Kevin Drum

Marx and Keynes Put Economics on the Map, and They Can Take It Right Off Again

| Thu Sep. 3, 2015 2:38 PM EDT

Over at PostEverything, Dan Drezner wonders why economics has managed to wield such an outsized influence among the social sciences. His strongest point—or at least the one he spends the most time on—is that economists "share a strong consensus about the virtues of free markets, free trade, capital mobility and entrepreneurialism." This makes them catnip to the plutocrat class, and therefore the favored social scientists of influential people everywhere.

Fine, says Adam Ozimek, but what about liberal economists? "Why is Paul Krugman famous? Robert Shiller? Joe Stiglitz? Jeff Sachs? 'To please plutocrats' is not a good theory." And this: "Why do liberal think tanks with liberal donors supporting liberal causes hire so many economists? To please plutocrats?"

I think Drezner and Ozimek each make good points. Here's my amateur historical explanation that incorporates both.

The first thing to understand is that in the 19th century, economists were no more influential than other social scientists. Folks like David Ricardo and Thomas Malthus were certainly prominent, but no more so than, say, Herbert Spencer or Max Weber. What's more, economics was a far less specialized field then. John Stuart Mill had a strong influence on economics, but was he an economist? Or a philosopher? Or a political scientist? He was all of those things.

So what happened to make economists so singularly influential in the 20th century? I'll toss out two causes: Karl Marx and John Maynard Keynes.

The fight for and against communism defined the second half of the 20th century, and Marx had always identified economics as the underpinning of his socio-historical theories. Outside of the battlefield, then, this made the most important conflict of the time fundamentally a fight over economics. In the public imagination, if not within the field itself, the fight between communism and free markets became identified as the face of economics, and this made it the most important branch of the social sciences.

Then Keynes upped the ante. In the same spirit that Whitehead called philosophy a series of footnotes to Plato, economics in the second half of the 20th century was largely a series of footnotes to Keynes. Rightly or wrongly, he became the poster child for liberals who wanted to justify their belief in an activist government and the arch nemesis of conservatives who wanted no such thing. In the same way that communism was the biggest fight on the global stage, the fight over the size and scope of government was the biggest fight on the domestic stage. And since this was fundamentally a fight over economics, the field of economics became ground zero for domestic politics in advanced economies around the world.

And that's why economists became so influential among both plutocrats and the lefty masses. Sure, it's partly because economists use lots of Greek letters and act like physicists, but mostly it's because that window dressing was used in service of the two most fundamental geo-socio-political conflicts of the late 20th century.

So does that mean economics is likely to lose influence in the future? After all, free market capitalism and mixed economies are now triumphant. Compared to the 20th century, we're now arguing over relative table scraps. And, as Drezner points out, the profession of economics has hardly covered itself with glory in the opening years of the 21st century. Has their time has come and gone?

Maybe. I mean, how should I know? Obviously there's a lot of inertia here, and economics will remain pretty important for a long time. But the biggest fights are gone and economists have an embarrassing recent track record of failure. If the rest of the social sciences want to mount an assault on the field, this would probably be a pretty good time to do it.

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Florida Governor Refuses to Admit That His Own Investigators Have Cleared Planned Parenthood

| Thu Sep. 3, 2015 1:08 PM EDT

Good news! Florida regulators have finished their investigation of Planned Parenthood and concluded that there were no problems with the group's handling of fetal tissue. But you might not know that if you read their press release about the investigation. It turns out that Florida Gov. Rick Scott preferred to keep this under wraps:

Emails between the governor’s office and AHCA, obtained by POLITICO Florida through a public records request, show the agency prepared a press release that same day noting that “there is no evidence of the mishandling of fetal remains at any of the 16 clinics we investigated across the state.”

Scott's office revised the release to exclude that sentence, an email sent by Scott’s communications director, Jackie Schutz, shows. Additionally, the revised release noted the AHCA would refer physicians who worked at the clinics to the Board of Medicine for possible disciplinary action.

Kinda reminds you of a half-bright middle schooler who thinks he has a genius idea, doesn't it?

Republicans Shot Themselves in the Foot Over Iran

| Thu Sep. 3, 2015 12:06 PM EDT

Why did Republicans fail to kill the Iran nuclear deal?

