Kevin Drum

Cell Phone or Porsche? Cable TV or First Class Travel? Quien Es Mas Macho?

| Fri Jun. 19, 2015 1:35 PM EDT

Via Brad DeLong, I see that Matt Bruenig has finally taken on a question that's bugged me for years. The question, in a nutshell, is this: Adjusted for inflation, would you rather live today with an income of $30,000 or back in the 1980s with an income of $60,000?1 Would the extra income be enticing enough to persuade you to give up 300 channels of high-def TV, cell phones, and universal access to the internet?

Now, the reason for asking this question usually has something to do with how we measure inflation. If you answer no—that is, you'd prefer today's world even with a lower income—it suggests that our inflation measures are inadequate. I mean, you're saying that $30,000 today buys more satisfaction than $60,000 in 1980 even though these are real, inflation-adjusted numbers. In other words, people today are quite a bit better off than official figures suggest. Officially, if your income had dropped in half over the past three decades, you'd be in dire shape. But in fact, this thought experiment suggests you're actually happier. So maybe income hasn't dropped in half in any practical sense.

This becomes meta-meta-economic very fast, so it's best not to get wound up in it right now. Because the thing that's always bugged me about this question is not so much its philosophical implications, but that it asks someone today what they'd think of living in the past. But that's rigged. I grew up in the world of today. I'm accustomed to all the gadgets at hand. The idea of giving them up naturally sounds horrible.

But that's not the only way to think of it. How about if we asked someone in 1980 about their preference. Would you rather have twice your current income, or would you rather have better TVs, portable phones, and instant access to all the information in the world? Well, these folks aren't accustomed to all that stuff. Sure, it sounds cool, but jeez, would I really use it much? Hmmm. I think I'll go with the extra income.

In other words, it's all a matter of what you're accustomed to. If you've been sleeping on the ground all your life, you have no trouble sleeping on the ground. Who needs a bed? If, like me, you've been sleeping on a bed all your life, you'd become a wreck trying to sleep on the ground. You'd pay a considerable sum of money just for an air mattress and a blanket.

Now, if you're still reading this, you may be nodding along a bit but nonetheless thinking that it's all just dorm room BS. We can't go back in time and ask people about the internet and cell phones, so what's the point of bringing it up? There are two reasons. First, I just wish more people realized that asking this question of current consumers stacks the deck and therefore doesn't tell us nearly as much as we think it does. Second, Matt Bruenig has come up with a clever way that kinda sorta does allow us to go back in time and ask people this question.

As he points out, we have a group of people who did indeed lead adult lives in the 80s and are still with us: senior citizens. And they can decide which technologies they want to use. So what do they choose?

Using smartphone adoption as a proxy for these people's technological preferences, it's clear that the people who actually lived as adults through both technological periods overwhelmingly prefer older technologies:

Judging from these people's preferences, you'd have to conclude that, in fact, older technologies are preferable to newer technologies. You don't need a hypothetical to determine whether living in the past was better: these are people who lived in the past and the present and clearly prefer the way they lived in the past, at least when it comes to the technologies that are supposed to have made life dramatically better (as incomes stagnated).

Now, this is obviously not a bulletproof comparison. Maybe old people just get stubborn, and that's all there is to it. Or maybe cell phones are a bad comparison. Even (or especially) senior citizens would probably be unwilling to go back to the medical technology of 1980. Plainly this is not the final answer to the tech vs. money question.

Still, it's an interesting approach, and it would be interesting to try to extend it. Behavioral economics tells us that people respond to losses much more strongly than gains, so asking people to give up something they like really is stacking the deck—especially if they have little conception of what the extra income in 1980 would gain them. People will always react far more intensely to a sure loss than to an offer of something new.

Anyway, more like this, please. For example, how about turning this around. Which would you prefer: (a) a doubling of your income right now, or (b) a world with driverless cars, internet chips implanted in your brain, and vacation flights to the moon? For a lot of people, this would not be an obvious choice at all.

1Note that this question is normally asked with bigger numbers: say, $50,000 vs. $100,000. I lowered it because I think it makes a difference. $30,000 really starts to make you think, doesn't it?

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Texas Rejected the Confederate Battle Flag On Its License Plates. The First Amendment Will Survive.

| Fri Jun. 19, 2015 11:36 AM EDT

Texas offers its driving public a vast array of specialty license plates. Most of them are designs submitted by private organizations, which then go through an approval process by the Texas Department of Motor Vehicles Board. If they approve it, it goes on sale.

