocery stores to sell beer and wine where they previously couldn't. "When you legalize something and more people do more of it, and the government gets more revenue because there's more of it ... that's not a tax increase," he explains. "The tax goes from 100 percent, meaning it's illegal, to whatever the tax is."

This is sophistry, of course. If the only tax on legalized marijuana was the traditional sales tax that most states already have, Norquist would be right. But that's not the plan in most places. Instead, there are special excise taxes just for pot, and those taxes are pretty high.

Of course, marijuana taxes have a few characteristics Norquist doesn't mention that might explain the real reason he's OK with them. First, they don't hit rich people very heavily. Second, they target an activity that social conservatives disapprove of. Third, the taxes primarily hit the young, not the oldsters who hold the whip hand in the conservative coalition.

Still, any port in a storm. Thanks, Grover!

Raising the Medicare Age to 67 Is a Lousy Idea

| Fri Oct. 25, 2013 7:59 AM PDT

The CBO has a new estimate of the budget savings from raising the Medicare age to 67. Here it is:

Please note: this is not percent of GDP. This is actual dollars. Over the next ten years, raising the Medicare age would save the government a whopping $2 billion per year on average. Austin Frakt and Aaron Carroll give the nickel explanation for why the number is so low: "The more people you kick off Medicare, the more you get on Medicaid. That increases federal expenditures. More people will also need exchange insurance, too, which means more people needing subsidies....And we’re not even counting the increase to state expenditures for the added Medicaid, the increased cost to employers who have to provide insurance, the increased cost to all Americans in higher premiums for adding those elderly people to the private risk pools, or the increased out of pocket expenses to those seniors."

Bottom line: raising the Medicare age to 67 accomplishes almost nothing. And if you take into account the increased costs in other areas (Medicaid and private insurance), it's a net negative. This is a zombie idea that needs to die once and for all.

The Aluminum Warehousing Racket Turns Out to Be Really Good for Aluminum Companies

| Thu Oct. 24, 2013 3:42 PM PDT

A few months I wrote a series of posts about Goldman Sachs' purchase of an aluminum warehousing business called Metro International. Their strategy, inexplicably, was to deliberately slow down deliveries of aluminum, thus driving up both the spot price and the storage premium they charge customers. The New York Times reported that over the course of three years, the wait time for aluminum deliveries had increased from six weeks to 16 months even though warehouses were bulging with ingots.

But how exactly did Goldman make money off this? It was nothing crude like speculating directly on the price of aluminum. The answer turned out to be insanely complicated—but completely legal. So the London Metal Exchange, which regulates aluminum warehousing and trading, has proposed new rules. Reuters reports that this would be terrible news for aluminum companies:

Two-thirds of aluminum producers would be losing money because of lower premiums paid on top of exchange benchmarks if the world’s biggest metals bourse approves rules to cut waiting times at its warehouses, according to JPMorgan Chase & Co. Premiums to obtain the metal will drop 60 percent to about $100 a metric ton as a result of the new rules the London Metal Exchange is expected to approve in October, Benjamin Defay, an analyst at the bank in London, wrote in a report e-mailed today. The LME proposed to oblige warehouses where waits extend for 100 days or more to let more metal out than they take in.

Hmmm. So if the rules were changed, it would hurt not just Goldman and its insanely complicated financing business, but also the aluminum producers, who benefit in a very un-complicated way from higher prices. For example, the Wall Street Journal estimates today that thanks to the warehousing logjam, Alcoa alone has earned an extra $649 million in premiums over the past three years—and that doesn't even count extra profits from higher spot prices. Perhaps, then, you can guess just what the aluminum industry thinks of the LME's new rules?

On Friday, Alcoa sent a letter to the U.S. Commodity Futures Trading Commission and the U.K. Financial Conduct Authority calling the LME proposal a "misguided" effort that would disrupt the market. Alcoa, which is based in Pittsburgh, said the LME should halt any plans to implement the changes.

Last month, Oleg Deripaska, chief executive of Rusal, the world's biggest aluminum producer by volume, said in a letter released publicly that the LME proposal "is an unprecedented intervention and one that Rusal strongly objects to."

That's a shocker, isn't it? Among other things, the LME's new rules would require warehouses to ship out more aluminum than they take in if wait times increase beyond 100 days. Presumably the rules would also tighten up the definitions of "ship" and "warehouse," since Goldman's warehouses are already in the habit of "shipping" aluminum from one building to another in order to evade current LME rules. Sadly, though, Goldman's financing racket may well continue, since its actions are beyond the purview of the LME.