Opponents of the deal may have miscalculated the degree of public interest in the debate. They hoped for the kind of outpouring of public anger that gave rise to the tea party and nearly doomed Obamacare in August 2010. But the Iran deal “just hasn’t had that kind of galvanizing effect” on the public, said Rep. David Price (D-N.C.), who backs the agreement.

....A Republican invitation to Israeli Prime Minister Benjamin Netanyahu to address both houses of Congress in March appears to have backfired. His harsh denunciation of the negotiations then underway, which the White House portrayed as a snub of Obama’s foreign policy, made the debate more polarizing and partisan, pushing Democrats to the president’s side.

Another factor, said one frustrated Republican on Capitol Hill: “Trump happened.” The GOP leadership aide, granted anonymity to discuss the setback, said billionaire Donald Trump’s attention-grabbing presidential campaign, along with scrutiny of Hillary Rodham Clinton’s email server, overshadowed all other issues this summer, making it harder for the Republicans’ message to attract attention.

....Democrats have felt free to back the deal in part because they heard from many in the American Jewish community who split from the more hawkish AIPAC....The dozen or so Democratic opponents in Congress come mainly from parts of New York, New Jersey and Florida with large politically conservative Jewish populations. But the opponents failed to mount a serious effort to persuade other lawmakers to buck the White House.

First things first: don't blame this on Donald Trump. He's been scathing about the deal, and has probably drawn more attention to it than all the AIPAC-funded ads put together. As for Hillary Clinton's email woes, it would please me no end if Republicans had shot themselves in the foot by focusing the fever swamps on that and leaving no room for outrage about Iran. But I doubt it. There's always stuff going on. Nobody ever fights a political battle in a pristine environment. There was plenty of room for Iran outrage.

As it happens, though, I think Republicans did shoot themselves in the foot, but in a different way. Ever since 2009, their political strategy has been relentless and one-dimensional: oppose everything President Obama supports, instantly and unanimously. They certainly followed this playbook on Iran. Republicans were slamming the deal before the text was even released, and virtually none of them even pretended to be interested in the merits of the final agreement. Instead, they formed a united, knee-jerk front against the deal practically before the ink was dry.

This did two things. First, it made them look unserious. From the beginning, the whole point of the economic sanctions against Iran was to use them as leverage to pressure the Iranian leadership to approve a nuclear deal. But by opposing it so quickly—based on an obviously specious desire for a "better deal" that they were never willing to spell out—Republicans made it clear that they opposed any agreement that lifted the sanctions. In other words, they opposed any agreement, period.

Second, by forming so quickly, the Republican wall of opposition turned the Iran agreement into an obviously partisan matter. Once they did that, they made it much harder for Democrats to oppose a president of their own party. A more deliberate approach almost certainly would have helped them pick up more Democratic votes.

All that said, keep in mind that Democrats only needed 34 senators or 145 House members to guarantee passage. That's not a high bar for a historic deal backed by a Democratic president. In other words, it's quite possible that Republicans actually did nothing wrong. They simply never had a chance in the first place.

Anchor Babies Exist, But Probably Not Very Many of Them

| Thu Sep. 3, 2015 11:07 AM EDT

Do "anchor babies" exist? Or are they just a pernicious myth invented by the anti-immigration right? The LA Times sent reporter Molly Hennessy-Fiske to Rio Grande City in Texas to check things out:

In this county in the heart of the impoverished Rio Grande Valley, so-called anchor babies have been delivered for decades, some to women who have already settled in Texas, others to those who crossed the river expressly to give birth on U.S. soil. "About six months ago I got one who was literally still wet from the river," [Dr. Rolando] Guerrero said.

....Just how many Mexican mothers come to give birth to the babies and the cost of caring for them are unclear. "They do come on purpose," said Thalia Munoz, chief executive of Starr County Memorial. "We have to absorb the costs....It's a persistent problem. It's a fact: They come over here for the anchor baby, they come over for the benefits."

....The doctors said they saw fewer women coming to have babies after Texas officials ordered a surge of law enforcement and National Guard troops to the border last summer in response to an influx of Central American immigrants....But since then, "slowly, it's been going back up," Guerrero said.

....At Starr County Memorial, most of the mothers the doctors see do not cross intentionally to give birth, they said — they were already living on the U.S. side of the border with families of mixed status. "I have families where I've delivered three or four" U.S.-born babies, Guerrero said.

