Kevin Drum

Quote of the Day - 5.11.09

| Mon May 11, 2009 11:51 AM EDT

From my sister, after a conversation about the death grip the financial industry continues to exert on Congress:

"Why should I even bother to vote if none of these people ever does anything that's good for me?"

Good question!  I didn't really have a very good answer.  Can anyone help?

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Cui Bono?

| Mon May 11, 2009 11:38 AM EDT

Today a bunch of healthcare industry executives will announce that they plan to go shoulder to shoulder with President Obama in his quest to cut healthcare costs.  Paul Krugman is cautious but supportive.  Jon Cohn is cautious but enthusiastic.  Ezra Klein is just cautious.

Count me in Ezra's camp.  The healthcare folks are promising initiatives that will cut the growth of healthcare spending by 1.5 percentage points a year.  Here's Jon Cohn on that:

That may not sound like a lot of money. But it is. If indeed the industry could produce such savings, according to the White House, it'd be worth around $2,500 a year to the typical family — which, it just so happens, is what Obama promised during his presidential campaign. (Amazing coincidence, no?)

....This doesn't mean the groups are acting out of altruism. The five big industry groups are the Advanced Medical Technology Association (AdvaMed), America's Health Insurance Plans (AHIP), the American Hospital Association (AHA), the American Medical Association (AMA) and Pharmaceutical Manufacturers of America (PhRMA). And they've made no secret of their opposition to proposals for creating a public insurance plan, into which anybody could enroll. Monday's gesture may simply be an effort to cut a deal that leaves out the public plan.

Ya think?  My problem here isn't that the industry folks haven't proposed detailed plans or enforcement mechanisms.  That's to be expected.  My problem is that they're apparently planning to argue that things like streamlined billing and "encouraging" the use of evidence-based guidelines will be enough to entirely meet Obama's cost goals.  Cost effectiveness research?  No need!  A public plan?  No need!  It's just like 1993, when the HMO revolution was going to change medical care so dramatically that there was no need for Bill Clinton's healthcare reform.  That didn't work out so well.

Anyway.  Jon argues that the optics are good even if we should continue to watch these guys like hawks.  Ezra just thinks we should just watch them like hawks.  I'm with Ezra.  Their incentives here are simply too clear to believe they want to genuinely be of help.

UPDATE: Matt Yglesias offers a comment:

Whatever kind of backstabbing these industry groups may or may not do in the future, they won’t be able to take back the fact that once upon a time they stood beside the White House in agreeing that it’s possible to achieve massive cost-savings without compromising patient care. That argument may well prove hugely important, politically, to getting a package through congress.

True enough.

Taxing Carbon - Part 4

| Mon May 11, 2009 10:44 AM EDT

A few days ago I took Jeffrey Sachs to task for a post he wrote supporting a carbon tax in preference to cap-and-trade.  Over the weekend he sent me a response.  I'll probably have a reply later today, but in the meantime, here's Sachs:Kevin Drum is certainly right that a cap-and-trade system potentially can look a lot more like a carbon tax than actual cap-and-trade systems have done in the past.  My worries are about the reality of such systems, not the theory.  Both the Waxman-Markey draft bill and the actual experience of the European Union Emissions Trading System (EU ETS) give me concern for the reasons that I mentioned.  While a tax can be levied at a few upstream points, the EU ETS involves around 12,000 enterprises and the draft Waxman-Markey bill would apparently involve several thousand US sites as well (essentially all industrial units which emit more than 25,000 tons of carbon dioxide equivalent greenhouse gases). We would create for essentially no reason a highly expensive, Wall-Street-based system of permit trading and enterprise compliance that could be substituted by an easy-to-implement upstream tax.  Mr. Drum correctly notes that the Waxman-Markey proposal is both upstream and downstream.  I do indeed like the upstream part. The fact, however, that it is also a downstream system, which is the administratively cumbersome part that would be avoided by an upstream carbon tax.

As for the lack of price predictability, the price fluctuations of the EU ETS are notorious.  Emissions prices actually collapsed for Phase I permits at the end of that phase (2007), and recently emission permit prices have declined from more than 30 euros per ton in 2008 to less than 15 euros this year.  Some European economists are arguing for a floor price in the EU ETS, which indeed would make it much more like a tax.  I disagree with Mr. Drum that we should see the trading system as a helpful macro stabilizer and therefore like the fact that the price on carbon emissions has collapsed. We need a stable carbon price into the future to give the right incentives for a new generation of low-emissions technology development and adoption, and should use other economic instruments for cyclical policies.

I agree with Mr. Drum that an emissions system can cover most of the economy like an upstream tax, but in practice the EU ETS covers only around 50 percent of the economy.  The Waxman-Markey bill aims for much more, so perhaps I'm too pessimistic on that count and Mr. Drum is correct, but we'll see once the negotiations proceed further.  As for revenues and for revenue transparency, I still believe that a tax is the right way to go. I am not very confident about the fairness of backroom haggling over emissions rights now underway in Washington, or which has characterized the EU ETS.  I think that the tax approach can be more direct and visible, and less vulnerable to unfair insider dealing.

