Kevin Drum

Happy Holidays! Economic Growth Finally Starting to Look Robust.

| Tue Dec. 23, 2014 10:32 AM EST

Hey, take a look at this. Yet another revision is in, and the Commerce Department now estimates that third-quarter GDP grew at a sizzling 5.0 percent rate, following a nearly-as-good 4.6 percent rate in the second quarter. Part of this is still a make-up for poor growth in the first quarter, but it's good news nonetheless. The economy really does seem to have found a new gear this year:

Tuesday’s report showed stronger-than-expected spending by U.S. consumers, particularly on services like health care. Fixed nonresidential investment also was revised up, signaling more spending by businesses on new buildings and research and development.

“There is a positive feedback loop going on at the moment,” Mike Jakeman, global analyst for the Economist Intelligence Unit, said in a note. “Job creation is running at the strongest rate for 15 years. More people in work means more income, which means more private spending, which means more business investment, which means more hiring.”

Corporate profits are also up, and the stock market is at new highs every day. Wage growth still needs to get stronger, but it showed signs of life last quarter. All things considered, five years after the Great Recession technically ended, we're finally doing pretty well.

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Putin Ally Says Putin Needs to Make Peace With West

| Tue Dec. 23, 2014 1:01 AM EST

Things that make you go hmmm:

Russia faces a “full-blown economic crisis” next year that will trigger a series of defaults and the loss of its investment-grade credit rating, a respected former finance minister has warned. Real incomes will fall by 2-5 per cent next year, the first decrease in real terms since 2000, said Alexei Kudrin, a longtime ally of President Vladimir Putin and widely tipped to succeed Dmitry Medvedev as prime minister.

....In unusually blunt comments for an establishment figure, he also called on Mr Putin to do what was necessary to improve relations with the west: “As for what the president and government must do now: the most important factor is the normalisation of Russia’s relations with its business partners, above all in Europe, the US and other countries.”

This gets to be a little like old-school Kremlinology, but I wonder what it means when a longtime Putin ally publicly suggests that Russia needs to mend relations with the West, and do it pronto? Is this really an independent act of truth-telling? Or some kind of semi-sanctioned trial balloon designed to start shifting domestic public opinion? I suppose it's most likely the former, especially considering this little tidbit:

Last March, the Russian leadership considered the possible consequences of sanctions against Russia in connection with the crisis in Ukraine, Civil Initiatives Committee Chairman Alexei Kudrin said...."I provided my assessment of the consequences. The president and prime minister listened to them. I simply paraphrased them and then submitted them in written form to the president's aide," he said.

His report included three possible scenarios for developments in connection with the enactment of sanctions against Russia, Kudrin said.

Hmmm again. This is basically noted without comment, since I don't really quite know what to make of it.

Brother, Can You Spare a Dime?

| Mon Dec. 22, 2014 3:18 PM EST

I'm going to keep things simple this year: Mother Jones is great! You already know that if you subscribe to the magazine (which you should) or if you read this blog. But no single source of funding can support what we do, so we rely on multiple sources. And you guessed it: one of them is reader donations.

So if you want to support our great journalism....

Or you just want to support this blog....

Or, hell, if you just want to say thank you to MoJo for providing me with much-needed health insurance this year....

Then how about making a year-end contribution? Small amounts are fine. Large amounts are even better! You can use PayPal or a credit card. Every little bit helps. So thanks for another year of reading my rants and raves, and thanks in advance for whatever donation you can afford. Here are the details:

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Someone Needs to Invent a Great Non-Opioid Painkiller

| Mon Dec. 22, 2014 12:39 PM EST

Austin Frakt writes about the stunningly widespread use and abuse of narcotic painkillers in the US:

Opioids now cause more deaths than any other drug, more than 16,000 in 2010. That year, the combination of hydrocodone and acetaminophen became the most prescribed medication in the United States. Patients here consumed 99 percent of the world’s hydrocodone, the opioid in Vicodin. They also consumed 80 percent of the world’s oxycodone, present in Percocet and OxyContin, and 65 percent of the world’s hydromorphone, the key ingredient in Dilaudid, in 2010. (Some opioids are also used to treat coughs, but that use doesn’t seem to be a major factor in the current wave of problems.)

