Kevin Drum

At the Moment, Inflation Is Our Friend, Not Our Enemy

| Mon Jun. 23, 2014 1:01 PM EDT

Atrios makes a point today that's been on my mind as well. So instead of writing it myself, I'll just let him say it:

I think more people need to make the point regularly (even Krgthulu!) that the lack of inflation risks isn't simply because we don't have any actual inflation, it's because if there's one thing the major central banks know how to do — and are biased in favor of doing — is killing inflation. If we do wake up and discover that we've had sustained inflation at, say, the unimaginable level of 3% for several months, ushering in the Zombie Apocalypse, our great and glorious central banks will actually step on the brakes. Genuine inflation risk isn't about a few months of too high inflation (which we should have but that's another discussion), it's about "irresponsible" central banks that will keep stepping on the gas even as hyperinflation is destroying the world. But that isn't going to happen and no one with half a brain really believes it's going to happen. Are those who fret about inflation evil or stupid? I have no idea, but...

In addition, I'd expand a bit on his aside that a few months of high inflation would be a good thing. That's true, and it's the primary reason we shouldn't let inflation fears overwhelm us. If the CPI rises by 4 or 5 percent for a few months, that's not a problem. It's happened before, and then reverted back to the mean. Even a year wouldn't be a problem. In fact, it would probably be helpful since it would implicitly reduce real interest rates and act as a spur to the economy. And if inflation stays at an elevated level for more than a year? Then Atrios is right: if there's one thing the Fed knows how to do, it's kill inflation. There's a ton of controversy over whether and how the Fed can influence other things (growth, employment, strength of the dollar, etc.), but there's no question about its ability to curb inflation if it wants to. This is something that left and right both agree about.

So yes: we should tolerate higher inflation for a while. With the economy still as weak as it is, there's a lot of potential upside and very little potential downside.

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Supreme Court Strikes Down EPA Interpretation of Clean Air Act

| Mon Jun. 23, 2014 11:22 AM EDT

A few years ago, the EPA added carbon dioxide to an established program that limits emissions of harmful pollutants. But there was a problem: the Clean Air Act says that permits are required by any source that emits more than 250 tons of a covered pollutant. Because CO2 is such a common gas, this would have forced tens of thousands of small sources to go through an expensive and pointless permitting process, something EPA wanted to avoid. So, for CO2 only, they unilaterally changed the threshold to 100,000 tons per year. This exempted most large businesses, but it also gave critics an opening to challenge the law. Today they won:

The Supreme Court, in a split ruling, has blocked the Obama administration from requiring special permits for some new power plants, but upheld them for others. In a dense 5-4 decision Monday, the justices said the Environmental Protection Agency had wrongly stretched an anti-pollution provision of the Clean Air Act to cover carbon emissions in new or modified plants.

But the ruling was confined to only one regulatory provision, and it is not likely to directly affect the broader climate-change policy that the administration announced earlier this month. That policy relies on a different part of the law that says states must take steps to reduce harmful air pollutants, which include greenhouse gases.

This doesn't affect the EPA's recent proposal that would limit CO2 emissions from power plants, since that relies on a different provision of the Clean Air Act that's already been blessed by the Supreme Court. However, today's ruling is a demonstration of something I've mentioned before: When an executive agency modifies the way it interprets a law, it's a fairly routine affair. Interpretations of federal statutes, especially complex regulatory constructions, are notoriously difficult, and agencies do it all the time. There's no presidential "lawlessness" or "tyranny" involved, and disputes over these interpretations are routinely resolved by courts. In this case, it was obviously a close call, since the decision was 5-4 and the opinion was long and dense.

This is what's likely to happen in other cases where the Obama administration has interpreted a law in ways that his critics don't like. If the critics are serious, they'll go to court, and in some cases they'll win. In others, they'll lose. Welcome to the 21st century.

UPDATE: I wrote this hastily because—and I know you're going to love this excuse—a temporary crown fell out and I had to pop out to my dentist to get it re-cemented. But now that I'm back, it's worth pointing out that today's Supreme Court decision actually upheld most of the EPA's new limitations on CO2 emissions. The main reason I highlighted the one piece they struck down was because I wanted to make a point about presidential "lawlessness" that's become such a talking point on the right these days. In the case of the 250-ton rule, the EPA tried to reinterpret the law and the court ruled against them. Other interpretations were upheld. That's the way this stuff goes.