Finally, I would like to remind Mr. Drum and his readers that I stated clearly in my brief Yale article cited by Mr. Drum that either a tax or a cap-and-trade system is far superior to the status quo.  We are arguing about matters that are less than essential.  If Congress actually adopts a cap-and-trade system, that would be a huge advance. In fact, putting a market price on carbon emissions (through either a tax or permit system) is just one modest part of a truly comprehensive and effective carbon mitigation strategy, that must involve standards, R&D, demonstration projects, and many other kinds of incentives and public policies.

Sachs is, among other things, Director of the Earth Institute at Columbia University and author of The End of Poverty: Economic Possibilities for Our Time.

Quote of the Day - 5.10.09

| Sun May 10, 2009 11:38 AM EDT

From Bill Schneider, CNN election guru and former senior fellow at the right-wing American Enterprise Institute:

"The Republicans aren't a party, they're a cult."

Well, today's GOP does seem to check most of the boxes in the International Cultic Studies Association's "Characteristics Associated with Cultic Groups."  Except for this one: "The group is preoccupied with bringing in new members."  That doesn't seem to be much of a priority for them these days.

Banned

| Sun May 10, 2009 11:12 AM EDT

Last week the British government published a list of people banned from entering the country.  The list included radio shock jock Michael Savage, thus guaranteeing it wide publicity and considerable condemnation.  But wait!  We ban people too.  We just don't make our list public. Graham Bowley reports:

To make the Coordinated Terrorist Watchlist, which has been maintained since 2003, you have to be “reasonably” suspected of “involvement in terrorist activity,” according to Chad Kolton, spokesman for the F.B.I.’s Terrorist Screening Center in northern Virginia. It can be fund-raising or recruiting, “but it’s a fairly high standard,” he said, and so probably does not include simply speaking about terrorism.

"Probably"?  Why does this not reassure me?

The Civic Function of Blogs

| Sat May 9, 2009 6:59 PM EDT

If newspapers go away as a way of holding politicians accountable, can blogs replace them?  Andrew Sullivan says yes:

A good blog, with a tenacious blogger, on a difficult subject, can keep at a subject with intensity newspapers are hard-pressed to match. And as long as there are meta-blogs or aggregators or edited blogs that can highlight niche blogging on important, less-read subjects, these issues can be brought to the fore. Ideally, blogs and newspapers form a helpful nexus. But both can and will evolve to save the old civic function of the press.

I don't disagree with this.  Still, even as recently as the 2008 campaign, it was striking how little impact most net-based feeding frenzies had until they were picked up by someone in the mainstream press.  So far, at least, it's still the MSM that mostly provides legitimacy to stories and forces public officials to react to negative publicity.  I wonder how long that will continue to be true?

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Chart of the Day - 5.9.2009

| Sat May 9, 2009 6:34 PM EDT

Just for the hell of it, here's a composite version of the two charts I posted the other day from the stress test report. Basically, for each of the 19 big banks that were tested, it shows estimates of both projected losses under adverse economic conditions as well as the ability to absorb those losses without eating into capital. For example, on the far left, American Express has big expected losses, but also has the capacity to absorb them all via earnings. So, since their capital structure is OK right now, that means it will stay OK and they don't need to raise money.

Next door, however, is Bank of America. They have big projected losses and only a limited ability to absorb them via earnings. That means their losses will eat into their capital. What's more, their capital structure isn't so hot even now. That's why Treasury is requiring them to raise a huge tranche of new money.

Anyway, as you can see, hardly anybody is in really good shape. Even the banks that have adequate capital and income to see them through the recession are still expected to take sizeable losses. And yet, bank stocks are up, up, up. Go figure. If I didn't listen to Paul Krugman so much maybe I would have bought 10,000 shares of BAC a couple of months ago and made a killing. Thanks a lot, Paul.

The End of the Carterets

| Sat May 9, 2009 4:34 PM EDT

The residents of the Carteret Islands have finally lost their long battle with global warming.  Sea levels have been rising for decades, crops no longer grow, and they're now left with no choice but to get out.  Dan Box reports:

The evacuation of the Carteret Islands have begun. This morning I stood on black volcanic sand, pressed up right against the jungle, and watched a small white boat powered by a single outboard engine run in against the shore. On board were five men from the Islands, the fathers of five families, who have come to finish building houses and gardens already begun in a cleared patch of jungle at Tinputz, on the east coast of Bougainville. When these homes are ready the five will return to the Carterets, to fetch their wives and children back. Life, they hope, will be better for them here. On the Carterets, king tides have washed away their crops and rising sea levels poisoned those that remain with salt. The people have been forced to move.

This is likely to become an increasingly common story over the upcoming decades, and while there are probably multiple causes, it's likely that global warming is one of the big ones.  We may be the ones causing most of the warming, but we're not the ones who will pay the biggest price.