When I got out of the hospital a couple of months ago, I was in considerable pain. The answer was morphine. For about two weeks, I took a couple of low-dose morphine tablets each day. Then the pain eased and I stopped.

I resisted the morphine at first, and my doctor had to argue me into using it regularly. "You broke a bone in your back," she told me. "Your pain is legitimate. We have a lot of experience treating pain with morphine, and you'll be all right."

I finally listened, and the morphine did indeed work as advertised. But it somehow got me thinking. Morphine? That's the best we can do? This stuff was invented 200 years ago. And while there are newer painkillers around, they're all opioids of one kind or another with all the usual horrible side effects1. How is it that in over a century of research, we still know so little about pain that we haven't been able to create a powerful, non-opioid painkiller?

I'm not really going anywhere with this. I'm just curious. Are there any good books, or even long magazine articles, about this? Why is that even after gazillions of dollars of effort, we're still relying on variants of the opium poppy for serious pain relief? It's the 21st century. How come we can't do better?

1Addiction, nausea, wooziness, constipation, etc.

There Is No Higher Ed Bubble. Yet.

| Mon Dec. 22, 2014 10:51 AM EST

Is there a higher-education bubble? Will technology produce cheaper, better alternatives in the near future? Are kids and parents finally figuring out that if Bill Gates can drop out of Harvard and become the richest man in the world, maybe an Ivy League degree isn't actually worth 50 grand a year? Dan Drezner thinks the whole idea is ridiculous, and he's willing to put his money where his mouth is:

If, in fact, there really is a higher ed bubble, it should pop before 2020. And if it does pop, then tuition prices for college should plummet as demand slackens. After all, that’s how a bubble works — when it deflates, the price of the asset should plummet in value, like housing in 2008. So who wants to bet me that an average of the 2020 tuition rates at Stanford University, Williams College, Texas A&M and the University of Massachusetts-Lowell will be lower than today?

I’m open to changing the particular schools, but those four are a nice distribution of private and public schools, elite and not-quite-as-elite colleges, with some geographic spread. Surely, true believers in a higher ed bubble would expect tuition rates at those schools to fall.

I really don’t think that will be the case. So anyone who believes in a higher ed bubble should be happy to take the other side of that bet.

Not me. I'd be willing to bet that eventually artificial intelligence will basically wipe out the demand for higher education completely. But "eventually" means something like 30 years minimum, probably more like 40 or 50. Maybe even more if AI continues to be as intractable as some people think it will be.

In the meantime, Drezner is right: the vast, vast majority of college students don't want to strike out on their own and try to become millionaire entrepreneurs. They just want ordinary jobs. And that's a good thing, since if everyone wanted to run their own companies, entrepreneurs wouldn't be able to find anyone to do all the non-CEO scutwork for their brilliant new social media startups.

So if something like 98 percent of college grads are aiming for traditional jobs in which they work for somebody else, guess what? All those somebody elses—which probably includes most of the people who think there's a higher-ed bubble—are going to want to hire college grads. They sure don't want to hire a bunch of losers who were too dim to drop out and become millionaires and couldn't even manage the gumption to accrue 120 units at State U, do they?

Look: the rising cost of higher education has multiple causes, but it's mostly driven by two simple things. At public schools, it's driven by declining state funding, which transfers an increasing share of the cost of higher ed onto students. Unfortunately, I see no reason to think this trend won't continue. At private schools, it's driven by the perception of how much a private degree is worth—and right now, all the evidence suggests that even with fairly astronomical tuitions at elite and semi-elite universities, the lifetime value of a degree is still worth more than students pay for it. Universities understand this, and since these days they mostly think of themselves not as public trusts, but as businesses who simply charge whatever the traffic will bear, they know they still have plenty of headroom to increase tuition. So this trend is likely to continue as well.

If I had to guess, I'd say that there's a class of 2nd or 3rd tier liberal arts colleges that might be in trouble. They have high tuitions, but the value of their degree isn't really superior to that of a state university. They might be in trouble, and if Drezner added one of these places to his list it might make his bet more interesting.