It's unlikely that we'll ever get a firm handle on how common this phenomenon is. But if the evidence of this story is typical, we can say that (a) anchor babies certainly exist, but (b) probably not in very large numbers. That's not likely to satisfy anyone, but sometimes life is like that.

Why Do High Schools Erase All the Test Score Gains of the Past 40 Years?

| Thu Sep. 3, 2015 10:22 AM EDT

SAT scores have been dropping slowly but steadily for the past decade:

The steady decline in SAT scores and generally stagnant results from high schools on federal tests and other measures reflect a troubling shortcoming of education-reform efforts. The test results show that gains in reading and math in elementary grades haven’t led to broad improvement in high schools, experts say. That means several hundred thousand teenagers, especially those who grew up poor, are leaving school every year unready for college.

“Why is education reform hitting a wall in high school?” asked Michael J. Petrilli, president of the Thomas B. Fordham Institute, a think tank. “You see this in all kinds of evidence. Kids don’t make a whole lot of gains once they’re in high school. It certainly should raise an alarm.”

It is difficult to pinpoint a reason for the decline in SAT scores, but educators cite a host of enduring challenges in the quest to lift high school achievement. Among them are poverty, language barriers, low levels of parental education and social ills that plague many urban neighborhoods.

I'm delighted to see an education story that acknowledges the plain evidence of test score gains, even if just in an aside. The simple fact is that through middle school, standardized test scores have risen significantly over both the past decade and the past four decades. Elementary and middle school test scores have not been either stagnant or dropping, but based on the usual reporting of this stuff, I doubt that one person in a hundred is aware of this.

But I'm also happy to see the flip side of this acknowledged: in general, all these gains wash away in high school. On the "gold standard" NAEP test, math scores have gone up just a few points among 17 year olds and reading scores have been flat. The usual explanation is that education reforms have initially been centered on elementary and middle schools, and scores will go up for older kids once those reforms start to become widespread in high schools.

Maybe. But that excuse is starting to look old in the tooth. And even if high schools haven't seen a lot of reforms yet, why is it that they seem to have a negative effect on student performance? If math scores were up, say, ten points by the end of middle school and remained ten points up by the end of high school, that would be one thing. High schools wouldn't be adding anything, but they wouldn't be doing any harm either. But that's not the case. Kids come out of middle school better prepared today, but come out of high school no better than they did in 1971. High school is actually erasing gains.

This is, needless to say, troubling. Poverty, language barriers, low levels of parental education and social ills are problems at all ages, so that explains little. Nor does disaggregating scores by race, since demographic changes have been similar at all age levels. But the plain truth is that the only thing that really matters is how well prepared kids are when they finish high school. All the test score gains in the world mean nothing if they're gone by age 17. This is something we really need to figure out.

Chart of the Day: The Future of Health Care Costs Looks Surprisingly Rosy

| Wed Sep. 2, 2015 9:25 PM EDT

You've seen various versions of this chart from me before, but perhaps you'd like to see it from a pair of highly-qualified researchers rather than some shorts-clad blogger? Not a problem. A recent paper out of the Schaeffer Center for Health Policy and Economics at USC shows that the annual increase in health care costs has been dropping steadily for more than 30 years. The green arrow shows the trendline.

Obviously this won't go on forever. But once again, it shows that the recent slowdown in health care costs isn't just an artifact of the Great Recession. That probably helped, but the downward trend far predates the recession. Bottom line: there will still be spikes and valleys in the future, but there's every reason to think that the general trend of health care costs over the next few decades will be either zero (i.e., equal to overall inflation) or pretty close to it.

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Donald Trump Has Lost Between $1 and $6 Billion Over His Business Career

| Wed Sep. 2, 2015 7:06 PM EDT

This post is about Donald Trump—sorry!—but the topic is something I've been a little curious about for a while: how much of Trump's wealth is inherited vs. earned? The basics are easy: Trump's father turned over control of the family real estate business to him in 1974. At the time, it was worth about $200 million. Trump would eventually inherit one-fifth of this, so his share of the company was worth about $40 million to start with.