Sex Offenders in our Schools

| Sat May 9, 2009 1:42 PM EDT

OK, I'm curious about something.  Let me lay out the issue and then solicit some opinions.

The Los Angeles Times has been running a series of pieces this week that basically declare war on the LA Unified School District.  Now, I don't live in Los Angeles and don't have a dog in this fight, but from everything I've heard LAUSD is so monumentally dysfunctional that they probably deserve whatever they're getting.  So to be clear up front: I don't have any special problem with the Times dedicating lots of space to beating up on the district.

Today's piece, though, is about teachers and aides accused of sexually molesting students.  This is, obviously, incendiary stuff.  And the Times subhead makes the point of today's article crystal clear: "L.A. Unified has failed to follow up on complaints once police or prosecutors dropped criminal actions, leaving students vulnerable to molesters."

Is this true?  Are LAUSD student vulnerable to molesters?  Maybe.  Unfortunately, the story was so poorly written that I literally had to print it out and start circling names and dates to figure out what their evidence was.  When I finished, here's what I had: Over a period from 1995 to 2005 the district, which employs around 50,000 teachers, apparently had three cases in which teachers or aides were (a) accused of molestation, (b) cleared, (c) put back in the classroom, and (d) later convicted of a subsequent molestation.  In addition, there was one more case in which an aide acquitted of molestation charges was briefly put back in a classroom but later fired.

In 2006 the district "tightened its policies" on allowing accused molesters back in the classroom, but then it happened again.  Police told district officials in 2007 that they had "found evidence" of a possible sexual relationship between an assistant principal named Steve Thomas Rooney and a student, but no charges were ever filed.  Rooney returned to work and a year later was arrested for allegedly kidnapping and sexually assaulting a 13-year-old girl.  The case is pending.

This is horrific stuff, and there's not much question that the district screwed up badly in the Rooney case.  But there are still a few things I'd like to know:

 • How does four or five cases over a decade compare to other school districts?  It actually sounds like a pretty low rate of recidivism to me.

 • Exactly what are the district's policies in cases like this?  Amazingly, the article never bothers to say.

 • How many teachers over the past ten years have been accused of molestation, cleared, and then returned to the classroom without further incident?  How many have been accused and then quickly and efficiently dismissed?

 • Given that not all charges are true, and that teachers cleared of charges deserve to be treated as innocent, exactly what is it that critics think needs to be done?  Amazingly, the article never really bothers to dive into this either.  Should the district conduct its own investigations if the police come up empty-handed?  Maybe.  That gets a few sentences in the story.  There's also a vague suggestion that if a teacher cleared of charges is transferred, the principal at the new school should be notified of....something.  It's never entirely clear what.  ("Past misconduct," the article says at the end, but if no charges are filed, or if a teacher is acquitted, there is no past misconduct.)

Considering that this is perhaps the most inflammatory charge that could possibly be leveled at LAUSD, shouldn't the Times address some of these issues instead of just recapping five cases from the past decade?  Shouldn't its readers be given some idea of how pervasive this problem really is?  Of how often molestation charges are brought?  Of how many innocent people have been falsely charged in addition to the possibly guilty ones who got off?  Of what, if anything, needs to be done about it?  Of how other districts handle this?

Seems that way to me.  But then again, I'm not a parent and maybe I'm not reacting as strongly as I should.  Maybe just publicizing the problem is a worthwhile public service.  Maybe.  Read the article and tell me.

The Cost of Housing

| Sat May 9, 2009 11:33 AM EDT

Why do houses cost so much today?  In the Wilson Quarterly, Witold Rybczynski writes that even when you adjust for inflation and home size, prices are still considerably higher today than they were 50 years ago.  There are two reasons, he says:

The first is Proposition 13, the 1978 California ballot initiative that required local governments to reduce property taxes and limit future increases, and sparked similar ­taxpayer-­driven initiatives in other states. Henceforth, municipalities were unable to finance the ­up-­front costs of infrastructure in new communities, as they had previously done, and instead required developers to pay for roads and sewers, and often for parks and other public amenities as well. These costs were passed on to home buyers, drastically increasing the selling price of a house.

Interesting!  If Rybczynski is right, we now have lower taxes but higher house prices.  And perhaps that's fair.  But it's also a godsend for everyone who bought a house more than 20 years ago.  In California, it means that your original home price was low because taxes paid for the property improvements.  Then the high taxes that built your neighborhood were capped, which drove up the price of building new neighborhoods, and since housing is fungible it also drove up the price of existing homes like yours.  In other words: low price, low taxes, lots of appreciation.  That's great news for all us baby boomers, but I'm afraid the Xers are paying the price.  Par for the course, isn't it?  Someday you guys are going to figure out just how badly we've screwed you over and it's going to be Soylent Green time.

(Rybczynski's second reason is development restrictions that artifically lower the supply of housing.  Read the whole piece for more details.)