Kevin Drum - 2013

Joyous Tidings on the Good Governance Front!

| Fri Dec. 6, 2013 3:11 PM EST

Today brings some surprisingly positive news on the governance front:

I don't know that I'd put money on any of these—especially the first one, more's the pity—but it sure represents an improvement over the past few months.

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Bill Bratton is a Great Choice to Head New York's Police Force

| Fri Dec. 6, 2013 1:18 PM EST

I got an email yesterday from a reader asking what I thought about Bill de Blasio appointing Bill Bratton as New York's new police commissioner. After all, I've written that reduced lead exposure is most likely responsible for New York's big crime drop in the 90s, not Bill Bratton, so we shouldn't buy into the Bratton hype, should we?

As it happens, I think Bratton is a great choice. He did a good job with limited resources during his tenure in Los Angeles, and people I respect almost uniformly admire him. Sure, his mouth is a little bigger than it needs to be sometimes, but his community policing reforms were very successful, and he did a terrific job of rebuilding relations with LA's minority communities during a very tense period. And while I don't know enough about this stuff to really have an informed opinion, my sense is that his focus on things like CompStat and broken windows are pretty effective.

It's worth re-emphasizing that the lead/crime theory is fairly limited. It explains one thing, and one thing only: the huge rise of violent crime starting in the 60s and its subsequent big drop starting in the 90s. This wave of crime, over and above any normal baseline, was probably due largely to skyrocketing childhood lead exposure in the years after World War II. However, the baseline level of crime isn't zero. Take away all the lead and you're still going to have plenty of crime. Good policing is what reduces that baseline level, and as best I can tell, Bill Bratton's policing is very good. We're not likely to see a 50 percent drop in crime during his upcoming tenure, but we probably can expect a modest drop in crime accompanied by better relations with the communities Bratton is charged with keeping safe.

Chart of the Day: Net New Jobs in November

| Fri Dec. 6, 2013 12:09 PM EST

The American economy added 203,000 new jobs in November, but about 90,000 of those jobs were needed just to keep up with population growth, so net job growth clocked in at 113,000. This is slightly better than the rate we've seen all year, but only slightly. We're plowing ahead, but not really making up lost ground from the Great Recession.

Comparisons with October are tricky, since that was the month of the government shutdown. However, compared to September, the labor force shrank by 265,000 and the labor force participation rate declined from 63.2 percent to 63.0 percent, while the number of unemployed shrank by 348,000. That produced a drop in the headline unemployment rate to 7.0%. However, some of that was due to the shrinking labor force, so it's only partially good news.

So....it's sort of a Groundhog Day jobs report. The good news is that job growth is steady despite the sequester and other austerity measures. The bad news is that people are still dropping out of the labor force in significant numbers, and we aren't really seeing any acceleration in the job market. We're still treading water.

Network Restrictions Are Nothing New For American Health Care Consumers

| Thu Dec. 5, 2013 8:07 PM EST

Megan McArdle writes today about the fact that in some states, health coverage purchased via Obamacare allows you access to only a limited number of doctors and hospitals:

Come January, when some number of Americans have bought insurance on the new health exchanges and are starting to use the services, you can expect another controversy to arise when many of them find out just how few doctors and hospitals they have access to. Call it “doc shock,” though the biggest outcry will not come when people try to schedule an appointment with their physician, but when someone gets sick and they learn they cannot go to whatever top-notch hospital they want, only to the hospital that is included in their plan

....Even if it were true that we could get better treatment at a lower cost by restricting peoples’ choices, people would still hate having their choices restricted....If narrow networks could give everyone in the country access to health-care outcomes no worse than 90 percent as good as the folks with the best doctors at 75 percent of the price we’d pay for broader networks, the health-care wonks would jump on that deal as an unbelievable bargain. But I think it’s pretty clear that average folks don’t think like health-care wonks.

I've been referring to this as "network shock," and I think it's a real issue. Depending on just how narrow some of these networks are, there's a potential for some substantial dissatisfaction from consumers.

At the same time, I want to push back against this notion that everyone hates restrictions and won't tolerate them even if it saves them money. For many decades, companies offered employees a choice of health care plans. Unrestricted plans cost more and had higher copays. PPOs limited your choices, but had lower copays.

So how have people responded to this? They voted with their wallets and chose restricted plans. Since 1998, the number of people covered by PPOs has risen from 11 percent to 57 percent. If you combine every type of restricted plan—PPO, HMO, POS, etc.—their combined market share is 99 percent. Old-school plans that allow you to choose any doctor you want were already dying a decade ago, and today they're all but extinct.

It's possible that in some states, plan restrictions are going to be tight enough to cause some serious pushback. But the truth is that consumers do think like health care wonks—if by that you mean that they expect to make tradeoffs between price and service. If you go on the exchange and choose a low-cost plan, you'll probably end up with a narrow network. If you pay more, you'll get a wider network. American consumers are well accustomed to this. Most of us have been making decisions like this for a very long time.

