Kevin Drum - February 2014

We Are Living in Boom Times for Debt Collectors

Student debt continues to go bad, and third-party collectors are booming.

| Tue Feb. 18, 2014 7:29 PM EST

I don't have any deep comments to make on this, but I wanted to share a couple of charts from the Fed's latest report on household debt. First up, here's a chart showing the number of loans that are severely delinquent:

One of these lines is not like the others. In general, delinquencies rose throughout the recession, and then began dropping as the economy began to improve around 2010-11. But not student loans. Delinquencies on student loans have been rising steadily for a decade, and when the economy began its recovery, they just went right on rising. Welcome to life as a college graduate.

The next chart shows the number and size of loans that have been turned over to third-party collectors:

The number of consumers who are being hounded by collectors rose during the recession, and then kept on rising. It's flattened out in the past couple of years, but it hasn't started decreasing yet. Ditto for the average collection, which has just gone up and up and up.

Multiply the two together and here's what you get. In 2003, the per capita amount of debt under collection was about $110 adjusted for inflation. In 2013 it was about $210. In ten years, this number has nearly doubled. Welcome to life outside the upper middle class.

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Why Are We Adopting the Stupidest Possible Payment System in the US?

Chip-and-signature costs a lot to implement but provides few benefits. What's the point?

| Tue Feb. 18, 2014 4:48 PM EST

Last year's big breach of credit card data at Target has rekindled interest in better security for card transactions. There are no silver bullets here, but one way to improve security is to adopt EMV, or "chip-and-PIN" cards, in which you have to enter a PIN when you buy something. This technology has been used in Europe for years, so it's well known to all the banks and card issuers.

But we're not getting it here. Sen. Al Franken asked several big card issuers why not, and they provided various answers. Here's the answer from Capital One:

In the past, EMV technology has been plagued by a "chicken-and-egg" dilemma because EMV technology only reduces fraud if the overwhelming majority of retailers adopt point of sale technology that accepts EMV payment cards. Simply put, banks have been historically reluctant to invest in payment card EMV technology without retailer adoption and retailers have been historically reluctant to invest in point of sale technology without bank adoption of EMV cards. This is why the development of EMV technology is a shared responsibility between the banks and the retailers.

You know what this calls for? Government action! It's precisely what government is for. When you have a collective action problem that's preventing you from accomplishing a clearly beneficial goal, federal regulations can get everyone on the same page quickly and efficiently. How do I know this? Because that's how it worked in Europe.

In any case, we're finally getting EMV technology in the United States starting in 2015. But in possibly the stupidest decision in the history of payment networks, we're actually getting chip-and-signature cards. Why? I've been unable to find a straight answer to this. The banks vaguely talk about merchant resistance to getting new terminals that accept PINs, but that makes no sense. PIN terminals aren't very expensive, and the cost would be effectively zero if you have a five or ten-year phase-in.

Alternatively, they make noises about American consumers not being used to PINs, but that doesn't make sense either. We all use PINs for our debit cards already. We'd learn to use PINs for credit cards in about five minutes.

And then, to add insult to injury, the cards we're getting will mostly be signature-only. That's not a requirement of the technology, though. They could be "signature preferred," which requires a signature if possible but accepts a PIN if not (at automated kiosks, for example). Why not do that? I truly have no idea.

Honestly, the whole thing is just a mystery. EMV technology is old and well-tested. Everyone knows how to make the transition because dozens of countries have already done it. It's not wildly expensive. It wouldn't spark a consumer revolt. So why are we getting idiotic signature-only PIN cards, which are probably the worst possible compromise imaginable? They require more expensive cards and upgrades to infrastructure, but they don't provide much additional security and they don't work universally outside the US.

It's crazy. I wish that someone could explain to me how this clusterfuck happened. I can't find a decent explanation that makes sense, and I'd really like to know. Anyone?

Astrology May Not Work, But Maybe it "Works" Anyway

If you believe, that belief itself can have a positive effect.

| Tue Feb. 18, 2014 2:59 PM EST

A few days ago, Chris Mooney reported here about a new study showing that belief in astrology is on the rise, especially among the young. What's up with that? One of Andrew Sullivan's readers offers a hypothesis:

The National Science Foundation study shows something is clearly shifting within the culture in regards to astrology, particularly for those under 45. What has shifted? It’s that astrology is slowly winning hearts and minds, not through silly horoscopes, but through consistent, effective counseling that clients find useful, practical and relevant to their lives. Professional astrologers cater to working-class individuals all the way up to lawyers, doctors, politicians, businessmen, and professionals of all stripes, every day in this country. Since the field is not routinely covered in the media, many would be surprised to learn that the average professional astrologer is highly educated, socially and politically liberal, and extremely intellectual.