Friday Cat Blogging - 20 June 2014

| Fri Jun. 20, 2014 3:04 PM EDT

Unless you're down in Rio watching the World Cup, tomorrow marks the beginning of summer. And you know what that means: lots of snoozing in the sunshine for Domino. Yesterday she got a head start, seeking out sunny spots in the garden that are free from the evil mockingbirds. Not that she really cares about them. They can mock away and she just yawns. I think they've even given up their dive-bombing routine since Domino so obviously poses no threat to their lifestyle. Mankind may have fallen centuries ago, but here at Casa Drum the critters live in a state of prelapsarian laziness.

Real Men Know What a Codec Is

| Fri Jun. 20, 2014 3:00 PM EDT

Tyler Cowen points today to a list of words that show the biggest disparities in recognition between men and women. Men, for example, are pretty familiar with humvee, claymore, and scimitar. Women are pretty familiar with taffeta, wisteria, and bodice. No big surprises there. But here's the #1 word on the male list:

codec (88, 48)

Seriously? We're supposed to believe that 88 percent of men are familiar with the word codec? True, this is only a test for recognizing a word, not necessarily for knowing what it means, but still. Something is wrong with this picture. Even taking into account the number of gamers and audiophiles who end up having to muck around with codecs, I'd still guess that no more than 10-20 percent of the men in America have ever come across the word.

But then again, maybe I'm wrong. Is it possible that among American males, knowledge of codecs is as widespread as knowledge of carburetors used to be?

Is a Government Shutdown Over Coal in Our Future?

| Fri Jun. 20, 2014 12:15 PM EDT

Brian Beutler thinks Republicans are likely to force yet another government shutdown, this time over the EPA's proposed restriction on coal-fired power plants. But unlike the last shutdown, which came last September because it literally seemed like their last chance to prevent Obamacare from taking effect, they have more leeway this time around:

I think history and reason both suggest they will not shut down the government before the election—but that their vehement interest in emitting as much carbon pollution as possible, combined with the likelihood that they'll win several Senate seats in November, presages a dramatic confrontation between Republicans Congress and the White House either right after the election or early next Congress.

....The crucial difference between last September and the coming one is that Republicans (particularly the hardline/opportunist faction) were staring down the imminent launch of the Affordable Care Act on October 1, 2013....The EPA rule is nothing like that. Or, at least, it isn't there yet. If Republicans cave now, or simply punt a confrontation over it until after the election, they'll have sacrificed nothing other than the opportunity to pants themselves in front of God and everyone a month before the election. And if they win a bunch of seats in November, their hands will be strengthened when they actually do go to the mattresses during this year's lame duck session of Congress or in early 2015.

This makes perfect sense. That doesn't mean Republicans will do it this way, of course, since common sense has been in short supply in the GOP caucus lately. Still, the recent election of relatively non-insane folks to the House leadership suggests just enough adult presence to keep the yahoos in line and the government open at least through November. After that, it's anyone's guess. If they're really going to do it, though, it might be best to wait until late next year so they can force all their presidential candidates to weigh in. That should do maximum damage to the GOP brand, which seems to be their real goal here.

It May Finally Be Time for an Independent Kurdistan

| Fri Jun. 20, 2014 10:49 AM EDT

Iraq's civil war may be a humanitarian crisis for most Iraqis, but for the Kurds in northern Iraq it represents an opportunity:

By every measure, the Sunni militants’ lightning advance through Mosul and on south toward Baghdad has been a disaster for Iraq. But it raises possibilities, many of them good ones, for the Kurds, who already have a great deal of autonomy in the north. If they can defend their borders and not get dragged into a bloody stalemate between the Iraqi Army, along with its Shiite militia allies, and the Sunni militants, the Kurds could emerge empowered, even, perhaps, with their centuries-old dream of their own state fulfilled.

As the Sunni militants seek to erase the border between Iraq and Syria that the colonial powers drew after World War I, the Kurds want to draw a new one, around a stretch of territory across northern Iraq. The ultimate goal is even more ambitious: to unite the Kurdish minorities from four countries — Syria, Iraq, Turkey and Iran.

Jonathan Dworkin, an infectious diseases doctor who has written about Kurdistan for me at the Washington Monthly blog in 2006 and then again here at MoJo in 2011, believes that the dream of a multi-ethnic Iraq is at the root of our failure there:

A more creative American policy would acknowledge the reality of what the Kurds have built, which is a prosperous and peaceful nation state in the mountains of Northern Iraq. It’s a nation whose soldiers and diplomats worked amicably alongside Americans through all the darkest episodes of the Iraq wars. It’s a nation where not a single American soldier died during ten years of bloody military involvement in Iraq, despite occasional terrorist attacks.

