Kevin Drum

By About 2020, We'll Probably Finally Know Whether a $15 Minimum Wage Is a Good Idea

| Thu May 21, 2015 10:23 AM EDT

So my near neighbor of Los Angeles is poised to raise the minimum wage to $15. How should we think of that?

Personally, I'm thrilled. Not because I think it's a slam-dunk good idea, but because along with Seattle and San Francisco it will give us a great set of natural experiments to figure out what happens when you raise the minimum wage a lot. We can argue all we want; we can extrapolate from other countries; and we can create complex Greek-letter models to predict the effects—but we can't know until someone actually does it.

So what do I think will happen? Several things:

In the tradeable sector, such as clothing piece work and agriculture, the results are very likely to be devastating. Luckily, LA doesn't have much agriculture left, but it does have a lot of apparel manufacture. That could evaporate completely (worst case) or perhaps migrate just across the borders into Ventura, San Bernardino, and other nearby counties. Heavier manufacturing will likely be unaffected since most workers already make more than $15.

In the food sector, people still need to eat, and they need to eat in Los Angeles. So there will probably be little damage there from outside competition. However, the higher minimum wage will almost certainly increase the incentive for fast food places to try to automate further and cut back on jobs. How many jobs this will affect is entirely speculative at this point.

Other service industries, including everything from nail salons to education to health care will probably not be affected much. They pretty much have to stay in place in order to serve their local clientele, so they'll just raise wages and pass the higher prices on to customers.

Likewise, retail, real estate, the arts, and professional services probably won't be affected too much. Retail has no place to go (though they might be able to automate some jobs away) while the others mostly pay more than $15 already. The hotel industry, by contrast, could easily become less competitive for convention business and end up shedding jobs.

On the bright side, of course, a large number of low-income workers will see their wages rise. On the less bright side, the experience of Puerto Rico suggests that (a) employment losses could be as high as 9 percent, and (b) lots of low-wage workers will flee to other places.

So if I had to guess, I'd say that Los Angeles will see (a) less poverty for low-wage workers who keep their jobs, and (b) higher prices for middle-class consumers, who will end up paying for the minimum wage hike. Since the poor spend more than the middle-class, this could be a net stimulus for the LA economy. On the downside, we're also pretty likely to see significant job losses. In other words, I agree with Adam Ozimek that we should not treat this as terra incognita just because it's never been done before:

It’s true that the farther we go out of the historical sample, the more uncertain we are about the magnitude of the impact. But I think minimum wage advocates are taking the wrong message from this. After all, a $100 minimum wage would also be out of sample and subject to the same “we have no clue” and “can’t be on solid ground” statements from Dube and Neumark. But this uncertainty is all in the direction of more job losses. When you enter unprecedented minimum wage hike territory your uncertainty goes up, but so undeniably does your risk of job losses. The idea that a minimum wage hike being of an unprecedented magnitude creates neutral uncertainty is like someone drinking more beer than they ever have just being uncertain about what it will do to their driving ability.

So we'll see. My own guess is that $15 is too high. I would have supported something in the $10-12 range for a city as large and basically prosperous as Los Angeles. But $15? There's just too much uncertainty in a number that big, and the uncertainty almost all points in the direction of significant job losses.

But I could be wrong! We now have three cities that are jumping into the deep end of the minimum wage debate, and that will eventually tell us more than all the speculation in the world combined. Fasten your seat belts.

Advertise on MotherJones.com

Rand Paul's Latest Fundraiser Now Underway

| Wed May 20, 2015 3:17 PM EDT

I see from the intertubes that Sen. Rand Paul has begun another talking filibuster. This time it's to protest any legislation that extends the NSA's ability to access metadata from phone calls, even if the data is held by the phone companies and available only by court order. Paul's filibuster will annoy a lot of people, but in the end I think I agree, for once, with John McCain: "He'll get his headline and then we'll move on."

That's pretty much the lay of the land. Paul will chew up some floor time, which might end up eating into Memorial Day weekend for the Senate, but since virtually no one agrees with his position, it's simply not going to accomplish anything. I'm even a little skeptical about the headlines. Frankly, once you've done the Jimmy Stewart bit once, its entertainment value starts to plummet.