We should have a decision on all this later this month. Stay tuned.

President Obama's Schmoozing Problem Goes Global

| Thu Oct. 24, 2013 12:16 PM PDT

On the international stage, it's just an endless series of bad news for President Obama these days. It seems as if everyone is mad at him. Here's Roger Cohen on Germany:

A senior official close to Merkel recently took me through the “very painful” saga of the Obama administration’s response to Syrian use of chemical weapons. It began with Susan Rice, the national security adviser, telling the Chancellery on Aug. 24 that the United States had the intelligence proving President Bashar al-Assad’s use of chemical weapons, that it would have to intervene and that it would be a matter of days. German pleas to wait for a United Nations report and to remember Iraq fell on deaf ears. Six days later, on Friday Aug. 30, Germany heard from France that the military strike on Syria was on and would happen that weekend — only for Obama to change tack the next day and say he would go to Congress.

Things got worse at the G-20 St. Petersburg summit meeting the next week. Again, Germany found the United States curtly dismissive....Germany found the atmosphere at the summit terrible. Vladimir Putin, the Russian president, insisted the Syrian opposition was behind the use of chemical weapons....Putin, to the Germans, appeared much more powerful than Obama. His strengthened international standing after America’s Syrian back-and-forth worries a Germany focused on bringing East European nations like Ukraine and Moldova into association accords with the E.U.

The French are upset too, and of course the Brazilians as well. Ditto for Saudi Arabia, which wants us to be tougher on both Syria and Iran. Andrew Sullivan reports similar complaints from Britain: "For all Obama’s re-positioning of the US as a partner, not a hegemon, in practice, the disdain for allies’ particular interests can seem as dismissive as Rumsfeld or Cheney. I’m not sure how to fix this substantively, unless the Congress reins in the NSA. But a little more respect for our European allies would surely help."

I'm unsure what to think about all this. On the NSA spying front, it's a little hard to take foreign complaints at face value since we know perfectly well that other countries do pretty much the same thing. We do more of it, because we're bigger and richer than most countries, but that's a matter of scale, not morals.

On Syria, there's no question that Obama handled things clumsily. And yet, Germany eventually got the response it wanted. Is a little bit of confusion along the way really all that unusual? As for Putin, Germany's concern over his improved stature strikes me as overblown, though obviously they're much more sensitive to this than we are. Ditto for Saudi Arabia and its concerns over Iran.

So what to think? Some of this seems like posturing. Some seems like a legitimate difference in perspective. And some simply seems like a difference of opinion that can't really be talked away. We want to negotiate with Syria and Iran, while Saudi Arabia wants us to flatten them. I don't really blame Obama for pursuing the former course even though the Saudis don't like it.

Beyond that, it seems like much of this is an example of what Bill Clinton says he eventually learned about foreign policy: that it's basically the same as domestic policy. Everyone has their own interests, and you just need to keep plugging away at it. Unfortunately, this is, by common consensus, Obama's worst trait. He doesn't schmooze much with domestic leaders and he doesn't schmooze much with foreign leaders either. This is why all these stories about our foreign policy travails spend at least as much time talking about feelings as they do about actual policies. Foreign allies feel dismissed; they feel unconsulted; they feel like no one in the White House really understands their needs. In the end, it's not clear to me how much that matters, since foreign powers mostly do what's in their own interest regardless of how warm their personal relationships are. George Bush may have had a friendly relationship with King Abdullah, but in the end they got along mostly because their interests coincided.

Still, those relationships matter at the margins. Obama is almost certainly suffering more from the latest round of disclosures than he would if he were a bit friendlier and chattier with his peers across the world. Unfortunately, that's not his style.

Republican Clown Show on Obamacare Has Already Started

| Thu Oct. 24, 2013 10:00 AM PDT

Today's hearing into the Obamacare website almost immediately descended into farce. Emma Roller provides the basics:

With a look of what can only be described as pure glee, Rep. Joe Barton (R-Tex.) pointed out a warning on healthcare.gov saying the information users enter is less private than typical medical forms.