I think you can all guess what I think of this, right? That said, I had an interesting experience many years ago. A friend of mine at work—very smart, very grounded, very educated—was also very deeply into astrology. It was mostly a subject of good-natured banter in the office, and she knew perfectly well that almost none of us were believers. Including me, of course. But then I saw her at work a couple of times, and came to the same conclusion as Sullivan's emailer.

She was, basically, a good counselor. She was empathetic, a good listener, and provided pretty good advice. It so happened that she used astrology as a way of organizing her thoughts, but as near as I could tell, that was just incidental. She believed it, and it gave her a useful framework to work from, but it didn't really mean anything beyond that. She would have been a good counselor whether she was reading star charts, reading palms, or reading out of the DSM-5. Astrology gave her confidence, and that in turn gave her clients confidence. Regardless of whether it was true, that fact made it useful.

Now, I have no idea whether this has anything to do with the fact that, since 2005, an increasing number of young people believe astrology has a scientific basis. Probably not. In fact, the whole thing might be statistical noise that will disappear the next time the NSF happens to ask this question. But it's possible that there's a virtuous (or vicious) circle here: counselors decide to try out astrology as a way of getting through to people; it turns out that it's effective at building confidence; so more counselors try it and, thanks to the good counseling, more people believe in it. Rinse and repeat.

This is just a guess, not something to be taken seriously. Other guesses welcome in comments.

Obama the Wimpy Tyrant....Or the Pathetic Autocrat....Or Something

The effort to pretend Obama is some kind of outrageous despot is getting ever more ridiculous.

| Tue Feb. 18, 2014 1:39 PM EST

Jonah Goldberg phones in a column today about the tyranny of Barack Obama and his flagrant abuse of executive orders, a topic you'd think conservatives would be tired of by now. But I guess they'll never get tired of it, no matter how inane it obviously is. I was, however, particularly impressed by this howler:

Some of his unilateral actions are a bigger deal, of course. The Environmental Protection Agency's decision to treat carbon dioxide as a "pollutant" is an outrageous expansion of executive power. But Obama doesn't tout that as a bullet point; he let the EPA take the political heat for that decision a while ago.

Huh. Last I heard, Massachusetts and some other states sued the EPA, and eventually the Supreme Court ruled that the agency was required to regulate greenhouse gases. The suit began during George W. Bush's first term and was resolved in 2007, while Barack Obama was still a freshman senator running a longshot campaign for the presidency. Obama has (rather fitfully) decided to take advantage of the Supreme Court's ruling, but he played no role at all in this particular expansion of executive power. Five Supreme Court justices can take the credit for that.

My other favorite part of the column was the very last sentence, warning Democrats of blowback for their tyrannical ways: "They shouldn't be surprised if the next Republican president takes advantage of that license."

No worries there, my friend. We are, after all, talking about the party that fired the Senate parliamentarian when he refused to give them a favorable ruling on a tax bill. The party that decided mid-decade redistricting was a brilliant new idea for expanding its majority. The party that decided to turn the filibuster into a routine requirement for 60 votes to pass any bill at all. The party that held open voting for three hours so it could arm-twist holdouts into voting for Medicare Part D. The party that spent the past three years passing voter ID laws in hopes that it would prevent likely Democratic voters from being able to cast ballots. The party that decided it was kosher to threaten to blow up the good credit of the United States as a bargaining chip in routine budget battles.

That party. I can assure Goldberg that we liberals have assumed all along that if Republicans get control of the presidency or Congress in 2016, they'll steamroll our current norms of government in ways that make Democrats look like five-year-olds. We'll be outraged, but we sure won't be surprised.