On the other hand, Paul seems to be mostly treating this as another great fundraising opportunity, and it might very well be. But that's probably all it will be.

Eight Good Lessons About Health Care — Plus a Ninth

| Wed May 20, 2015 1:20 PM EDT

Over at Vox today, Sarah Kliff and Julia Belluz have a list of eight things they now do differently after reporting on health care for a combined decade between them. It's a great list, and unless I missed something I think I agree with every word on it. Even item #3, which has been, um, a bit of a challenge for me over the past six months.

Of course, as with all collections of advice, even good ones, this one has an underlying ninth item: don't be an idiot. Sometimes guidelines need to be broken. But they're still good to keep in mind.

Big Banks Plead Guilty to Collusion, But Fines are Pocket Change

| Wed May 20, 2015 11:43 AM EDT

Five of the planet's biggest banks have finally been forced to plead guilty to collusion charges in the foreign exchange market:

The Justice Department forced four of the banks — Citigroup, JPMorgan Chase, Barclays and the Royal Bank of Scotland — to plead guilty to antitrust violations in the foreign exchange market as part of a scheme that padded the banks’ profits and enriched the traders who carried out the plot....Underscoring the collusive nature of their contact, which often occurred in online chat rooms, one group of traders called themselves “the cartel,” an invitation-only club where stakes were so high that a newcomer was warned, “Mess this up and sleep with one eye open.” To carry out the scheme, one trader would typically build a huge position in a currency and then unload it at a crucial moment, hoping to move prices. Traders at the other banks agreed to, as New York State’s financial regulator put it, “stay out of each other’s way.”

....The guilty pleas, which the banks are expected to enter in federal court later on Wednesday, represent a first in a financial industry that has been dogged by numerous scandals and investigations since the 2008 financial crisis. Until now, banks have either had their biggest banking units or small subsidiaries plead guilty.

....As part of the criminal deal with the Justice Department, a fifth bank, UBS, will plead guilty to manipulating the London Interbank Offered Rate, or Libor, a benchmark rate that underpins the cost of trillions of dollars in credit cards and other loans.

The total fine is about $5 billion, and it's about damn time this happened. Unfortunately, I assume that a billion dollars each is basically pocket change that's already been fully reserved on their balance sheets. Needless to say, not a single dime of this will hit the actual people running the banks, who couldn't possibly be expected to know that any of this stuff was going on. They were too busy drinking their lunches and remodeling their corner offices to know what a few rogue traders on the 23rd floor were doing. The Times confirms that life will go on as usual:

For the banks, though, life as a felon is likely to carry more symbolic shame than practical problems. Although they could be technically barred by American regulators from managing mutual funds or corporate pension plans or perform certain other securities activities, the banks have obtained waivers from the Securities and Exchange Commission that will allow them to conduct business as usual. In fact, the cases were not announced until after the S.E.C. had time to act.

It's good to be king.

The Truth About How Obama Has Handled the Pacific Trade Deal

| Wed May 20, 2015 9:00 AM EDT
Japanese Prime Minister Shinzo Abe and President Barack Obama at the White House on April 28, 2015

While Kevin Drum is focused on getting better, we've invited some of the remarkable writers and thinkers who have traded links and ideas with him from Blogosphere 1.0 to this day to contribute posts and keep the conversation going. Today we're honored to present a post from Daniel Drezner.

One of the enduring memes of the Obama administration has been the notion that the president is a lousy politician. One of the things that Bill Clinton and George W. Bush had in common is that they knew how to schmooze. Obama, on the other hand, does not have any close friendships on the international stage, nor is he particularly tight with Republican or Democrat members of Congress. Indeed, this has been a sufficiently common lament for someone to write "A Brief History of President Obama Not Having Any Friends" last year.