....The usual criticism of the view that Iraqis would be better off apart is that the regional neighbors would never allow it. In the case of the Kurds, that basically means Turkey. But the situation between Kurds and Turks has changed a lot in recent years. Last year a pipeline was completed that will allow Kurds to export oil directly to Turkey, bypassing Baghdad and greatly enhancing their economic independence. As one Turkish official involved in the oil deal recently put it in a Washington Post article on the topic, when it comes to Kurdish independence, Turkey “has bought that option.” No doubt many in Turkey would prefer the status quo to an independent Kurdistan, but the economic boom in Sulaimania and Erbil is evidence itself that money is trumping ideology in Turkey.

There are practical benefits as well to an independent Kurdish state. Kurdistan would provide America with one good ally, rather than a series of fake ones. The Kurds already field a tough and self-motivated defense force to counter terrorist threats from neighboring parts of Iraq, and unlike our allies in the Persian Gulf, they have been a consistent enemy of Al Qaeda in all its varied permutations. Their government would provide useful intelligence and a quiet diplomatic channel to Iran. Importantly, they would free us from the absurdity of supporting yet another Arab dictatorship. Maliki would become Iran’s problem, which is appropriate, as he is largely their creation.

Back in the day, Joe Biden was a proponent of creating a loosely federal Iraq, with Kurdish, Sunni, and Shiite states that had considerable freedom from central control in Baghdad. There were, and still are, a lot of problems with that idea, but an independent Kurdistan would be the easiest first step. For all practical purposes, Kurdistan has been operating independently for years; it's stable and prosperous; it has a working army; and it's strongly pro-American. Figuring out the borders would be a challenge, but not an impossible one. If it's really true that Turkey wouldn't go ballistic over the prospect (out of fear that it would cause internal problems with its own Kurdish population), it's a prospect worth considering. And Karl Vick of Time reports that it really is true:

The transformation of Turkey from enemy to key ally of Iraqi Kurdistan is almost complete, removing a key obstacle to the dismemberment of Iraq as Sunni Muslim extremists gain territory in a nation ruled by a sectarian Shiite Muslim government.

“It’s a fact that the autonomous Kurdish region of Iraq is the best ally of Turkey in the Middle East,” says Dogu Ergil, a political science professor at Istanbul’s Fatih University who specializes in what Turks call “the Kurdish question.” “Once it was a formidable potential enemy, because Turkey feared a basically independent Iraqi Kurdistan would be an attraction center for the Kurds of Turkey. But it proved that it’s not so, and Iraqi Kurds could be the best economic partners of Turkey.”

Perhaps an independent Kurdistan is a more realistic possibility than most of us think.

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House Votes to End NSA Backdoor Searches

| Fri Jun. 20, 2014 12:29 AM EDT

In theory, the NSA is not supposed to spy on Americans without a warrant. However, if they claim that they're really spying on a foreigner who just happens to be talking to an American, they can collect both sides of the conversation and put all the information in one of their giant databases. And once the American information is in their database, they can search for it because, technically, they're not collecting anything they aren't allowed to. They're just searching for stuff they've already "inadvertently" collected.

To you and me, this is laughable sophistry. To the NSA, it's just another day at the office. Today, however, the House voted to end these "backdoor" searches:

The House, by a 293-123 vote late Thursday, approved a bipartisan proposal to limit the NSA’s surveillance programs by requiring the agency to get a court-ordered warrant to search U.S. records in its possession.

....The FISA Amendments Act authorizes overseas surveillance of online and telephone communications and prohibits the agency from intentionally targeting U.S. residents. But the law does not prohibit the agency from querying U.S. communications inadvertently collected under the foreign surveillance program.

Intelligence officials have acknowledged in recent months they do conduct warrantless searches of U.S. records under the program, leading to protests from civil rights and privacy groups.

This hasn't made it into law yet, and I'm sure we can expect the usual process of watering down as the Senate gets involved and tricky little words get inserted here and there. But it's a start.

Supreme Court Narrows Scope of Software Patents. Slightly.

| Thu Jun. 19, 2014 1:29 PM EDT

The Supreme Court unanimously tossed out an egregiously vague software patent today, and that's good news. Unfortunately, it was a fairly narrow ruling that didn't provide much guidance about which software patents are and aren't valid. Tim Lee explains:

The patent claimed a method of hedging against counter-party risk, which is a fancy word for the risk that you make a deal with someone and later he doesn't uphold his end of the bargain. The Supreme Court unanimously held that you can't patent an abstract concept like this merely by stating that the hedging should be done on a computer.

....[But] the Supreme Court rejects Alice's patent because "each step does no more than require a generic computer to perform generic computer functions." But many computer programmers would point out that this describes all software.