But he'd still win. He might lose by 2040, but he's safe as long as he sticks to 2020.

When Will China Finally Get Tired of Propping Up North Korea?

| Mon Dec. 22, 2014 9:53 AM EST

The United States might not have much leverage over North Korea, but China does. Virtually all of North Korea's external trade is with China, and Chinese support is pretty much all that keeps North Korea from collapsing. This means that when the United States wants to pressure Pyongyang, it has limited options as long as Chinese support of the regime remains strong. But how long will that support last? Over the weekend, Jane Perlez of the New York Times reported that it might finally be faltering:

When a retired Chinese general with impeccable Communist Party credentials recently wrote a scathing account of North Korea as a recalcitrant ally headed for collapse and unworthy of support, he exposed a roiling debate in China about how to deal with the country’s young leader, Kim Jong-un.

....The parlous state of the relationship between North Korea and China was on display again Wednesday when Pyongyang commemorated the third anniversary of the death of Kim Jong-il, the father of the current leader, Kim Jong-un, and failed to invite a senior Chinese official.

The last time a Chinese leader visited North Korea was in July 2013 when Vice President Li Yuanchao tried to patch up relations, and pressed North Korea, after its third nuclear test in February 2013, to slow down its nuclear weapons program. Mr. Li failed in that quest....After the vice president’s visit, relations plummeted further, entering the icebox last December when China’s main conduit within the North Korean government, Jang Song-thaek, a senior official and the uncle of Kim Jong-un, was executed in a purge. In July, President Xi Jinping snubbed North Korea, visiting South Korea instead. Mr. Xi has yet to visit North Korea, and is said to have been infuriated by a third nuclear test by North Korea in February 2013, soon after Kim Jong-un came to power.

So does this mean that China might help us out in our current dispute with North Korea over the Sony hack? Probably not—or not much, anyway. North Korea's very weakness is also its greatest strength: if it collapses, two things would probably happen. First, there would be a flood of refugees trying to cross the border into China. Second, the Korean peninsula would likely become unified and China would find itself with a US ally right smack on its border. Given the current state of Sino-American relations, that's simply not something China is willing to risk.

Not yet, anyway. But who knows? There are worse things in the world than a refugee crisis, and relations with the US have the potential to warm up in the future. One of these days North Korea may simply become too large a liability for China to protect. If that ever happens, North Korea's lifespan can probably be measured in years or months.

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No, There Really Isn't Much We Can Do To Retaliate Against North Korea

| Sun Dec. 21, 2014 2:59 PM EST

A couple of days ago I wrote a post suggesting that there might not really be much we can do to retaliate against North Korea, who the FBI blames for the Sony hack. So I was curious to read "A Reply to Kim’s Cyberterrorism," a Wall Street Journal editorial telling us what options we had. I figured that if anyone could make the best case for action, it was the Journal.

Unfortunately, they mostly just persuaded me that there really is very little we can do. After clearing their throats with a couple of suggestions that even they admit are mostly just symbolic, they get to the meat of things:

Earlier this year [Rep. Ed Royce] introduced the North Korea Sanctions Enforcement Act, which gives Treasury the power it needs to sanction banks facilitating North Korea’s finances. It passed the House easily in July but has since been locked up in Harry Reid’s Senate at the behest of the Obama Administration. Mr. Royce tells us he plans to reintroduce the bill as a first order of business in the new Congress. New Jersey Democrat Robert Menendez has introduced similar legislation in the Senate; a bill could be on Mr. Obama’s desk by the second week in January.

So....that's it. And even this is weaker tea than the Journal suggests. For starters, the bill has a serious structural problem because it puts severe limits on the president's power, which is why Obama hasn't supported it in the past. It's a bad idea in foreign relations for Congress to mandate sanctions that can then be lifted only by Congress. This makes it almost impossible for presidents to negotiate future agreements because they have no carrots to offer in return for good behavior.