It's Time to End the Cable Sports Tax

If you're in LA and you want to watch the Dodgers, then you'll have to pony up. But if you don't want to watch them, you shouldn't have to pay a cent.

| Tue Feb. 18, 2014 12:50 PM EST

With spring training in the air here in Los Angeles, the saga of Dodger baseball is entering the ninth inning. Until last year, Dodger games were split between a broadcast channel and a basic cable sports channel. Total cost for the rights was about $50 million. Then Time-Warner signed a deal to run a 24/7 Dodger channel and paid a whopping $210 million for the 2014 rights. They have to make back that money, of course, and their plan for doing it is twofold: (a) charge a lot for the channel, and (b) insist that cable and satellite companies put it in their basic subscriber packages, where everyone has to pay for it:

Many distributors are upset about being pressured to carry a new sports network in a region that already has several similar channels, including not only Prime Ticket but also Fox Sports West, Pac-12 Los Angeles and Time Warner Cable's SportsNet and Deportes.

"It is really hard to understand why everyone needs their own channel when they didn't need one before," said Andy Albert, senior vice president of content acquisition for Cox Communications.

"Time Warner Cable has unilaterally decided to pay an unprecedented high price and now wants all of their own customers as well as those of their competitors, none of which who had any say in the matter, to pick up that tab," said Dan York, DirecTV's chief content officer...."Given the high price that Time Warner Cable is seeking, it would be reasonable to ask that only those families who truly want to pay for the Dodgers actually pay for it," said DirecTV's York, whose company has 1.2 million subscribers in the region.

SportsNet LA's response: A la carte is "not really on the table," Rone said.

Of course it's not. If it were a la carte, Time-Warner wouldn't have a snowball's chance of earning back its $210 million. But I say: tough luck. It's time to put a stop to this madness. The Dodgers (and the Lakers, who signed a similar deal) seem to think that every cable household in the LA basin should pay a head tax of $60 per year to support them. Why? Beats me. Because it's sports. No other private enterprise is able to demand an explicit tribute like this from every consumer in a region, whether or not they happen to buy their products. For most companies, the best they can do is finagle a few tax breaks here and there—which, of course, sports teams do too.

This is basically a tax on everyone with a TV. There's no excuse for it, and our local tea partiers should all be up in arms about it. Here's hoping that Cox and DirecTV and all the other cable companies hold out and force the Dodgers and Time-Warner to cry uncle. Someone needs to set an example.

Do Movies Make Us Stupid About Prisons?

Maybe. Or maybe we're just stupid about everything we don't know much about.

| Tue Feb. 18, 2014 11:36 AM EST

Keith Humphreys recently attended a dinner party where everyone he talked to seemed quite sure they knew everything there is to know about prisons. Most of them were dead wrong:

Nobody is informed about all areas of public policy. And most people don’t have trouble admitting that they don’t know anything about, say, the US-Brazil diplomatic relationship, Libor rate management, or sugar subsidies. But for a subset of public policy issues, a large number of completely ignorant people are dead sure they have all the facts....Prison is one of those areas, and I strongly suspect it is because there is so much fictionalization of it. If I were bored, I am sure I could easily list a hundred movies set in prisons. The Big House is also a common backdrop for TV shows, novels and comic books.

I suppose that's part of it. But here's a different theory: When it comes to issues of general public interest (i.e., not Libor or sugar subsidies), the less people know about something the more confident they are in their opinions. Everyone with the manual dexterity to hoist a beer can regale you with confident answers to all the ills of society, while in the very next breath insisting that you don't know what you're talking about when it comes to subject X. That's a lot more complicated than you think.

Subject X, of course, is something they happen to know a lot about, probably because they work in the field. But it doesn't matter. The fact that they've learned to be cautious about the one field they know the most about doesn't stop them from assuming that every other field is pretty simple and tractable.

I am, of course, a professional in this kind of behavior. But lemme tell you, this blogging stuff is a lot trickier than you'd think. There are no easy answers to doing it right and attracting a large audience.

As for prisons, click the link if you want to learn five things that you might not know. But since you read this blog and are obviously smarter than the average bear, I will be disappointed if you don't already know at least one or two of them. You do know that the prison population is shrinking, don't you?

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The NSA's Problems Go Beyond Just Its Phone Records Program

We've known about that for a long time. But we haven't known about all the other stuff.

| Tue Feb. 18, 2014 2:58 AM EST

Eli Lake talks with Director of National Intelligence James Clapper about the NSA's massive collection of phone records:

In an exclusive interview with The Daily Beast, Clapper said the problems facing the U.S. intelligence community over its collection of phone records could have been avoided. “I probably shouldn’t say this, but I will. Had we been transparent about this from the outset right after 9/11—which is the genesis of the 215 program—and said both to the American people and to their elected representatives, we need to cover this gap, we need to make sure this never happens to us again, so here is what we are going to set up, here is how it’s going to work, and why we have to do it, and here are the safeguards... We wouldn’t have had the problem we had,” Clapper said.

