Kevin Drum

Obamacare Now Benefiting From an Amazing Life Spiral

| Fri Sep. 5, 2014 1:37 PM EDT

Courtesy of the Kaiser Family Foundation, here's a cheerier chart for this morning. It shows the projected premium increases under Obamacare, and it's really pretty amazing. After years of double-digit increases, next year will bring an average decrease in premiums of 0.8 percent.

That's genuinely stunning. It's possible, of course, that the precise number might change as more states report on next year's premiums, but the trend in the chart is pretty clear: a few small states show sizeable rate increases, but large states (or, more accurately, large cities) all show fairly small changes. It's not surprising that small states are the ones that tend to show higher variation, but they're also the ones that don't affect the overall averages very much. So it seems likely that once all the states have reported in, the overall change in premium levels will be very close to zero.

Paul Krugman calls this part of Obamacare's "life spiral." In other words, it's exactly the opposite of the dreaded death spiral that every conservative in the country has been banging the drum about for years. Basically, as good news accumulates, it breeds more good news. As Krugman puts it, success feeds success. And that's true. The news about Obamacare has been almost uniformly positive for months. There are still plenty of small problems here and there—most of which could be solved if Republicans would allow it—and the refusal of so many red states to adopt Obamacare's Medicaid expansion is truly a scandal. Nonetheless, it's clear that Obamacare is basically a success. There's nothing much that's likely to change that now.

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Euro Area Economy Is Even Worse Than Ours

| Fri Sep. 5, 2014 12:17 PM EDT

Would you like some more dreary economic news? No? Too bad. The latest GDP report for the euro area is in, and GDP was flat compared to Q1 and up only 0.7 percent compared to last year. This comes on top of news from a few days ago that euro-area inflation is down to 0.3 percent, which is dangerously close to deflation territory. The basic GDP chart is below.

Chart of the Day: Net New Jobs in August

| Fri Sep. 5, 2014 10:29 AM EDT

The American economy added 142,000 new jobs in March, but about 90,000 of those jobs were needed just to keep up with population growth, so net job growth clocked in at an anemic 52,000. The headline unemployment rate ticked down to 6.1 percent, but that's mostly because of rounding. The real decline was about one-twentieth of a point, from 6.19 percent to 6.14 percent.

What's worse, even that tiny drop was illusory: the number of employed people in August was virtually the same as in July. The drop in the unemployment rate was due entirely to the fact that 268,000 people dropped out of the labor force. The labor force participation rate dropped from 62.9 percent to 62.8 percent, and that's what caused the "drop" in unemployment.

It's not wise to get too depressed over a single month's bad numbers, just as it's not wise to get too excited over a single month's good numbers. Still, it's discouraging to see even the modest gains of the past half year grind to a complete, jarring halt. For all practical purposes, the economy failed to improve even a smidgen last month. For the time being, we're back to treading water.

Chart of the Day: The Rich Are Getting Richer, The Poor Are....

| Thu Sep. 4, 2014 4:51 PM EDT

The Federal Reserve's 2013 Survey of Consumer Finances is out, and guess what? Over the past 25 years, the rich have seen their wealth skyrocket, from 44.8 percent of the total to 54.4 percent of the total. The middle class and the poor, by contrast, have seen their share of national wealth plummet from 33.2 percent to 24.7 percent.

In other words, the rich are getting richer and the poor are....well, you know. Is it any wonder that the rich don't really want to see a lot of changes to our current economic regime? Why would they?

ISIS Is a Test of Leadership. Real Leadership.

| Thu Sep. 4, 2014 12:39 PM EDT

From Ron Fournier, writing about President Obama and the threat of ISIS:

A columnist should never admit uncertainty, but here's mine: I'm not ready to side with the hawks or the doves.

It's conventional wisdom that columnists should always be self-assured. But can someone explain why? I know that sounds naive, but seriously. Why? Why should opinion mongers be expected to have firm, considered, immediate views on every possible subject? I get that nobody wants to read someone who dithers about everything, but shouldn't we be equally suspicious of those who somehow manage to cobble together unflinching insta-opinions about everything under the sun?

In any case, Fournier is making the—obvious?—point that there's nothing wrong with Obama taking time to figure out what to do about ISIS. That's doubly true since he's working in the shadow of the lies and incompetence that brought us the Iraq war:

President Obama is a living reflection of this psychological context. Uncertain and contradictory, Obama is grasping for the right mix of hawk and dove to rally Americans, unite the world, and confront ISIS without locking the United States into another unholy mess.

God bless him. It's a hellish task. Obama's lack of clarity so far has drawn criticism from the across the political spectrum, including from me (here and here). Two loyal readers remind me by email, and for different reasons, that Obama needs time to get this right.

