Kevin Drum

Sorry, But Working for the Government Is Not a "Get Out of Jail Free" Card

| Fri Feb. 20, 2015 10:31 AM EST

First it was the police union in New York City, now it's the transport workers union:

The arrest last week of a bus driver who struck a 15-year-old girl angered union officials, who sent a memo to members this week warning that bus drivers were under attack and were being treated like “criminals.”

The union, Transport Workers Union Local 100, says the arrest on Friday of the driver, Francisco DeJesus, a veteran with the Metropolitan Transportation Authority, was uncalled-for....Mr. DeJesus was charged with failure to yield after his bus struck the girl as she was crossing the street with a walk signal in Williamsburg, Brooklyn, on her way to school. She was pinned under the front of the bus, and her leg was severely injured.

....Union officials argue that accidents can happen despite bus operators’ best efforts. Making a left turn without a traffic signal can be difficult, city streets are chaotic, and there are blind spots in the bus equipment, John Samuelsen, president of the Transport Workers Union, said on Wednesday. “In this case,” he said, referring to Mr. DeJesus, “there was no indicator, despite the heartache of the tragedy, that the bus operator did anything reckless.”

Come on. This is the worst excuse ever. Making a left turn without a signal on a busy street is difficult for everyone, not just bus drivers. That's hardly a good reason to just let it pass.

I sympathize with the union's position to the extent that anyone who drives a lot is more likely to be involved in an accident, and that's not necessarily evidence of recklessness. It's just evidence that you drive a lot. But plenty of people drive a lot. Truckers. Delivery vans. Taxi drivers. Sales people. And if they hit someone, they're held accountable. That doesn't mean they're always convicted and jailed, but it does mean they're (sometimes) arrested and then investigated. What else are police supposed to do?

A bus driver's union card is not like a 007 license to kill. Working for the government is not a Get Out Of Jail Free card. If you run over someone, you're probably going to be arrested and you're certainly going to be investigated. If you did nothing wrong, then charges will be dropped. If a prosecutor concludes you did do something wrong, you'll get a fair trial. It's crazy to expect anything different.

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The NSA Has Access to Your Cell Phone's Encryption Key. And Everyone Else's Too.

| Thu Feb. 19, 2015 11:38 PM EST

The surveillance state, it turns out, is even bigger and badder than we thought. Previously, the story from the NSA has been: yes, we have access to petabytes of telephone metadata (who you called, what time you called, etc.), but we don't have routine access to your actual conversations. And this even made a kind of sense: telephone companies store bulk metadata and can make it available to the NSA. They don't record phone conversations. Besides, on cell phones those conversations are encrypted anyway.

But guess what? That encryption depends on a key stored on the SIM card inside your cell phone. If you have access to the key, you can listen in to all the conversations you want.

You know what's coming next, don't you? Here is Jeremy Scahill at the Intercept:

American and British spies hacked into the internal computer network of the largest manufacturer of SIM cards in the world, stealing encryption keys used to protect the privacy of cellphone communications across the globe, according to top-secret documents provided to The Intercept by National Security Agency whistleblower Edward Snowden. The hack was perpetrated by a joint unit consisting of operatives from the NSA and its British counterpart Government Communications Headquarters, or GCHQ.

....The company targeted by the intelligence agencies, Gemalto, is a multinational firm incorporated in the Netherlands that makes the chips used in mobile phones and next-generation credit cards. Among its clients are AT&T, T-Mobile, Verizon, Sprint and some 450 wireless network providers around the world.

....According to one secret GCHQ slide, the British intelligence agency penetrated Gemalto’s internal networks, planting malware on several computers, giving GCHQ secret access....Most significantly, GCHQ also penetrated “authentication servers,” allowing it to decrypt data and voice communications between a targeted individual’s phone and his or her telecom provider’s network. A note accompanying the slide asserted that the spy agency was “very happy with the data so far and [was] working through the vast quantity of product.”

The folks at Gemalto say they had no idea any of this had happened. Apparently it was a very stealthy hack indeed. As you might expect, there is much, much more at the link.