Software is nothing more than a long list of conventional mathematical operations. If you think a list of conventional operations isn't patent-eligible, that implies that any "invention" you can implement by loading software on a generic computer isn't patent-eligible. The problem is that judges lose sight of this fact as software gets more complex, leading to a de facto rule that only complicated computer programs can be patented.

This problem is hardly unique to software. An ordinary physical invention, after all, is usually just a collection of previously known parts put together in an innovative way. So when do you decide that the invention, taken as a whole, is truly innovative? It's a judgment call.

Now, I happen to think that this judgment is harder in the software realm than elsewhere, and that patent offices are inherently less competent to judge software implementations than other inventions. The algorithms themselves are typically impenetrable, and deducing prior art is all but impossible. At a guess—and that's all I can do since there's really no data available—I'd say that hardly any software inventions are truly innovative. They're simply solutions to problems that are put in front of a coding team. For the vast bulk of them, any other coding team given the same problem would probably come up with a pretty similar solution.

Unfortunately, it's essentially unknowable whether I'm right or wrong about that. What's not unknowable, however, is what the world would be like without software patents. That's because we used to live in such a world, and guess what? Software development thrived. So it's hard to see what benefits we get from all this. It's great for patent trolls, and I suppose it works OK for giant corporations that use their patent portfolios as bargaining tools with other giant corporations, but that's about it. So why bother?

About Half of Obamacare Exchange Enrollees Were Previously Uninsured

| Thu Jun. 19, 2014 11:40 AM EDT

A new Kaiser survey shows that 57 percent of those who bought health insurance on Obamacare exchanges were previously uninsured. That's about 4.5 million people who gained private insurance via the exchanges, and the vast majority of them say they would have remained uninsured if not for Obamacare. If this number is correct, it suggests that the number of newly insured by the end of the year will be a little higher than I've projected before—perhaps around 11-13 million.

But is it correct? Sarah Kliff provides the chart on the right showing the wildly different estimates from different sources, and explains that much of the divergence is due to different organizations asking different questions:

McKinsey asked people to identify the insurance they had "most of the year" in 2013....The RAND estimate relies on the research firm's ongoing American Life Panel....It found that, when it reached out to them mostly in early March, that 36 percent of those who had exchange coverage were, in earlier surveys, uninsured.

....Health and Human Services has estimated 87 percent of certain Obamacare enrollees lacked coverage when they signed up. This figure comes from a question on Healthcare.gov....The Kaiser Family Foundation report....asked survey respondents this question: "Before you began coverage under your current health insurance plan, were you covered by a different plan you purchased yourself, were you covered by an employer, by COBRA, did you have Medicaid or other public coverage, or were you uninsured?"

To a certain extent, there is no right answer. The basic problem is that the pool of uninsured has a lot of churn: people are covered for a while, then lose their jobs, then get another job, etc. So if you had insurance last August, but lost your job and signed up for Obamacare in November, do you count as previously uninsured? According to McKinsey, no. According to Kaiser, yes.

My own guess is that the Kaiser methodology is probably the closest of the four to what we'd normally think of as "uninsured," and its sample size is big enough to be reliable. In any case, when you combine these surveys with the Gallup results, the most likely number seems to be somewhere around 50 percent. Given the inherent subjectivity of the topic, that's probably about as good an estimate as we can get. There's just no reliable way to get precision any higher.

Obama: Ask First, Shoot Later

| Thu Jun. 19, 2014 10:23 AM EDT

Congratulations to the LA Times copy desk for the brilliant front-page headline on the right (print edition only). In the obligatory bland tones of a straight news piece, it perfectly captures both President Obama's approach to military intervention as well as the approach of the war-is-always-the-answer faction of the Republican Party. And the accompanying story isn't bad either:

Last fall, as President Obama weighed airstrikes against Syria, deliberations followed a clear pattern: The president solicited scores of options, planners returned with possibilities, and, according to people involved, Obama would reply with the same question: And then what?

Over the last several days, with Obama mulling involvement in another Middle East conflict, this time in Iraq, that dynamic has held.

....Obama's approach — the persistent "and then what?" question — reflects his deep skepticism about the ability of military intervention to fix entrenched problems, a suspicion that some note has grown, or at least solidified, during his tenure.

....That view won support Wednesday from the general who was the architect of the so-called troop surge under George W. Bush. The U.S. should reengage militarily in Iraq only if the country's sectarian communities reach a political agreement, retired Gen. David Petraeus said at a conference in London. "This cannot be the United States being the air force for Shia militias, or a Shia on Sunni Arab fight," he said.

At least there are a few people still left in Washington who understand this. Now we just need a few more.