“What did us in here, what worked against us was this shocking revelation,” he said, referring to the first disclosures from Snowden. If the program had been publicly introduced in the wake of the 9/11 attacks, most Americans would probably have supported it. “I don’t think it would be of any greater concern to most Americans than fingerprints. Well people kind of accept that because they know about it. But had we been transparent about it and say here’s one more thing we have to do as citizens for the common good, just like we have to go to airports two hours early and take our shoes off, all the other things we do for the common good, this is one more thing.”

Two things. First, Clapper is quite possibly right. In the immediate aftermath of 9/11, Congress might well have approved DNA testing of everybody in the country if George Bush had proposed it. Hell, they approved the invasion of Iraq.

Second, though, Clapper is also wrong. I think he is, anyway. It wasn't Snowden's "shocking revelation" about the phone records program that did so much damage to the NSA. After all, we've known about that in fuzzy terms since 2005 and in very specific terms since Leslie Cauley reported it in 2006:

"It's the largest database ever assembled in the world," said one person, who, like the others who agreed to talk about the NSA's activities, declined to be identified by name or affiliation. The agency's goal is "to create a database of every call ever made" within the nation's borders, this person added.

For the customers of these companies, it means that the government has detailed records of calls they made — across town or across the country — to family members, co-workers, business contacts and others.

This provoked a bit of controversy at the time, but it faded away pretty quickly. It's true that Snowden provided documentary evidence that had been missing in the earlier reports, but he didn't really change what we knew. The sad fact is that the mere knowledge that the NSA was collecting an enormous database of every call made in the United States simply didn't bother people very much when it was first revealed.

No, what hurt the NSA was Snowden's revelations about everything it was doing. If it had just been phone records, interest might have died out quickly, just as it did in 2006. But it was far more than that, and that's what's kept this alive. Clapper is kidding himself if he thinks otherwise.

Robots Aren't Here Yet, But That Doesn't Mean They Never Will Be

Why do so many people think that just because computers aren't very intelligent yet, AI is just a bunch of hooey?

| Tue Feb. 18, 2014 1:15 AM EST

Robert Gordon is one of our preeminent scholars of economic growth. He's also a well-known pessimist about the future: he believes that well-known trends in demographics, education, inequality, and government debt will suppress growth rates over the next several decades.

Fair enough. But what about the possibility that advances in robotics and artificial intelligence will have a huge impact between now and 2050? In a new paper, Gordon dismisses the idea in a few disdainful paragraphs. Here's an excerpt:

Much attention has been paid in the popular media to small robots since “Baxter,” the inexpensive $25,000 robot, made his debut on the TV program 60 Minutes....Reflections on Baxter lead to skepticism that it/he is a major threat to American jobs outside of routine tasks in manufacturing, which only makes up 8 percent of American employment.  For his demonstration at the TED conference in Long Beach in late February, 2013,  Baxter had to be packed in a suitcase.  He could not get his own boarding pass and walk onto the plane.  This is the problem with robots — they are both mentally and physically limited to narrow tasks.  They can think but can’t walk, or they can walk but can’t think.

....This lack of multitasking ability is dismissed by the robot enthusiasts — just wait, it is coming.  Soon our robots will not only be able to win at Jeopardy but also will be able to check in your bags at the sky cap station at the airport, thus displacing the skycaps.  But the physical tasks that humans can do are unlikely to be replaced in the next several decades by robots.

....What is often forgotten is that we are well into the computer age, and every Home Depot, Wal-Mart, and local supermarket has self-check-out lines that allow you to check out your groceries or paint cans by scanning them through a robot.  But except for very small orders it takes longer, and so people still voluntarily wait in line for a human instead of taking the option of the no-wait self-checkout-lane.  The same theme — that the most obvious uses of robots and computers have already happened — pervades commerce.  Airport baggage sorting belts are mechanized, as is most of the process of checking in for a flight.

I promise that this is a fair excerpt (and of course you can decide for yourself by clicking on the link). Gordon's entire argument is that computers were invented a long time ago and we still don't have smart robots today. And if we don't have them by now, we won't have them anytime soon.