How Big a Deal Would It Be If Red States Lost Their Obamacare Subsidies?

| Thu Feb. 19, 2015 5:51 PM EST

What happens if the Supreme Court somehow persuades itself that Obamacare subsidies shouldn't be available to people in states that rely on the federal exchange? Answer: in the red states that have refused to operate their own exchanges, lots of people would lose their subsidies—and most likely lose their health insurance too, since they could no longer afford it.

We already know that most red-state governors don't care about that. After all, if they did care they'd accept Obamacare's Medicaid expansion, which would provide health care to millions of their residents. So Greg Sargent takes a different tack today. What would it mean to state economies if their subsidies go away? Sargent's rough calculations are on the right. Florida, for example, would lose about $5 billion per year, which would be a hit to its economy. Would that be likely to convince its governor to start up a state exchange so that subsidies would keep flowing?

Sadly no. Florida has a state GDP of about $750 billion. The loss of $5 billion would represent about half a percent of the state's economy. That's not nothing, but it's close. And it's certainly not enough to make up for the opprobrium of being thought soft on Obamacare.

So....nice try. But I think we're pretty much where we've always been: it's going to be yelling and screaming from constituents and lobbyists that eventually gets red-state governors (and legislatures) to accept any part of Obamacare that they have a choice about. It's anyone's guess when that yelling will finally get loud enough.

Walmart's Surprise Wage Increase Might Be Good News About the Economy

| Thu Feb. 19, 2015 2:09 PM EST

This is interesting news, especially in the wake of my earlier post about the dismal state of earnings growth in 2014. Walmart is raising wages:

The retail giant, which has been criticized for continuing to pay some employees the bare legal minimum, said that all of its United States workers would earn at least $9 an hour by April [and $10 per hour by 2016]. That would mean a raise for about 40 percent of its work force, to at least $1.75 above the federal minimum wage, the retailer said....Walmart's move follows in the footsteps of retailers like Gap and Ikea, which both took steps last year to keep pay above federal minimum wage level, in an effort to lessen turnover and attract more lower-wage workers.

....In trying to address other major complaints from workers, Walmart said it would work to make scheduling easier and more predictable, and would also improve employee training.

Why is Walmart doing this? I hope Neil Irwin is right:

The best possible news would be if Walmart’s executives made this decision not out of a desire for good press or for a squishy sense of do-gooderism, but because coldhearted business strategy compelled it.

....The company’s sales and profits rose nicely [between 2007 and 2014] while the company kept a lid on its payroll. Gains went to Walmart shareholders, not Walmart workers. So what has changed? The simple answer is that the world for employers is very different with a 5.7 percent unemployment rate (the January level) than it was five years ago, at 9.8 percent. Finding qualified workers is harder for employers now than it was then, and their workers are at risk of jumping ship if they don’t receive pay increases or other improvements. Apart from pay, Walmart executives said in their conference call with reporters that they were revising their employee scheduling policies so that workers could have more predictability in their work schedules and more easily get time off when they needed it, such as for a doctor’s appointment.

Megan McArdle highlights some recent changes in Walmart's business strategy, such as a stronger focus on e-commerce, groceries, and better inventory control:

What a lot of these changes have in common is that you need good workers to execute them well. (Terrible things happen in the grocery business unless you have an absolutely passionate commitment to rooting out expired meat and past-it produce.) Keeping stock on the shelves doesn’t sound hard until you try to get resentful teenagers to actually do so. And so forth.

One way to get a more dedicated and experienced workforce is to pay workers more. They’ll stay longer, and they’ll be very eager to keep that job. Wal-Mart had clearly previously concluded that it didn’t need a dedicated and experienced workforce composed of people who were really eager to keep their jobs. Now the company seems to have changed its mind.

From any other retailer, this would just be an isolated bit of news. From Walmart, it's potentially a big deal—thanks both to Walmart's sheer size and its impact on other retailers. Maybe, just maybe, it's a sign that the labor market really is starting to tighten.