So let's stipulate that the president is a cold fish. What remains contested is whether this matters in terms of getting things done. There are DC insiders who argue that personal relationships and one-on-one politicking really do matter. These are the pundits who tend to bemoan presidential passivity and write "Why won't Obama lead?" ledes and ask why Barack Obama doesn't drink more whiskey with Mitch McConnell or play more golf with John Boehner. And then there are structuralists who argue that what really matters are the separation of powers written into the Constitution and the incentive of opposition parties to, you know, oppose the president's policies.

When it comes to managing his own party, there may be something to the "Why can't Obama lead?" meme.

Last week's machinations over trade promotion authority (TPA) regarding the Trans Pacific Partnership (TPP) will not definitively settle this debate, but they did offer a few data points that suggest the relative merits of each side of this debate.

First, Senate Majority Leader Mitch McConnell gave a delightfully blunt interview to the New York Times' John Harwood. On TPA/TPP, McConnell and most of the Senate Republicans are working with Obama, which puts him in strange territory. To explain this to Harwood, McConnell flatly debunked the notion that Obama would have accomplished more in the GOP-controlled Congress if only he'd been more sociable with Republican members of Congress:

In the caricature of how Washington works, Mr. McConnell and other congressional Republicans were supposed to bond with Mr. Obama at a so-called bourbon summit meeting, as though a soothing, generous pour would bring them together.

It has never happened—which, as far as Mr. McConnell is concerned, counts for exactly zero.

"It's all good stuff for you all to write, but it has no effect on policy," Mr. McConnell said. He dismissed "press talk" that social outreach could bridge the deep ideological and partisan divisions of 21st-century American politics.

"It wouldn't make any difference," he concluded. "Look, it's a business." (emphasis added)

And that sound you just heard was the combined egos of the "why can't Obama lead" crowd visibly deflating.

McConnell's Hyman Roth-like answer would seem to validate the structuralist position of the president's ability to get legislation passed—at least when it comes to dealing with the opposition party.

When it comes to dealing with his own party, however, I'm not sure that the structuralists can claim victory. One could argue that Democrats are just as constrained on trade as Republicans because of their base's public opinion, but I don't think it's really that simple.

There were a lot of things going on in last Tuesday's initial failure of TPA to pass the Senate, including genuine policy differences between Obama and elements of the progressive movement. But as Reuters noted, at least part of it was Obama's alienation of Senate Democrats:

As for Obama, he may have hurt his chances with Democrats by minimizing concerns about trade's impact on labor, the environment and regulations, and his explicit criticism of the anti-trade stance of leading liberal Democratic Senator Elizabeth Warren.

"The president was disrespectful to her," Democratic Senator Sherrod Brown told reporters. "When he said that a number of us, not just Senator Warren, don't know what we're talking about...he shouldn't have." Brown opposes the fast-track bill.

Indeed, there has been a lot of Democrat grumbling about Obama's rhetorical jabs at Warren and other anti-TPP Democrats, to the point where Sherrod Brown accused Obama of sexism.

Of course, twenty-four hours later, a deal had been struck for a vote on TPA in the Senate. If Edward Isaac-Dovere and Burgess Everett's Politico recap is accurate, then Presidential Leadership (TM) played a pivotal role in the process:

The White House named names. And not 24 hours later, President Barack Obama and his aides had a deal to get fast-track back on track...

Obama aides strategically put out word to reporters of the meeting, even before senators had arrived at the White House. Shortly after the meeting ended, they released the list: the seven Democrats who'd voted for fast-track in committee, plus Sens. Heidi Heitkamp (D-N.D.), Patty Murray (D-Wash.) and Tim Kaine (D-Va.). A few hours before, every Senate Democrat except Tom Carper of Delaware had publicly rebuked his trade effort. Now the White House put on the spot the other nine who had either publicly or privately indicated they would support the underlying fast-track and Trade Adjustment Assistance package, but who voted against opening debate.

In other words, the president had more than enough votes just in the room to get the trade bill moving. According to senators who were there, the president took his time, spending 90 minutes to explain why they needed to get their act together.

Now this does sound like some Old Time-y Presidential leadership, and so maybe, when it comes to managing his own party, there is something to the "Why can't Obama lead?" meme.