Recently, the Sons of Confederate Veterans submitted a design that included the Confederate battle flag. They were turned down. Yesterday the Supreme Court upheld the Board's decision on the grounds that license plates are government speech, not private speech, and therefore the government gets to decide what it does and doesn't want to say. The dissenting minority called this ridiculous: If you see a license plate that says "Drink Pepsi," would anyone seriously think the government of Texas was endorsing Pepsi? Of course not. It's private speech.

It's a sticky wicket. It's also one I don't understand. Here's an excerpt from the majority opinion:

The Board must approve every specialty plate design proposal before the design can appear on a Texas plate. And the Board and its predecessor have actively exercised this authority. Texas asserts, and SCV concedes, that the State has rejected at least a dozen proposed designs.

....This final approval authority allows Texas to choose how to present itself and its constituency. Thus, Texas offers plates celebrating the many educational institutions attended by its citizens. But it need not issue plates deriding schooling. Texas offers plates that pay tribute to the Texas citrus industry. But it need not issue plates praising Florida’s oranges as far better. And Texas offers plates that say “Fight Terrorism.” But it need not issue plates promoting al Qaeda.

Right. Nor do they have to approve a design celebrating the KKK or Lee Harvey Oswald. Doesn't this seem more germane than a fight over First Amendment issues? Unless Texas is literally required to accept anything and everything that's submitted, they obviously have to be allowed to reject designs they find offensive. At that point, it's just a matter of what process is required to decide a design is offensive. That's it.

Now, if the Supreme Court thinks their process is defective, that's fine. Tell them what minimum requirements they have to fulfill. But surely that's the only real issue at hand. The Board plainly has the right to turn down designs. The only question is how they go about it. Why not issue a ruling on these grounds instead?

John Kasich Completely Misunderstands the Teachings of Jesus

| Fri Jun. 19, 2015 10:48 AM EDT

Ed Kilgore points me toward a Politico profile of John Kasich that demonstrates pretty vividly why he's not likely to make a dent in the Republican primaries. Here he is at a conference hosted by the Koch brothers last year:

At one point, according to accounts provided by two sources present, Randy Kendrick, a major contributor and the wife of Ken Kendrick, the owner of the Arizona Diamondbacks, rose to say she disagreed with Kasich’s decision to expand Medicaid coverage, and questioned why he’d expressed the view it was what God wanted.

The governor’s response was fiery. “I don’t know about you, lady,” he said as he pointed at Kendrick, his voice rising. “But when I get to the Pearly Gates, I’m going to have an answer for what I’ve done for the poor.”

The rest of the Republican Party, needless to say, believes that St. Peter is going to ask them what they did to keep the poor from suckling on the tits of the rich. Because that's what the Bible say. See, right here: When it comes to paying poor laborers whatever he feels like, "Is it not lawful for me to do what I will with mine own?" Jesus once said in a quote taken entirely out of context.

Obviously Kasich doesn't know his Bible. Help the poor indeed. Who can blame Bobby Jindal, Nikki Haley, and 20 audience members for stalking out? Kasich needs to bone up on the real Bible before he spouts off again.

Jeb Bush Has Announced the Perfect Republican Economic Plan

| Thu Jun. 18, 2015 3:03 PM EDT

Rand Paul says his secret to success is that his tax cut plan will supercharge economic growth. Jeb Bush says his secret to success is that merely by being president he will supercharge economic growth.

I guess I have to give this round to Paul. He at least tried to come up with some math salad to justify his belief that a Rand Paul presidency will bring about economic nirvana. Bush simply declared ex cathedra that he'd make the economy grow at an astonishing 4 percent per year. Why? "It's a nice round number. It's double the growth that we are growing at. It's not just an aspiration. It's doable."

Um, OK. He gets points for copping to a sort of amiable idiocy, I suppose. But in case you're interested, here's economic growth since the Reagan administration:

Reagan managed 4 percent growth four times in eight years. George H. W. Bush managed it zero times. Bill Clinton did it five times in eight years. George W. Bush did it zero times. Barack Obama has (so far) done it zero times. And no president in history has averaged 4 percent growth over the course of his presidency. No one.1

If you want all the gory details, Matt Yglesias has much more here about just how unlikely this kind of growth is. But politically speaking, the details aren't what's interesting. What's interesting is that Bush's comment is an unusually clear peek behind the curtain, one that demonstrates how unseriously Republicans take the economy. It's all just cotton candy for the gullible. Cut taxes on the rich and this will—somehow—supercharge the economy. Slash regulations and this will—somehow—unleash business activity and supercharge the economy. Now Bush has decided to dispense with even the mumbo jumbo explanations. He's distilled the GOP economic message down to its essence: Elect me president and—merely because I'm a Republican and I say so—I'll supercharge the economy.