Scott Walker's Tax Cuts Are Coming Back to Haunt Him

| Thu Feb. 19, 2015 1:27 PM EST

Via Ed Kilgore, this might prove to be Scott Walker's biggest Achilles' heel:

Wisconsin Governor Scott Walker, facing a $283 million deficit that needs to be closed by the end of June, will skip more than $100 million in debt payments to balance the books thrown into disarray by his tax cuts.

....“They need some cash,” said Todd Berry, president of the Wisconsin Taxpayers Alliance, a nonpartisan research group that examines taxes and government spending. “This is kicking the can down the road.”

For the time being, this is probably not a big deal. Walker says he's just "restructuring" the state's debt, and that will probably wash for now. But there's no question that Walker's tax cut zealotry puts him in a dilemma. If the economy continues to slog along, Wisconsin's finances will deteriorate and Walker's presidential chances will suffer. If the economy picks up, Wisconsin will benefit but so will Hillary Clinton. The path to presidential success often turns out to depend on the economy, and for Walker it might end up being a narrow path indeed.

Chart of the Day: Wages Are Down For Almost Everyone

| Thu Feb. 19, 2015 12:51 PM EST

EPI's Elise Gould provides us with wage data for 2014 today, and the results aren't pretty:

  • Every group has seen a cumulative drop in wages since 2007 except for the top 5 percent (red line).
  • Every group saw a drop in wages in 2014 except for the bottom 10 percent (dark blue line).

Why did wages of the poor rebound a bit last year? Because 19 states raised their minimum wages:

A state-by-state comparison of trends in the 10th percentile suggests that these minimum-wage increases account for the nationwide 10th percentile increase. Between 2013 and 2014, the 10th percentile wage in states with minimum-wage increases grew by an average of 1.6 percent, while it barely rose (a 0.3 percent increase) in states without a minimum-wage increase.

In other news about wage growth, women have done slightly better than men; whites have done better than blacks; and college graduates have done better than high school grads. The full report is here.

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Giuliani's Anti-Obama Rant Is a Big Opportunity for Jeb Bush

| Thu Feb. 19, 2015 12:02 PM EST

Here is Rudy Giuliani telling us how he really feels about President Obama during a private group dinner last night featuring Wisconsin Governor Scott Walker:

I do not believe that the president loves America. He doesn’t love you. And he doesn’t love me. He wasn’t brought up the way you were brought up and I was brought up through love of this country.

Classy, as always. But I bring it up to make a particular point. It's unlikely, I think, that Walker will repudiate Giuliani's comments. But Jeb Bush could—and if he's smart, he will.

Here's why. It would cost him some support among the tea party set, but he's not going to get a lot of support there anyway. What's more, he doesn't really need it. All Jeb has to do to win is follow the Romney strategy: sweep up all the votes of the Republican moderates while everyone else fights over scraps of the tea party vote. Taking a public stand against Giuliani would cement his position as the adult in the Republican field, a position that Mitt Romney rode to the GOP nomination in 2012.

But the Romney strategy only works if Jeb is the sole adult running. Walker is trying to straddle the line between mainstream and tea party, and if he can pull it off he'll win. Jeb's team has to make sure he can't do that, and the best way to accomplish this is to take a few high-profile stands—like denouncing Giuliani's views—that Walker isn't willing to emulate. If Jeb can force Walker to make some moves early on that paint him as a pure tea party creature, that could permanently hurt him. And with Romney out and Chris Christie looking weak, Jeb could then have the centrist Republican vote all to himself. That could put him in the White House.

But he has to go big and go fast. Denounce Giuliani in terms strong enough to get some attention, and in a way that's likely to push Walker into making a mistake. The race is on.

The American Public Is Becoming Ever More Rabid for War Against ISIS

| Thu Feb. 19, 2015 11:22 AM EST

It sure isn't hard to gin Americans into a war fever. President Obama isn't even trying, but support for sending U.S. ground troops back into Iraq to fight ISIS continues to grow. According to a new CBS News poll, it now stands at 57 percent.

It's not just conservatives, either. Democrats favor sending in ground troops by a margin of 50-43 percent. We're only a few public beheadings away from two-thirds approval margins among all groups, which is something of a magic number. If we reach that point, President Obama and congressional Democrats might decide—reluctantly or otherwise—that they have to change course and send in a substantial ground force.