But not a lot. My colleague Greg Sargent's take suggests that last Tuesday's vote was more about Reid/McConnell dynamics than anything to do with Obama. And even the close of Politico's story:

Then again, some Senate Democrats said this all would have been resolved even without Obama—though maybe not in time for the House to take up the bill in June, keeping it on track to help Obama seal the Trans-Pacific Partnership with 12 Pacific Rim countries.

"This was going to end up there anyway," Nelson said. "But I would say the meeting with the president accelerated the discussion."

So, to sum up: Most of the time, the structuralists are mostly right when it comes to presidents exercising leadership in pushing legislation through Congress. But they're not completely right. On the margins, when dealing with one's own party, maybe presidential leadership matters just a wee bit.

Are You a True Political Junkie? A Wee Test.

| Tue May 19, 2015 2:49 PM EDT

I'm often amazed at the incredible memories that true political junkies have for trivial stuff that happened well over a decade ago. I was just reading a Kevin Williamson item over at The Corner, and he was noting that (a) some police organizations are apparently referring to President Obama's new restrictions on transfer of military equipment as a "ban," and (b) that lefties were attacking this as fear-mongering, since it wasn't a ban, just a restriction on how the federal government plans to spend its own money.

Where's he going with this, I wondered. I didn't have to wait long to find out:

Well....

Am I the only one who remembers the so-called federal ban on stem-cell research enacted by the Bush administration? That was a ban that was not, in fact, a ban at all, or even a ban on federal funding for embryonic stem-cell research, but a restriction on federal funding for research using newly created lines of embryonic stem cells. When the [Fraternal Order of Police] complains that police departments cannot use federal funds the way they did before, the Left insists that the word “ban” is inappropriate, that the complaints amount to “fear-mongering.” But Mother Jones wrote of a “Stem Cell Research Ban” under Bush, CBS News reported “Obama Ends Stem Cell Research Ban,” Wired wrote of a “Bush stem cell ban,” U.S. News and World Report wrote of “Bush’s Stem Cell Research Ban,” etc.

A funding restriction is not a ban; it isn’t now—but it wasn’t then, either. It is too much to expect even a modicum of consistency from our feckless, lollygagging media, which is mainly composed of people who were too thick for law school and too lazy to sell real estate, and certainly not from the intellectually dishonest Democratic operatives within the media (Hello, Mr. Stephanopoulos!). But we should always keep that dishonesty in mind.

I guess I take a much more easygoing attitude toward this stuff, especially when we're talking about headlines. Heds are almost never entirely accurate thanks to space constraints, and using the word ban instead of ban on federal funding of new stem cell lines seems pretty much inevitable. As long as the hed is reasonably close to reality and a more accurate explanation is put in the first paragraph or two, I can't get too excited.

And if it was something that happened back in 2001? I'd be racking my brains to remember what happened and whether I should still give a damn. I guess that's what marks me as not really a true political junkie. I don't hold grudges against the press quite long enough.

Advertise on MotherJones.com

Finally! It's Tax Fantasyland Season Again!

| Tue May 19, 2015 11:29 AM EDT

One of the more entertaining aspects of the 2012 presidential race was keeping track of the ever-expanding array of fanciful tax plans from Republicans. Even after Herman Cain announced his absurd 9-9-9 plan, other plans that would cut taxes even more kept coming down the pike. No candidate was willing to give up the mantle of biggest tax cutter.

But that wasn't the truly entertaining part. The entertainment came from the fact that the candidates were all willing to describe in almost loving detail what they'd cut: capital gains vs. regular income; different tax brackets; precise rates that millionaires would have to pay; and so forth. But when anyone asked which tax deductions and tax credits they'd kill in order to make their plans revenue neutral, they'd blush like schoolchildren and insist that only Congress could make that call. So brave!