Our Handy Calculator Lets You Pretend You're a 1-Percenter For a Day

| Thu Dec. 5, 2013 5:09 PM EST

Do you ever wonder what your income would be like if it had grown as fast as the average investment banker's since 1960? Well, wonder no more! Click here, enter your current salary, and our handy-dandy calculator will tell you how much you'd be making today if ordinary incomes had gone up as fast as the top 1 percent.

Now, before you ask, no, it's not realistic to think that everyone's income could rise as fast as the superwealthy's has. Still, this calculator provides a concrete sense of what a 270 percent increase really means. When you hear that the head of Goldman Sachs used to make $20 million and now makes $75 million, it just seems like two ginormous numbers. When you find out that a similar growth rate means that you would be making, say, $150,000 instead of $50,000, it kind of brings it all home.

Modern Racism and "12 Years a Slave"

| Thu Dec. 5, 2013 4:34 PM EST

I was not as blown away by 12 Years a Slave as Jonathan Chait was, but no matter. Tastes differ. However, in a long piece yesterday, Chait used the film as a springboard to talk about modern-day conservative resistance to the idea that racial discrimination is still a problem. Here's his final paragraph:

Conservatives can transport themselves for two hours into the hellish antebellum world of 12 Years a Slave and experience the same horror and grief that liberals feel. What they cannot do, almost uniformly, is walk out of the theater and detect the still-extant residue of that world all around them.

Chait is quite correct that conservatives mostly refuse to acknowledge the reality of modern racism. Not the bullwhips of 1850 or the fire hoses of a century later, but the constant, petty abuses, police stops, lousy schools, social wariness, and legal injustices that remain part of daily life for most African-Americans. These things are hard for most whites to detect—I imagine I'm fairly typical in understanding them mostly as cultural abstractions, not because I ever encounter them in my personal life—and conservatives rarely even try. Instead, they mostly choose to view them as mere partisan inventions brought up to make the right look hateful and bigoted.

Odd as it sounds, movies like 12 Years a Slave may confirm this worldview more than they challenge it. After all, the point of the film is to show us the unrelenting horrors of slavery: the beatings, the fear, the subjugation, and the degradation. But the more horrific the on-screen portrayal, the more difficult it is to see parallels with the modern world. Regardless of how pervasive institutional racism still is, it shares little emotional resonance with the appalling cruelty of the antebellum South. Because of that, the obvious reaction of anyone walking out of the theater is a sense of relief that this has all been relegated to the ash heap of history. 

12 Years a Slave was a fine film. But expecting it to change anyone's views on affirmative action or voter ID laws is expecting too much. Ironically, it's more likely to do just the opposite. In many ways, it's basically a license to view racism as a horror uniquely of the past.

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No, Pre-Existing Conditions Are Not Like Car Wrecks

| Thu Dec. 5, 2013 2:04 PM EST

One of the most maddening aspects of the debate over Obamacare isn't simply the fact that conservatives dislike it, but the fact that they seem unable even to understand what the point is. Via Ed Kilgore, here is Georgia state insurance commissioner Ralph Hudgens—surely a guy who should understand what insurance is and how it works—comparing pre-existing condition requirements to having a car wreck:

A pre-existing condition would be then you calling up your insurance agent and saying, "I'd like to get collision insurance coverage on my car." And your insurance agent says, "You've never had that before, why would you want it now?" And you say, "Well I just had a wreck, it was my fault, and I want the insurance company to pay for the repairs to my car." And that's the exact same thing on pre-existing insurance.

Well, sure, it's the exact same thing except for the fact that it has nothing in common whatsoever. In fact, this is basically a defense of the individual mandate, though Hudgens doesn't seem to understand that either.

People with pre-existing conditions aren't folks trying to scam the system. They're just people who got sick. And Republicans simply have no realistic plan for allowing them access to affordable health care. This is a problem for the GOP, because unlike the $100-a-plate crowd that tittered at Hudgens' story, most people understand that pre-existing conditions can happen to anyone. That's why Obamacare's requirement for community rating—i.e., for insurance companies to cover people with pre-existing conditions at the same price as anyone else—is so popular. What most people don't quite understand is that this is what produces the rest of Obamacare too. If insurance companies have to cover people with pre-existing conditions, they'll go out of business unless they cover everyone else too. That way the entire insurance pool covers the small number who get seriously sick in any given year. So you have to have an individual mandate. But lots of people can't afford insurance. So if you have an individual mandate, you have to have subsidies for low-income workers. And with that, you have community rating, the individual mandate, and subsidies. And that's about 90 percent of what Obamacare is.

It's one thing to oppose Obamacare. But Republicans have no realistic alternative. They can blather away about tort reform and HSAs forever, but even low-information voters dimly understand that it's just blather. Either you're going to cover sick people or you aren't. And if you do, you're going to end up with something that has most of the same features of Obamacare. Smarter Republicans understand this perfectly well, which is why they dance around the issue so manically. They know that their plans don't actually provide health coverage for much of anyone at all. Dimmer Republicans like Hudgens don't have a clue, so they just tell dumb stories to well-heeled crowds. I'm not really sure which is worse.