He went on to press Campbell [an executive at CGI], trying to get her to say the website violates the Health Insurance Portability and Accountability Act. "You know it’s not HIPAA compliant,” he told her. “Admit it! You’re under oath!" Campbell demurred, and [Rep. Frank] Pallone swooped in to save the day:

Pallone: I started out in my opening statements saying there was no legitimacy to this hearing, and the last line of questioning certainly confirms that. HIPAA only applies when there's health information being provided. That's not in play here today—no health information is required in the application process, and why is that? Because pre-existing conditions don't matter! So once again, here we have my Republican colleagues trying to scare everybody—

Etc.

That's all funny enough. But the cherry on top comes from Sarah Kliff, who provides a snapshot of the HTML code that Barton is upset about:

The warning that Barton is objecting to isn't even active code. The HTML tag in the pink oval means that everything which follows has been "commented out." The seven lines of code above don't show up anywhere on the actual website and are never executed in any way. It's just boilerplate that was taken from somewhere else, and then edited.

This is what I was talking about earlier this morning when I suggested that Republicans are unlikely to hold serious hearings. This kind of thing is just embarrassingly ignorant. A few more like this, demonstrating that Republicans are flailing around looking for partisan cudgels rather than genuinely trying to investigate a procurement process gone wrong, and the press will simply lose interest. And they'll be right to.

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The Case For Layaway

| Thu Oct. 24, 2013 9:22 AM PDT

Alex Tabarrok writes today that layaway plans don't make sense. He's right. As a matter of pure economics, you'll almost certainly be better off saving the money, earning interest on it, and then using it to buy the stuff you want after you've saved enough. So why do people do it?

The answer isn't really that complicated. Erik Loomis explains:

Like so many ultimately well-meaning articles about the poor I read on the internet, it’s seems to me that Tabarrok doesn’t understand layaway because he’s never been poor (although I don’t actually know). Let’s imagine a situation for layaway. You are 11 years old. It’s July. Your family doesn’t have much money. Getting new school clothes is a big deal because you don’t get very many new clothes in a year and you want to wear them on the first day of school. Your parents are really worried about this. They want to buy you the new clothes. They also know that they will have a really hard time actually saving the money to purchase them all at once. So they put them on layaway at the Target or Walmart and make the payments, hoping to have them all paid off before school starts.

How would I come up with this scenario? Because I was that 10 or 11 year old and my parents used layaway to get me those new clothes I wanted....In a so-called rational economic world, layaway might not make sense. In the real world that actually people live and operate in it makes a ton of sense, even if it is bad economics. People can’t save money easily. It’s actually a more secure investment to pay some of it up front, which commits the individual to buying the product and makes acquiring it probable, but also gives the buyer some leeway if disaster strikes.

I've never been poor, but I dealt with plenty of layaway customers back when I ran a Radio Shack store in the early 80s. My customers probably weren't all that poor either, but neither were they especially well off, and they understood themselves well enough to realize that they needed some kind of prod to stick to a savings plan. Layaway provided it. Economically it didn't make sense, but on a purely human level it made a ton of sense.

It's also worth noting that the economic case against layaway is thinner than it seems. Suppose you put a $300 item on layaway for four months. What's the opportunity cost? Roughly speaking, it's the interest you could have earned on that money, which for most of us is around 2 percent or less these days.1 That's a grand total of one dollar over the course of four months. Frankly, if layaway really does provide a psychological prod to make the payments, it's not a bad deal at all.

1For some low-income families who don't have enough money to even qualify for a no-fee savings account, it might actually be more like zero percent in practice.

Can Republicans Investigate Obamacare Without Making Fools of Themselves?

| Thu Oct. 24, 2013 8:18 AM PDT

The latest from Capitol Hill is a Republican push to investigate the Obamacare rollout and get to the bottom of what happened. Greg Sargent comments:

Interestingly, Republicans believe the new push will get the public to forget GOP excesses during the last battle — even though both revolve around the party’s central organizing point, i.e., the drive to destroy the Affordable Care Act before it’s too late. As the Washington Examiner’s David Drucker put it: “House GOP leaders are looking to revive their majority’s political strength by focusing on the nuts and bolts of legislating, a policy agenda centered on jobs and economic growth — and concerted oversight of Obamacare, a law still unpopular with many Americans.”

....Serious Congressional oversight would be absolutely welcome here. The question is, are House Republicans capable of supplying it? Obamacare’s problems are inexcusable, and there should be accountability for them. There are real and legitimate problems here that could be exposed.

But when it comes to supplying genuine oversight, previous House GOP probes — into Benghazi and the IRS scandal — devolved into circus stunts. Those investigations got knocked off kilter by lurid and fanciful charges that seemed directed at a hard right audience that remains firmly in the grip of the conservative closed information feedback loop.