Josh Barro reports today that even with only a few candidates yet in the race, Republicans are already tying themselves in knots over taxes:

There are a few ways the 2016 Republican candidates can avoid the Romney middle-class tax trap. They can break with party tradition and abandon the position that there should be significant tax-rate cuts for top earners. They can forthrightly defend the idea that people with low and middle incomes should pay more. They can abandon the promise of revenue neutrality — so a tax cut for the rich does not need to be offset by tax increases elsewhere. They can be as vague as possible.

So far, apparently, the scorecard looks like this:

  • Carson, Cruz and Paul are calling for flat taxes but are taking the classic position that they'll talk about ways to stay revenue neutral sometime.....in the future. Like maybe the 14th of never.
  • Christie has a slightly modified version of the classic. He won't talk about how he'll stay revenue neutral either, but he's also claiming that he might just let the deficit take some of the hit, which would mean fewer hot-button deductions to eliminate that could wreck his candidacy.
  • Rubio, the boy genius of the Everglades, goes even further, taking what I'll call the Sam Brownback position: screw the deficit, he says. He's just going to lower taxes and leave it at that. After that we're in God's hands.
  • Finally, Jeb Bush has taken the most unusual position of all: he's not even talking about taxes. He's generally in favor of lowering taxes, but that's as much as he's willing to say.

That's only six candidates, and there are many more to come—and we can expect plenty of tax fantasyland from all of them, I think. I mean, can you imagine what Lindsey Graham or Carly Fiorina are going to come up with? The mind reels. With the exception of the poor shmoes at the Tax Policy Center, who have to pretend to take this stuff seriously while they trudge through their analysis of each and every farfetched plan, it should be plenty of fun for the rest of us. Which candidate will come up with the most ridiculous, most pandering plan of all? Your guess is as good as mine.

Obamacare Is Making It Easier to Be a Young Working Parent

| Tue May 19, 2015 6:20 AM EDT

With Kevin Drum continuing to focus on getting better, we've invited some of the remarkable writers and thinkers who have traded links and ideas with him from Blogosphere 1.0 to this day to contribute posts and keep the conversation going. Today we're honored to present a post from economist Dean Baker.

The main point of the Affordable Care Act was to extend health insurance coverage to the uninsured. While this is a tremendously important goal, a benefit that is almost equally important was to provide a guarantee of coverage to those already insured if they lose or leave their job. This matters hugely because roughly 2 million people lose their job every month due to firing or layoffs. As a result of the ACA most of these workers can now count on being able to get affordable coverage even after losing their job.

The ACA also means that people who may previously have felt trapped at a job because of their need for insurance now can leave their job without the risk that they or their family would go uninsured. This could give many pre-Medicare age workers the option to retire early. It could give workers with young children or other care-giving responsibilities the opportunity to work part-time. It could give workers the opportunity to start a business. Or, it could just give workers the opportunity to leave a job they hate.

While it is still too early to reach conclusive assessments of the labor market impact of the ACA, the evidence to date looks promising. Republican opponents of Obamacare have often complained that the program would turn the country into a "part-time nation." It turns out that there is something to their story, but probably not what they intended. The number of people who are working part-time for economic reasons, meaning they would work full-time if a full-time position was available, has fallen by almost 16 percent from the start of 2013 to the start of 2015. This is part of the general improvement in the labor market over this period.

The number of people working part-time involuntarily is still well above pre-recession levels, but it has been going in the right direction.

It is true that the employer sanction part of the ACA has not taken effect (which required that employers with more than 50 workers provide insurance or pay a penalty, but it is not clear this would make a difference. Under the original wording of the law (Obama subsequently suspended this provision), employers would have expected that the sanctions would apply for the first six months of 2013. We found no evidence of shifting to more part-time work during this period compared to the first six months of 2012.

But there is a story on increased voluntary part-time employment. This is up by 5.7 percent in the first four months of 2015 compared to 2013. This corresponds to more than 1 million people who have chosen to work part-time. We did some analysis of who these people were and found that it was overwhelmingly a story of young parents working part-time.

Back in the old days we might have thought this was an outcome that family-values conservatives would have welcomed.