This would probably be a disaster. The most optimistic scenario is that Graeme Wood is right, and the ISIS folks are such nutters that they'd welcome a final, conventional showdown against the forces of the West:

The Islamic State has attached great importance to the Syrian city of Dabiq, near Aleppo....It is here, the Prophet reportedly said, that the armies of Rome will set up their camp. The armies of Islam will meet them, and Dabiq will be Rome’s Waterloo or its Antietam.

....Now that it has taken Dabiq, the Islamic State awaits the arrival of an enemy army there, whose defeat will initiate the countdown to the apocalypse....If the United States were to invade, the Islamic State’s obsession with battle at Dabiq suggests that it might send vast resources there, as if in a conventional battle. If the state musters at Dabiq in full force, only to be routed, it might never recover.

That's a battle we could pretty easily win. But if it turns out the leadership of ISIS isn't quite as daft and millenarian as Wood says, then the only way to defeat ISIS would be in grisly house-to-house fighting in Sunni strongholds like Mosul. We already know that U.S. troops can't do that effectively, and neither can the predominantly Shia troops controlled by Iraq. It would be a long, grinding, disaster of a war.

But apparently the American public hasn't quite internalized that yet. They're becoming more and more enraged about ISIS, and they want to do something. That's a bad combination.

Obamacare Will Cover About 19 Million People This Year

| Wed Feb. 18, 2015 4:52 PM EST

With the signup deadline now past, we have a pretty good idea of how many people will be getting health care coverage via Obamacare in 2015. Here's a rough estimate:

The Medicaid number will rise throughout the year, and is higher if you use a looser way of counting. Needless to say, it would also be higher if all the holdout states joined in. For now, though, using a strict count just through February, the Obamacare total stands at about 18.6 million people—and will likely rise a bit more thanks to state extensions of the deadline. So call it 19 million or so.

That's a lot of people. If you got into politics to help actual people with actual problems, you should be damn proud of voting for the Affordable Care Act in 2010. No other legislation of at least the past two decades even comes close to its real-world impact.

Here's a Surprisingly Simple Reason that New Regulation Might Spur the Creation of More Startups

| Wed Feb. 18, 2015 2:30 PM EST

Earlier this morning I wrote about a new study suggesting that new federal regulation doesn't inhibit the creation of new startup companies in an industry. In fact, it might actually stimulate the creation of startups. This seems counterintuitive, but a reader with some experience in the education and health care sectors—which were influenced by NCLB and Obamacare, respectively—proposes an explanation for this:

Healthcare startups have absolutely exploded post-ACA....This was pretty well anticipated by venture capital; a bunch of Sand Hill firms started putting together ad-hoc health IT teams shortly after the ACA was passed, on the basic logic that anything that changed an industry as much as the ACA did would necessarily create a lot of startup opportunities.

I worked in education research shortly after the passage of NCLB, and while I can't speak to this nearly as confidently as I can speak to the current healthcare startup landscape, it at least seemed to me that a lot of startups sprung up to help schools/districts/states etc. adapt to the new law.

The general principle I've taken from this is that federal regulation, or at least major federal regulation, changes the landscape of its target industries enough to increase startup opportunities, because incumbents are slow to adapt for all the same reasons incumbents are usually slow to adapt to change. Entrepreneurs and startup investors have a pretty good sense of that dynamic.

This seems pretty plausible. Any major change, whether it's a technological change or a regulatory change, creates a new landscape. And big incumbents are usually slow to react, regardless of where the change came from. This gives startups an opportunity to dive in and take advantage of the change faster than existing firms.

This doesn't mean that regulatory change is necessarily either beneficial or harmful. It might be generally beneficial on the theory that nearly anything which shakes up an industry ends up being useful. Or it might be generally harmful because startups addressing regulatory change don't really add any long-term value. That's a question for another day. Either way, though, it's change, and that might be reason enough to expect an increase in startup activity whenever new federal regulations are introduced.