And there's more. If you assume the economy is going to skyrocket, there's no need to address niggling concerns about spending or budget deficits. There will be money for everything! And when it doesn't happen? Oops. Sorry. Next time we'll get serious for sure. Honest.

1OK, OK, it's true that FDR did it. How? By starting at the bottom of the worst depression in history and ending with the biggest wartime boom in history. This basically makes the case for just how unlikely this is to ever happen again.

Fast Track Is Now Back on a Fast Track to the Senate

| Thu Jun. 18, 2015 1:15 PM EDT

Well, the House just passed standalone fast-track authority for the Trans-Pacific Partnership treaty. Now it's on to the Senate, where 14 Democrats voted for it back when it was paired up with TAA, the assistance program for workers who lose their jobs because of the treaty. Will the Gang of 14 still vote for it as a standalone bill? By my count, if there are more than four or five defections, it will fail. Stay tuned.

If it passes, TAA will then get a second vote too, free of fast-track entanglements: "Republicans have decided to tuck the worker assistance components into a noncontentious trade preference bill related to Africa, and send it back to the House for final passage."

So there you have it. Stay tuned.

POSTSCRIPT: I still don't have a firm opinion on the treaty since I failed to delve into it over the weekend. Sorry. Unfortunately, my proxy guides aren't working for me either. On the anti side, I'm no big fan of the IP clauses in the treaty. On the pro side, I'm influenced by the fact that it's supported by both President Obama and Ron Wyden, my favorite senator. So I'm still on the fence.

I Read Rand Paul's Flat Tax Plan So You Don't Have To

| Thu Jun. 18, 2015 12:14 PM EDT

Rand Paul talks taxes in the Wall Street Journal today:

My tax plan would blow up the tax code and start over. In consultation with some of the top tax experts in the country, including the Heritage Foundation’s Stephen Moore....

Hmmm. I think we can probably stop there. If Stephen Moore is one of the brains behind this, we can be pretty sure it's the usual hodgepodge of innumerate nonsense he's famous for. But at least Paul's op-ed doesn't lack for tea party applause lines! Here are my favorites: "seized by the IRS," "rogue agency," "harass anyone who might be adversarial to President Obama’s policies," "economic steroid injection," "rot in the system," and "crony capitalists and lobbyists exploded his noble crusade."1

In any case, I'll save you the trouble of reading the whole thing. It's the usual flat-tax utopia: One rate for everyone, no deductions, end of story. No discussion of how to define "income," of course, which is what makes the tax code complicated in the first place. But no matter. According to Paul, the rich will end up paying 14.5 percent in taxes, with no loopholes to pay less. Given that the rich currently pay about 22 percent of their income in federal taxes, they should be pretty happy about that. They should also be pretty happy that he's getting rid of the estate tax entirely.

And the middle class? Well, they no longer have to pay payroll taxes. Just 14.5 percent of their income.

Happy days! And how will this add up? The usual way: it will supercharge the economy blah blah blah, and we'll all be making such huge buckets of cash that tax revenues will go up. Easy peasy.

The song never changes with these guys. But it's a siren song, and Americans have never been very good at math. I'm sure it will sound good to lots of people, and it will sound great to the lucky few. Hell, I figure it would save me personally $15,000 a year, maybe more. Rand Paul 2016!

1That would be Paul's buddy Steve Forbes, whose noble flat-tax crusade in 1996 went nowhere thanks to the shadowy forces of....Bob Dole.

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It Looks Like Germany is Ready to Let Greece Collapse

| Thu Jun. 18, 2015 11:05 AM EDT

Last-ditch talks between Greece and the rest of Europe are scheduled to start today. Nobody is very optimistic:

There is little sign that either side is softening its position....In Germany especially, the fear is that providing new loans to Greece without extracting more spending cuts represents a fateful step toward a so-called transfer union, with wealthier nations providing handouts to Greece and other weaker countries. “If a small country can blackmail the other members into a transfer union without conditions and controls, the euro cannot survive,” said Adam Lerrick, a sovereign debt expert at the American Enterprise Institute, a research organization based in Washington.

....Both sides are girding for a euro exit.

The Greek central bank warned on Wednesday that the country’s economy would be devastated. And bankers say that in the last week, Greeks have pulled more than €1.5 billion from their deposit accounts. Within the European Stability Mechanism, Europe’s newly formed rescue vehicle, preparations are being made to bolster other weak countries in the event of a contagion panic.