There was little change or an actual decline in the percentage of workers over the age of 35 who were working part-time voluntarily. There was a modest increase in the percentage of workers under age 35, without children, working part-time voluntarily. There was a 10.2 percent increase in the share of workers under the age of 35, with one to two kids, working part-time. For young workers with three of more kids the increase was 15.4 percent.

Based on these findings it appears that Obamacare has allowed many young parents the opportunity to work at part-time jobs so that they could spend more time with their kids. Back in the old days we might have thought this was an outcome that family-values conservatives would have welcomed.

As far as other labor market effects of Obamacare, there has been a modest uptick in self-employment, but it would require more analysis to give the ACA credit. Similarly, older workers are accounting for a smaller share of employment growth, perhaps due to the fact that they no longer to need to get health care through their jobs. These areas will require further study to make any conclusive judgments, but based on the data we have seen to date, it seems pretty clear that Obamacare is allowing many young parents to have more time with their kids. And that is a good story that needs to be told.

It's Experiment Week

| Mon May 18, 2015 12:49 PM EDT

As you all know, I'm recovering nicely from my chemotherapy. That is to say, technically I'm recovering nicely. All my numbers are in a good range and are continuing to improve, and there's every reason to think that will continue.

However, I still feel crappy. Heavy fatigue and nausea rule my day. But I'm thinking that I might—might!—be feeling ever so slightly better on that front. Just a smidgen. Plus I'm so bored I could scream. So I'm going to test my energy level this week by writing two blog posts a day. It's unlikely that any of them will include heavy analysis. They'll be more in the mold of this morning's post, "Marco Rubio is a Moron," which was not exactly a strain on my gray matter or powers of concentration. But it was kinda fun.

Anyway that's the plan. And just to add to the difficulty factor, it turns out my neighbors are beginning a 3-month home gutting and remodel. That should be nice and noisy, especially since we share a common wall with them. So here's my tentative daily schedule:

  • Eat breakfast
  • Rest
  • Write blog post.
  • Rest.
  • Take a walk around the block.
  • Rest.
  • Write blog post.
  • Rest.
  • Take a shower.
  • Rest.
  • Eat lunch.
  • Rest.
  • Take another walk around the block.
  • Rest.

And....that will probably do it. We'll see.

Marco Rubio Is a Moron

| Mon May 18, 2015 11:51 AM EDT

Here's the latest from Florida wunderkind Marco Rubio:

Marco Rubio Struggles With Question on Iraq War

Under a barrage of questions from Chris Wallace of Fox News, Mr. Rubio repeatedly said “it was not a mistake” for President George W. Bush to order the invasion based on the intelligence he had at the time. But Mr. Rubio grew defensive as Mr. Wallace pressed him to say flatly whether he now believed the war was a mistake. Mr. Rubio chose instead to criticize the questions themselves, saying that in “the real world” presidents have to make decisions based on evidence presented to them at the time.

“It’s not a mistake — I still say it was not a mistake because the president was presented with intelligence that said Iraq had weapons of mass destruction, it was governed by a man who had committed atrocities in the past with weapons of mass destruction,” Mr. Rubio said on “Fox News Sunday.”

A moment later, as Mr. Wallace tried to pin him down on his view, Mr. Rubio began to reply, “Based on what we know now, I think everyone agrees — ” but Mr. Wallace cut him off before he finished the thought.

“So was it a mistake now?” Mr. Wallace asked.

“I don’t understand the question you’re asking,” Mr. Rubio said.

The truth is that I don't care about Rubio's actual position on the Iraq War. The guy's trying to run on a platform of more-hawkish-than-thou, and that's pretty much all I need to know. Most of the time he sounds like a ten-year-old trying to sound tough in front of the older kids.

But I'm seriously beginning to wonder if he has a 3-digit IQ. After Jeb Bush's weeklong debacle trying to answer this question, every Republican candidate ought to have their own answer figured out. And not just figured out: by now their answers ought to be poll-tested, cut down into nice little sound bites, and so smoothly delivered you'd never even know this was a tricky issue in the first place.

But no. Rubio sounded like this question came as a total surprise. Seriously, Marco? This guy does not sound like he's ready for prime time.