Yep, that's a good question, all right. I doubt it, because I doubt that Darrell Issa has learned his lesson from the events of the past year. I don't really blame him for the IRS scandal going south, since that one truly did look legit at first and it was a helluva juicy target. But his overreach on Benghazi likely ruined what could have been a decent investigation. I don't think Republicans would ever have found a big-time smoking gun in Benghazi, but a more sober investigation might very well have done some damage, especially since Republicans basically had the press on their side. Instead, they went bananas, and the investigation became a joke.

Ditto for the recent government shutdown. Republicans overreached, and instead of winning a modest political victory that might have been popular with the public, they became the target of massive public anger.

There's plenty of meat available in an investigation of the Obamacare rollout. But a good investigation will go slowly, taking pains not to drown officials in a blizzard of subpoenas while they're in the middle of fighting a fire. A good investigation will also focus a lot of its effort on real issues of procurement and how the federal government handles IT projects. It won't be just a fishing expedition for emails that might be embarrassing to Obama staffers.

There will almost certainly be plenty of the latter. There's already evidence that political considerations contributed to Obamacare's rollout problems. But those will get exposed in a serious investigation. Maybe it will take a little longer, but they'll come.

Can Issa restrain his attack dog personality enough to understand that? Will the tea party caucus allow it? Or will the whole thing quickly devolve into a barrage of subpoenas that are so obviously politically motivated that no one takes them seriously anymore? We'll see, but I'd put my money on the latter right now.

White House Plans to Extend Purchase Deadline for Health Insurance

| Wed Oct. 23, 2013 4:26 PM PDT

The White House has no plans to delay the individual mandate, but apparently it does plan to give everyone a break on the exact date that coverage has to begin:

Amid mounting criticism, the White House said Wednesday that it plans to push back the deadline requiring Americans to purchase health insurance — a provision of the Obama administration’s health care law widely known as the individual mandate — by as much as six weeks, as experts scramble to fix the technical bugs plaguing HealthCare.gov, administration officials told NBC News.

....As the law stands now, individuals are expected to begin the application process via HealthCare.gov by Feb. 15 to avoid a financial penalty. But under the prospective change, individuals will be expected to have started enrollment by March to avoid incurring the penalty.

The current law says you need to have insurance by midnight on March 31. Since the application process takes a while, that means you need to begin by February 15 in order to meet the deadline. Under this new rule, as long as you've begun the application process by March 31, you'll be counted as covered and won't have to pay a fine.

I'm a little surprised the administration is taking this action so soon. After all, if the Obamacare website is up and running by mid-November, that should still leave plenty of time for everyone to meet the old deadline. This suggests that the White House has already concluded that fixing the online application process is going to be a long slog.

UPDATE: Sarah Kliff has a more detailed explanation here. It turns out the reason for the February 15 date is actually a little more complicated than I suggested. But the bottom line remains the same: under the old rules, you needed to apply by February 15. Under the new rules you need to apply by March 31.

Hooray! New York Times Bans Use of "Record" Unless It's Adjusted for Inflation

| Wed Oct. 23, 2013 11:45 AM PDT

Someone named Mental Lint tweeted this today: "Well @kdrum will be happy about that." Excellent! But what exactly will I be happy about? Clicking the mouse to expand the conversation, I see that he's responding to a tweet from David Leonhardt, the Washington bureau chief for the New York Times. Here is Leonhardt's tweet:

NYT changes stylebook today to bar uses of "record" or "largest" unless inflation is taken into account.

Be still my beating heart! A second tweet apparently quotes from the new entry in the stylebook:

"This is not statistical quibbling. It is simply not accurate to describe $1,000 in 2013 dollars as “more” money than, say, $900 in 1960..."

Yes! Praise the Lord! My long, lonely1 struggle has finally paid off. But this is only a start. The Times hasn't banned comparisons of nominal figures over time, which can be every bit as deceptive. There are practical reasons for this, since sometimes inflation-adjusted figures aren't easily available or—more rarely—aren't appropriate or necessary. But I hope the stylebook at least strongly states a preference for money comparisons over time to be inflation adjusted unless there's a very good reason not to. And I hope that other newspapers follow the Times' lead here. It is, so to speak, long past time.

1OK, OK. It wasn't really all that long. And not really all that lonely, either. Cut me some poetic license slack, here.