While polls in Greece still show overwhelming support of the euro, a majority of Greeks are fed up with the harsh austerity measures that have been a condition for the €240 billion in loans that have been disbursed to the country.

I have the advantage of living in California, where this is all a fairly academic debate. It's even interesting, in a way. Will both sides blink at the last second? If they don't, and Greece leaves the euro and then defaults on its loans and devalues its currency, will it work? How much pain will it cause? Will Greece recover fairly quickly?

Those are interesting questions for anyone who doesn't actually have to live with the answers. For the Greeks themselves, though, the result is going to be horrible either way. It's just a matter of which way is slightly less horrible. For the rest of Europe, it's possible that it will all be a big nothingburger. Then again, nobody thought the default of Creditanstalt would supercharge the Great Depression. So who knows?

What a mess. Both sides are right, and both sides are wrong. But so far Europe has done next to nothing for Greece. They've made lots of loans, but mainly so that Greece could pay back its debt to shaky European banks. It's been every bit as disingenuous and self-interested as all the cheap loans those banks made to Greece in the first place so that Germans and others could enjoy access to cheap Greek products during the aughts. They enjoyed the boom from those loans and supported it with monetary policy that favored Germany but overheated Greece, and then when the economy went sour they set monetary policy continent-wide to favor Germany yet again, not the folks they'd been shoveling money to all those years. And when Greece's economy collapsed, they just sat back, talked about following the rules, and demanded that Greece let their economy collapse even further.

It's not as if Greece bears no blame for what happened. A lot of people share in that. But Germany has been the cynical manipulator of events all the way back to 2000, tacitly approving capital flows to Greece when it helped the German economy and then orchestrating billions in loans when German banks ended up in trouble. And now that German banks aren't in trouble anymore, bye bye loans. Time to pull up the ladder.

Whatever else happens, it's a good time to be German and it's a crappy time to be Greek. Welcome to the European "union."

TPP, TPA, and TAA: Explaining the Unexplainable

| Wed Jun. 17, 2015 9:33 PM EDT

Even granting that I haven't followed the TPP treaty debate all that closely, the latest maneuvering to get it passed is a little puzzling. As you may recall, the original strategy was to pair up TPA, which most Democrats oppose, with TAA, which most Democrats like, in hopes of attracting enough Democratic votes to pass the whole package. With these preliminaries out of the way, Congress could then vote on TPP itself. It didn't work. Dems voted heavily against TAA because they knew it would sink TPA too. So what's next?

Hold on. That probably barely sounded like English to some of you. Here's an acronym primer:

TPP = Trans Pacific Partnership, a trade treaty between the United States and a bunch of other countries around the Pacific Rim. It's been under negotiation for years and will be ready for a ratification vote soon.

TPA = Trade Promotion Authority, aka "fast track." This comes before the TPP vote, and guarantees that the treaty text will be submitted to Congress for an up-or-down vote with no amendments allowed. Without it, the treaty is dead, since obviously all the other countries won't allow the US to unilaterally makes changes.

TAA = Trade Adjustment Assistance. Trade agreements with poor countries often lead to job losses in the US, as jobs get moved overseas. TAA is a laundry list of measures designed to help workers who lose their jobs because of the treaty, and it's supposed to make trade treaties more tolerable to organized labor. It very decidedly failed to do so this time.

Now go read the first paragraph of this post again.

Right. So where were we? Oh yes: The TPA+TAA package bombed with anti-treaty Democrats, and it needed at least a few Democratic votes to pass. So what's next?

On Thursday the House will vote on just the fast-track portion—also known as Trade Promotion Authority, or TPA—on the understanding that the workers’ aid would be approved later.

....In a renewed push to win support for the fast-track bill, Mr. Obama huddled Wednesday at the White House with pro-trade Democrats. House Speaker John Boehner (R., Ohio) and Senate Majority Leader Mitch McConnell (R., Ky.), meanwhile, said they would find a way to separately pass legislation renewing the workers’ aid program, also known as Trade Adjustment Assistance or TAA, hoping to shore up the Democratic support necessary for the new plan.

Hmmm. TPA actually passed the House last week, even though TAA had already been voted down earlier in the day. So I guess the idea here is that pro-treaty Democrats will vote for TPA as a standalone bill too. I mean, if they were willing to vote for it last week after TAA had been defeated, why not vote for it this week with no TAA? Following that, it's just a matter of sending the standalone TPA bill to the Senate and finding out if a few Democrats there will still vote for it even without TAA.