Third Quarter GDP Revised Upward, But Nobody Is Happy About It

| Thu Dec. 5, 2013 1:13 PM EST

The BEA announced today that economic growth in the third quarter wasn't 2.8 percent after all. It was 3.6 percent. But the conventional wisdom on this congealed instantly: the entire revision was due almost entirely to a buildup in inventories, not final sales, so it doesn't mean much. If businesses are building up inventories this quarter, they'll probably cut back next quarter and it will all come out in the wash.

That's all true enough, but I think discretion is the better part of wisdom here. It's way too easy to start diving into the details of every GDP report and every employment report, looking for nuances that suggest things are either better or worse than the headline number suggests. Most of the time, though, I think you miss the forest for the trees when you do this. There's always something in these reports that you can point to as evidence for either optimism or pessimism. You can do it every quarter. In the end, though, I think you're better off taking the headline number at face value and not worrying too much about the details. (Unless, of course, you're analyzing the details for their own sake. If you're writing a report about inventory levels, then go ahead and pay attention to the inventory numbers.)

As it happens, however, this time around there probably really is some reason for caution. As Matt Yglesias points out, "Gross Domestic Income—an alternative procedure for counting up the same concept that GDP measures—rose only 1.4 percent in this report. The GDI approach is generally more accurate, further underscoring there are a lot of dark clouds to this silver lining." I don't know for sure that GDI is "generally" more accurate, but it certainly has some advantages over GDP measurements, and even if you just average the two you get a third quarter growth rate of 2.5 percent. That's not terrible, but it's not great either. More aggregate demand, please.

Really, Obama? That's All You've Got on Income Inequality?

| Wed Dec. 4, 2013 7:04 PM EST

President Obama gave a big speech today about rising income inequality and declining income mobility, and I was glad to see him give a shout out to my favorite theory of why we should care about this:

These trends are bad for our economy. One study finds that growth is more fragile and recessions are more frequent in countries with greater inequality. And that makes sense. When families have less to spend, that means businesses have fewer customers, and households rack up greater mortgage and credit card debt; meanwhile, concentrated wealth at the top is less likely to result in the kind of broadly based consumer spending that drives our economy, and together with lax regulation, may contribute to risky speculative bubbles.

Or, as I like to put it : (1) the rich suck up more and more of the money, (2) eventually they can't find anything useful to do with it all and start making lots of dodgy loans to stagnating middle-class consumers, (3) this works great for a while, but then (4) kablooey.

Obama's speech was chock full of statistics, which may or may not have been a good idea, but all of them are probably familiar to anyone who reads this blog regularly. Personally, I was more interested in what kinds of policy changes he wanted us all to get behind. Here they are:

To begin with, we have to continue to relentlessly push a growth agenda....simplifying our corporate tax code in a way that closes wasteful loopholes and ends incentives to ship jobs overseas....a trade agenda that grows exports and works for the middle class....coming together around a responsible budget.

....Step two is making sure we empower more Americans with the skills and education they need....supporting states that have raised standards for teaching and learning....helped more students go to college with grants and loans that go farther than before....innovation that reins in tuition costs....worked to connect local businesses with community colleges....making high-quality preschool available to every child in America.

....The third part of this middle-class economics is empowering our workers....collective bargaining laws function as they’re supposed to....raise a minimum wage that in real terms right now is below where it was when Harry Truman was in office.

....Number four, as I alluded to earlier, we still need targeted programs for the communities and workers that have been hit hardest by economic change....And we're also going to have to do more for the long-term unemployed.

....Fifth, we've got to revamp retirement to protect Americans in their golden years....encourage private savings and shore up the promise of Social Security for future generations.

I understand that even a fairly anodyne prescription like this is going to get the Fox News crowd all lathered up about how Obama is finally tearing away the disguise and revealing his true Marxist colors, but still. It's kind of weak tea, isn't it?

Maybe it's not reasonable to expect an awful lot more from a sitting US president, but I guess I'm not feeling all that reasonable these days. Or am I just being crotchety because I'm fighting off a cold? In any case, I sure wish there had been at least one genuinely big, newsworthy proposal here. It might have no chance of going anywhere, but then again, neither does most of this other stuff. At least something big might have started driving the conversation in a more interesting direction.

NSA Tracks 5 Billion Cellphone Locations Each and Every Day

| Wed Dec. 4, 2013 4:55 PM EST

Here's the latest from the Snowden leaks:

The National Security Agency is gathering nearly 5 billion records a day on the whereabouts of cellphones around the world, according to top-secret documents and interviews with U.S. intelligence officials, enabling the agency to track the movements of individuals — and map their relationships — in ways that would have been previously unimaginable.

....The number of Americans whose locations are tracked as part of the NSA’s collection of data overseas is impossible to determine from the Snowden documents alone, and senior intelligence officials declined to offer an estimate. “It’s awkward for us to try to provide any specific numbers,” one intelligence official said in a telephone interview. An NSA spokeswoman who took part in the call cut in to say the agency has no way to calculate such a figure.

An intelligence lawyer, speaking with his agency’s permission, said location data are obtained by methods “tuned to be looking outside the United States,” a formulation he repeated three times. When U.S. cellphone data are collected, he said, the data are not covered by the Fourth Amendment, which protects Americans against unreasonable searches and seizures.

I wonder just how good this "tuning" is?