But that could be fixed. What can't be fixed is the fact that North Korea learned a lesson from our previous attempt at tightening economic sanctions in 2007, when we cut off the US links of Banco Delta Asia, a Macau-based bank suspected of doing business with North Korea. This in turn panicked other Macau banks into cutting off their relationships with North Korea, which severely restricted the regime's access to dollars. As the Journal notes, this genuinely hurt North Korea, and the Bush administration agreed to resolve the BDA issue during the Six-Party nuclear talks later that year.

Unfortunately for us, sanctions like this would hurt North Korea a lot less now than they did back in 2007. Stephan Haggard explains:

Post-BDA, and since the ascent of Kim Jong-un in particular, North Korea has also sought to diversify its trade, investment and financial links. The KPA and its associates have developed relationships with financial entities that are not concerned with access to the U.S. market, both in China and outside it; Russia will be particularly interesting to watch in this regard but there is also the open field of the Middle East....While this legislation might raise the costs of proliferation activities if implemented, it is unlikely to staunch them completely and could simply forge new networks beyond the law's reach.

Another question is whether the sanctions will have the broader strategic effect of moving the North Koreans toward serious negotiation of its nuclear program....The paradoxical feature of sanctions is that they rarely have the direct effect of forcing the target country to capitulate. The HR 1771 sanctions will have effect only when coupled with strong statements of a willingness to engage if North Korea showed signs of interest in doing so. The legislation provides plenty of sticks; the administration will have to continue to articulate the prospective carrots in a way that is credible. Strong sanctions legislation makes that difficult to do if the legislation places a series of binding constraints on the president's discretion. Why negotiate with the U.S. if there is no return from doing so?

With changes, Royce's sanctions bill might be an appropriate response to the Sony hack. However, it's unlikely to have a severe effect on North Korea. Even worse, past history shows that a single-minded "get tough" attitude toward the DPRK can backfire badly, as it did on George Bush when his refusal to negotiate with Pyongyang in 2002 led in short order to the ejection of UN inspectors and the construction of plutonium bombs from a stockpile that had previously been kept under lock and key.

As the cliche goes, there are no good options here, just bad and less bad. I wouldn't necessarily oppose a modified version of the sanctions bill, but it's unlikely to have a major impact. It might even make things worse. If this is the best we can do, it's pretty much an admission that there's not really much we can do.

Let's Blame Conservatives For All the Killings They're Responsible For

| Sun Dec. 21, 2014 11:41 AM EST

Via Atrios, here is America's-mayor-for-life Rudy Giuliani commenting on the killing of two New York City police officers yesterday by a deranged gunman:

“We’ve had four months of propaganda starting with the president that everybody should hate the police,” Giuliani said during an appearance on Fox News on Sunday. “The protests are being embraced, the protests are being encouraged. The protests, even the ones that don’t lead to violence, a lot of them lead to violence, all of them lead to a conclusion. The police are bad, the police are racist. That is completely wrong.”

....The former mayor also criticized President Barack Obama, Holder, and Al Sharpton for addressing the underlining racial tensions behind the failure to indict the white police officers who killed [Eric Garner on Staten Island] and Mike Brown in Ferguson. “They have created an atmosphere of severe, strong, anti-police hatred in certain communities. For that, they should be ashamed of themselves,” he said.

Fair enough. But I assume this means we can blame Bill O'Reilly for his 28 episodes of invective against "Tiller the Baby Killer" that eventually ended in the murder of Wichita abortion provider George Tiller by anti-abortion activist Scott Roeder. We can blame conservative talk radio for fueling the anti-government hysteria that led Timothy McVeigh to bomb a federal building in Oklahoma City. We can blame the relentless xenophobia of Fox News for the bombing of an Islamic Center in Joplin or the massacre of Sikh worshippers by a white supremacist in Wisconsin. We can blame the NRA for the mass shootings in Newtown and Aurora. We can blame Republicans for stoking the anti-IRS paranoia that prompted Andrew Joseph Stack to crash a private plane into an IRS building in Austin, killing two people. We can blame the Christian Right for the anti-gay paranoia that led the Westboro Baptist Church to picket the funeral of Matthew Snyder, a US Marine killed in Iraq, with signs that carried their signature "God Hates Fags" slogan. We can blame Sean Hannity for his repeated support of Cliven Bundy's "range war" against the BLM, which eventually motivated Jerad and Amanda Miller to kill five people in Las Vegas after participating in the Bundy standoff and declaring, "If they're going to come bring violence to us, well, if that's the language they want to speak, we'll learn it." And, of course, we can blame Rudy Giuliani and the entire conservative movement for their virtually unanimous indifference to the state-sanctioned police killings of black suspects over minor offenses in Ferguson and Staten Island, which apparently motivated the murder of the New York police officers on Saturday.