It's all a little weird and desperate, but it might work. Republicans are swearing that if TPA passes, they'll bring up TAA for a vote later, which is supposed to appease Democratic concerns about job losses. Dems only voted against TAA in order to kill TPA, so if TPA has already passed there's no longer any reason for them to vote against TAA.

Of course, even if Republicans allow a vote on TAA, it also needs a few Republican votes to pass, and the problem here is the opposite: Republicans have little reason to vote for TAA once TPA has already passed and there's no longer any need to appease Democrats. But Democrats can't pass it alone. They need some Republican votes too. So do they trust the GOP leadership to deliver those votes?

Jesus. What a rat's nest. If you didn't understand any of that, try reading it again. And then again. If it still doesn't make sense, just forget the whole thing and eat a quart of ice cream. You'll be better off.

Benghazi Hearings Now a Trip Down Memory Lane

| Wed Jun. 17, 2015 1:19 PM EDT

Jonathan Allen on the Trey Gowdy clown show better known as Benghazi! hearings:

Republicans finally stripped away any pretense that they are more interested in the Benghazi attack than in attacking Hillary Clinton. With the nine-hour interrogation of bit player Sid Blumenthal Tuesday, they jumped the shark.

The House Select Committee on Benghazi deposed the Clinton confidant in a closed hearing room in a sub-basement of the Capitol. Blumenthal’s never been to Libya. He doesn’t know anything special about the Benghazi attack. He did sometimes forward "intelligence" memos from an ex-CIA officer to his longtime friend Hillary Clinton.

Not surprisingly, the committee — tasked with investigating the Benghazi assault — learned absolutely nothing from Blumenthal about the terrorist attack that killed four Americans, including Ambassador Chris Stevens, in September 2012.

However, by spending all that time on Blumenthal, they met someone who does know something about Hillary Clinton. Indeed, Blumenthal’s appearance on Capitol Hill — where he was last a prominent figure during Bill Clinton’s impeachment saga — felt like part of a national time warp in which Americans are forced to relive the partisan warfare of the 1990s, when Republicans summoned Clinton aides to testify about an endless string of investigations. A Clinton confidant testifying before Congress is the only thing more '90s than a Bush and a Clinton running for president.

Apparently the questioning of Blumenthal was so transparently aimed at gathering campaign material against Hillary that Democrats on the committee want the full transcript released. They probably also want it released because Republicans in the past have had a bad habit of selectively releasing tiny little parts of transcripts purpose-designed to make Democrats look bad.1 Best to nip that in the bud.

There are so many things that I thought Republicans would eventually calm down about. Obamacare. Benghazi. Climate change. Iraq. Putin. Obama's betrayal of Israel. But no. Granted, campaign season is upon us, and that's when things always get hot, but still. Benghazi? Seriously? How many metric tons of evidence does it take for them to admit that it was a tragedy but not an act of treason?

1Though, in fairness, I don't think Gowdy has ever done this.

Obamacare for Blue States But Not For Red: Dream or Nightmare?

| Wed Jun. 17, 2015 11:36 AM EDT

Speaking of King v. Burwell, here's the thing about it that I've always really wondered about. Suppose the plaintiffs win and Republicans can't agree on a plan to do anything about it. Subsidies get eliminated in 34 states, almost all of them red. This basically guts Obamacare for anyone in, say, the bottom third of the income spectrum, which is virtually all Obamacare users. A few middle-class users with pre-existing conditions will still take advantage of it, which will cause either a big death spiral or a little one among insurance companies, but rates will surely go up. Bottom line: the extent of the chaos is a little hard to predict, but for all practical purposes Obamacare goes away in red states.

But in blue states? It's business as usual. California will continue to hoover up federal subsidies and its exchange will be open for business as usual. Ditto for the liberal hellholes of New York and Taxachusetts and so forth.

Bottom line: We will have a thriving social welfare program for health care in the blue states—funded by everyone's tax dollars—and nothing in the red states. Is that tolerable? Is it sustainable? Red states won't be able to do much about it, aside from caving in and tacitly supporting Obamacare by starting up their own exchanges. So what happens? Does this eventually cause congressional Republicans to cave in completely and pass the infamous four-word fix? Do they hold out because they hate Obamacare just that much? Or what?

We've never had a major social spending program limited solely to the blue states who support it. It's terra incognita. So what would happen?

NOTE: I continue to think the Supreme Court will do the right thing and rule against the plaintiffs in King. That would make this all moot. But you never know.