Over at National Journal, Shirish Dáte estimates that if Trump had put that money into an index fund of S&P 500 stocks, it would be worth about $3 billion today. If he'd taken the $200 million he was reportedly worth in 1982 and done the same, he'd be worth $8 billion. So how does that compare to Trump's actual net worth? Here's Dáte:

“Every year, Trump shares a lot of information with us that helps us get to the figures we publish. But he also consistently pushes for a higher net worth—especially when it comes to the value of his personal brand,” Forbes reporter Erin Carlyle wrote this June, explaining the magazine’s assessment that Trump was worth $4.1 billion, less than half of his claimed net worth. A subsequent review by Bloomberg found he was worth $2.9 billion.

....Perhaps the most deeply researched account of his wealth is a decade old: the book TrumpNation, by former New York Times journalist Tim O’Brien, who found three sources close to Trump who estimated that he was worth between $150 million and $250 million....Trump wound up suing O’Brien for defamation, claiming his book had damaged his business. The suit was eventually dismissed, but not before Trump sat for a deposition in which he admitted that he routinely exaggerated the values of his properties.

....That 2007 deposition also revealed that in 2005, two separate banks had assessed Trump’s assets and liabilities before agreeing to lend him money. One, North Fork Bank, decided he was worth $1.2 billion, while Deutsche Bank found he was worth no more than $788 million.

So....at a guess, Trump is worth somewhere in the neighborhood of $2 billion in 2015. Anything above that is based on valuations of his personal brand—which might be worth something in theory, but buys no jet fuel or campaign ads. In terms of actual, tangible net worth, he's worth considerably less than the $3 billion (or $8 billion) he'd be worth if he'd just dumped his share of the family fortune into a Vanguard fund.

In other words, over the course of the past four decades, Trump's business acumen has netted him somewhere between -$1 billion and -$6 billion. Ouch. Virtually every person in America can claim a better financial record than that.

Now, in fairness, Dáte's numbers for the S&P fund assume that all dividends are reinvested, which would have meant Trump had no income to live on. Obviously he spends a fair amount every year, and if you take that into account the Vanguard strategy wouldn't look as good. Plus, of course, there's the fact that Dáte is a THIRD-RATE LOSER who is JEALOUS of Trump's BRILLIANT CAREER and does anything he can to DEMEAN Trump's SUCCESS. So take him with a grain of salt.

Hillary Clinton's Favorability Ratings Are Right In Their Normal Groove

| Wed Sep. 2, 2015 2:55 PM EDT

Greg Sargent says that Hillary Clinton's tanking favorability ratings should take no one by surprise. It's what happens every time an election starts up and she's once again viewed as a partisan political figure. "Her drop was probably inevitable once she made the transition from Secretary of State — a job that carries the trappings of above-politics statesmanship, or if you prefer, states-womanship — to candidate for president."

There's much more at the link, but the annotated chart below pretty much tells the story. When she's removed from the fray, her unfavorability ratings bounce around between 20 and 40 percent. When she's involved in an election, they go up to 45-55 percent or even a little higher. The same thing is happening this time around.

Iran Will Always Be Three Months Away From Having Nukes

| Wed Sep. 2, 2015 1:43 PM EDT

Paul Waldman writes about the asymmetric political risks that Democrats and Republicans face over the Iran nuclear deal:

If the agreement proves to be a failure — let’s say that Iran manages to conduct a nuclear weapons program in secret, then announces to the world that they have a nuclear weapon — it will indeed be front-page news, and the Democrats who supported the deal might suffer grave political consequences. So in order to vote yes, they had to look seriously at the deal and its alternatives, and accept some long term political peril.

By contrast, there probably is less long term risk for Republicans in opposing the deal.

It’s true that if the deal does achieve its goals, it will be added to a list of things on which Republicans were spectacularly wrong, but which led them to change their opinions not a whit....Iraq War....Bill Clinton’s tax-increasing 1993 budget....George Bush’s tax cuts....But if the deal works as intended, what will be the outcome be? Iran without nuclear weapons, of course, but that is a state of being rather than an event. There will be no blaring headlines saying, “Iran Still Has No Nukes — Dems Proven Right!” Five or ten years from now, Republicans will continue to argue that the deal was dreadful, even if Iran’s nuclear ambitions have been contained.