Or wait. Maybe we can't do any of those things. Maybe lots of people support lots of things, and we can't twist that generalized support into blame for maniacs who decide to take up arms for their own demented reasons. Maybe that's a better idea after all.

Here's How the Sony Hack Is Like 9/11

| Sat Dec. 20, 2014 3:44 PM EST

I doubt that I'm the first to say this, but has anyone noticed a striking similarity between 9/11 and the Sony hack? Not in terms of scope or malevolence, of course, but in terms of—what's the best word here? Creativity? Bang for the buck?

Here's what I mean. The 9/11 attack wasn't especially sophisticated. In fact, it was famously crude and butt cheap. All it took was a few guys who learned rudimentary piloting skills and then carried some box cutters on board four airplanes1. The reason it worked is that it was brilliant. Nobody had ever considered that hijackers could take control of a plane without so much as a single cheap handgun, and even if they could, no one had really figured that they could do anything much worse than fly the plane somewhere and maybe engineer a hostage crisis. But al-Qaeda thought different. They understood that (a) box cutters would be good enough to hold pilots and passengers at bay for an hour or two, and (b) this was long enough to fly their airplanes into a pair of iconic skyscrapers, killing thousands in an extraordinarily gruesome way. They took a crude, simplistic weapon and figured out a way to cause damage that was both tangibly enormous and emotionally outsized.

The Sony hack is a far smaller thing, but it shows a lot of the same hallmarks. Despite what press reports say, it wasn't really all that sophisticated. It was, to be sure, a step up from box cutters, but it's not like North Korea tried to hack into a nuclear power plant or the Pentagon. They picked a soft target. In fact, based on press reports, it sounds like even in the vast sea of crappy IT security that we call America, Sony Pictures was unusually lax. Hacking into their network was something that probably dozens of groups around the world could have done if they had thought about it. And like al-Qaeda before them, North Korea thought about it. And they realized that a Sony Pictures hack, done right, could have an outsized emotional impact. Like 9/11, it was a brilliant example of using a relatively crude tool to produce a gigantic payoff.

So what happens next? The 9/11 attack was huge, but even for its size it provoked a mammoth overreaction that continues to this day. Will the Sony hack do the same? After the dozens of credit card hacks of the past couple of years corporations are finally getting the news that they need to secure their networks better, and the Sony hack might prompt even more companies to finally get serious about IT security. That would be good. On the other hand, it could also provoke an overreaction that ends up locking down corporate infrastructure so tightly that workplaces turn into digital gulags. That would be dumb.

So then. Better corporate IT security: good. Massive overreaction: bad. Let's get things right this time.

1It also required recruiting 19 guys willing to die for a cause. This is definitely uncommon. But it doesn't really change the basic nature of how al-Qaeda managed to pull off such a massive attack.

Personal Health Update

| Fri Dec. 19, 2014 8:34 PM EST

I haven't had any fresh news on the health front lately, so I haven't brought it up on the blog. But I continue to get lots of queries and good wishes, and today I finally have something to report. I'm 8 weeks through my 16-week regimen of chemotherapy, and last week my doctor ordered up sort of a halftime report on how I'm doing. This is an extended set of lab tests, and today she called to tell me the results.

Apparently they came out great. Unfortunately, I don't actually remember the names of the protein markers and other things we were looking for, so I have to be a little vague here. Immunoglobulins? Lympho-somethings? In any case, the levels were way, way down, and that's what we were hoping for. This means the chemo is working well so far and the myeloma is hopefully on the run.

That's my good news for the day. What's yours?