This is an embarrassingly bad argument. I can somehow imagine a circa-1870 version of Gordon arguing that all this folderol about electricity is ridiculous. Why, we've been studying electricity for over a century, and what do we have to show for it? Some clunky batteries, the telegraph, a few arc lamps with limited use, and a steady supply of techno-optimist inventors who keep telling us that any day now they'll invent a practical generator that will replace steam engines and change the world. Don't believe it, folks.1

It's funny. Every time I write about AI, I get email from some friends and regular readers telling me that I'm all wet. And these correspondents have good arguments. I don't happen to think they're right, but they're good arguments from people who have obviously thought about this stuff. Gordon, however, doesn't even pretend to engage with the AI literature. He just says that since the current level of AI is primitive, it's obviously all a bunch of bunk.

But if that's all you're going to say, why even bother? A little over a year ago Gordon wrote an op-ed in which he dismissed the prospects of several evolving technologies, but didn't even mention AI. At the time, I wrote that this was a blinkered view: "At the very least, you need to acknowledge it, and then explain why you think it will never happen, or why it won't produce a lot of future growth even if it does." This time around, Gordon hasn't ignored AI completely, but he certainly hasn't taken it remotely seriously.2 This is, to be frank, not the work of a scholar who seriously wants to engage with the prospects of future technological growth. It's the work of someone who's just checking off a box in order to fend off critics of his pre-ordained conclusion.

1Ironically, Gordon writes that in the mid-1870s everyone knew what was coming: "Inventors were feverishly working on turning the telegraph into the telephone, trying to find a way to transform electricity coming from batteries into the power source to create electric light, trying to find a way of harnessing the power of petroleum to create a lightweight and powerful internal combustion engine. The 1875 diaries of Edison, Bell, and Benz are full of such 'we're almost there' speculation. Once that was achieved, the dream since Icarus of human flight became a matter of time and experimentation." But for some reason, similar feverish work on intelligent machines in the 2010s is treated as obviously going nowhere.

2This would actually be fine if he'd just say so. AI is speculative enough that it would be perfectly reasonable to simply treat it as a wild card: write a paragraph acknowledging that, yes, it could upend everything, but that this particular paper is a look into a future in which AI remains immature for the foreseeable future. Nothing wrong with that.

Quote of the Day: Nuclear Talks With Iran "Will Not Lead Anywhere"

When the Ayatollah Ali Khamenei says they're going nowhere, that probably means they're going nowhere.

| Mon Feb. 17, 2014 10:38 PM EST

From Iran's supreme leader, the Ayatollah Ali Khamenei, lowering expectations for the nuclear talks that start tomorrow in Vienna:

I am not optimistic about the negotiations. It will not lead anywhere, but I am not opposed either. What our foreign ministry and officials have started will continue and Iran will not violate its (pledge) ... but I say again that this is of no use and will not lead anywhere.

Hmmm. Something tells me that when Khamenei says these negotiations won't lead anywhere, it's more than just an opinion. Probably more than just a suggestion, too. I think the Vegas odds on these talks just dropped through the floor.

Death at Sochi: Time to Give it a Rest?

We really don't need to make tragedy and pain into the backdrop for every Olympic victory.

| Mon Feb. 17, 2014 7:21 PM EST

I thought maybe I was the only one who was getting a little annoyed by this, but apparently not:

Nate Carlisle, a reporter at the Salt Lake Tribune, the hometown paper of many ski and snowboard athletes, has been running a spreadsheet calculating the number of stories featuring competitors' dead relatives. Through Saturday, Carlisle found, there had been 25 such stories, an average of nearly three per day. On Sunday night the death preoccupation continued when NBC's Christin Cooper prodded Bode Miller, after he won bronze in the Super-G, on the loss of his brother, prompting the skier to fall to the ground in tears and the Twittersphere to light up.

Carlisle's spreadsheet is here. He's now up to 29, and that's not even counting all the tearjerking stories that stop short of death (Alex Bilodeau's brother with cerebral palsy, for example). I get that this stuff might appeal more to other people than it does to me, but come on. Enough's enough. We shouldn't pretend that tragedy and pain are what motivate most athletes, or that they somehow give athletic accomplishments more depth and meaning. There are plenty of other ways to humanize the winners and losers at Sochi.