In a way, it's actually worse than this. Even if Iran doesn't get nukes there will be endless opportunities to raise alarms that it's going to happen any day now. Israeli leaders have been warning that Iran is three months away from a nuclear bomb for over two decades. There will always be new studies, new developments, and new conflicts that provide excuses for hysterical Fox News segments telling us we're all about to die at the hands of the ayatollahs. To see this in action, just take a look at Obamacare. All the top line evidence suggests it's working surprisingly well. Maybe better than even its own supporters thought it would. But that hasn't stopped a torrent of alarming reports that provide countless pretexts for predicting Obamacare's imminent doom. Premiums are going up 40 percent! Workers' hours are being slashed! You won't be able to see your family doctor anymore! Death panels!

So have no worries. Iran could be nuclear free in 2050 and Bill Kristol's grandkids will still be warning everyone else's grandkids that the ayatollahs are this close to getting a bomb. It's kind of soothing, in a way, like a squeaky door that you'd miss if you ever oiled it.

Here's the Price Tag for CAP's New Child Care Program: About $100 Billion

| Wed Sep. 2, 2015 12:21 PM EDT

The Center for American Progress—aka "Hillary's Think Tank"—has released "A New Vision for Child Care in the United States." But it's not really very new. It's just a tax credit that varies with income. If you're at the poverty level, you'd get a tax credit of about $13,000 paid directly to the child care facility of your choice. If you make more, the tax credit would be less. The maximum out-of-pocket expense for families would range from 2 percent at the low end to 12 percent at the high end.

Does this sound familiar? It should: it bears a strong family resemblance to Obamacare.

But it might be a good idea regardless of how new it really is. I'm certainly a fan of both preschool and subsidized child care. The big question is going to be how much it costs, and that's something the authors don't address. There's probably a reason for that. My very rough horseback calculation suggests it could run up a tab of $100 billion per year. Maybe more.1 [See update below.]

That's a lot of money. How's it going to be paid for? Danielle Paquet asked CAP about this, and was told vaguely that "restructuring the tax system" and "closing wasteful loopholes" might do the trick. I dunno. That's a lot of wasteful loopholes.

Needless to say, this is one of the downsides of taking public policy seriously. If you're Donald Trump, you just tell everyone not to worry. "I'm going to be great for the kids," and he'll take care of it from there. But if you're a Democrat, you normally feel obliged to present an actual plan that can actually work in the real world—and that means people can attach a price to it. And that, in turn, means you can be badgered about how you're going to pay for it.

Politically speaking, this is something that Democrats will need to be careful about. There's a temptation among liberals to be the anti-Trump, tossing out dozens of detailed white papers to solve all the world's problems. But this gives conservatives an opening to add up the cost of all those white papers and start bellowing about how their very own proposals prove that Democrats want to bankrupt the country and tax millionaires into insolvency. It's best to tread carefully here.

On the other hand, maybe Hillary could benefit from a small dose of Trumpism. Maybe she should adopt CAP's proposal and just declare that she's going to soak the rich to pay for it. Why pussyfoot around it? After all, polls show that taxing the rich at higher rates is a pretty popular idea. Maybe it's time to go bullroar populist and just beat the tar out of the malefactors of great wealth.

Then again, maybe not. That doesn't really sound much like Hillary, does it?

1The program is for kids aged 0-4. My estimate is based on about 20 million kids qualifying, with an average tax credit in the neighborhood of $8,000 each. That's $160 billion. If two-thirds of all families take advantage of this tax credit, that comes to about $100 billion. Needless to say, more detailed cost estimates are welcome.

UPDATE: I am mistaken. CAP estimates a cost of $40 billion for their proposal, which they believe would not just help working families, but also stimulate the economy:

The economy as a whole benefits from policies that help working families. As an example, the Canadian province of Quebec developed a nearly universal child care assistance program, and economists at the University of Quebec and the University of Sherbrooke estimate that the program boosted women’s labor force participation by nearly 4 percentage points, which in turn boosted GDP by 1.7 percentage points.

I'm habitually skeptical of claims that social programs will recoup all or part of their costs by boosting the economy, but it's probably true in this case. The effect of increased employment on GDP is pretty straightforward. The policy question, of course, is how much this will offset the program costs. But then, that's always the policy question, isn't it?

In any case, I'm not sure how CAP gets to $40 billion, and it strikes me as a little low. But it might be right. It would be interesting to see an estimate from a reliable third-party source.