Yes indeed. Sometimes you have to make a fast decision, even if you have limited knowledge. That's life. But other times you don't, and you'd be foolish to lock yourself into a decision when you have time to collect more intelligence. This is the true lesson of leadership: Make decisions as fast as possible, but no faster. That's what Obama is doing.

Colleges Don't Teach Much, but College Students Don't Know It

| Thu Sep. 4, 2014 11:32 AM EDT

The Collegiate Learning Assessment is just what it sounds like: a test that measures critical thinking, analytic reasoning, and communications skills in college students. Several years ago, Richard Arum and Josipa Roksa reported that most students didn't improve much on this test after four years of college, and a full third didn't improve at all. Now they've written a follow-up, which concludes, unsurprisingly, that students with high CLA scores do better in the job market than students with low scores. Kevin Carey provides the highlights of the rest of the study:

Remarkably, the students had almost no awareness of this dynamic. When asked during their senior year in 2009, three-quarters reported gaining high levels of critical thinking skills in college, despite strong C.L.A. evidence to the contrary. When asked again two years later, nearly half reported even higher levels of learning in college. This was true across the spectrum of students, including those who had struggled to find and keep good jobs.

Through diplomas, increasingly inflated grades and the drumbeat of college self-promotion, these students had been told they had received a great education. The fact that the typical student spent three times as much time socializing and recreating in college as studying and going to class didn’t change that belief. Nor did unsteady employment outcomes and, for the large majority of those surveyed, continued financial dependence on their parents.

....Mr. Arum and Ms. Roksa’s latest research suggests that within the large population of college graduates, those who were poorly taught are paying an economic price....Yet those same students continue to believe they got a great education, even after two years of struggle. This suggests a fundamental failure in the higher education market — while employers can tell the difference between those who learned in college and those who were left academically adrift, the students themselves cannot.

I suppose this is a specialized case of the Dunning-Kruger effect: incompetent people don't realize they're incompetent. There's probably not much universities can do about that, but it's disheartening that they're motivated to actively encourage it.

On the other hand, I suppose you can argue that it doesn't matter. After all, employers seem to figure out pretty quickly who's good and who isn't, so it doesn't do them much harm. And the kids themselves are better off for having a degree, even if they didn't learn much. So perhaps this is a Pareto-efficient situation after all.

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ECB Finally Shows Signs of Taking Lousy Economic Growth Seriously

| Thu Sep. 4, 2014 10:20 AM EDT

In a surprise move, the European Central Bank cut interest rates nearly to zero today And there's more:

The central bank said that in October it would begin buying asset-backed securities, bundles of loans issued by banks to businesses and households....Perhaps more significantly, Mr. Draghi said that the central bank’s governing council was ready to take further measures if needed — a clear reference to quantitative easing, or broad-based purchases of government bonds or other assets.

“The governing council is unanimous in its commitment to using additional unconventional instruments,” Mr. Draghi said at a news conference....“Q.E. was discussed,” Mr. Draghi said. “A broad asset purchase program was discussed.” He said some members of the governing council favored starting such purchases, but others did not.

More from the Wall Street Journal:

While the ECB had in recent months indicated it was considering an ABS purchase program, the addition of a covered bond program and rate cuts was a surprise, and an indication that officials have grown increasingly concerned that the recent period of very low inflation could persist longer than first thought and may threaten the currency area's economic recovery.

"In August, we see a worsening of the medium-term inflation outlook, a downward movement in all indicators of inflation expectations," Mr. Draghi said. "Most, if not all, the data we got in August on GDP (gross domestic product) and inflation showed that the recovery was losing momentum."

It's still too little, too late—as usual with the ECB—but at least it suggests that European leaders are finally taking seriously the combination of low inflation and lousy economic growth in the eurozone. More please.

No, Obama's Ukraine Policy Isn't "Muddled"

| Wed Sep. 3, 2014 2:44 PM EDT

Time's Michael Scherer writes today about President Obama's foreign policy:

“NATO must send an unmistakable message in support of Ukraine,” Obama said. “Ukraine needs more than words.”

The rhetoric hit its marks. The message, however, was muddled.

As he finished his speaking engagements, several questions remained about how he intends to deal with the multiple foreign policy crises facing his administration. He again condemned Russian incursions into Ukraine, and promised new U.S. and European help to train, modernize and strengthen the Ukrainian military. But his “unmistakable message” of support stopped short of defining or ruling out any additional U.S. military role should Russian aggression continue.

While he pointedly promised to defend those countries in the region who are signatories to the North Atlantic Treaty Organization (NATO), Obama offered no similar assurances to Ukraine, even as he highlighted that country’s voluntary contributions to NATO military efforts. Instead, Obama asked for a focus on a peace process that seems, for the moment, elusive.

“Since ultimately there’s no military solution to this crisis, we will continue to support [Ukrainian] President [Petro] Poroshenko’s efforts to achieve peace because, like all independent nations, Ukraine must be free to decide its own destiny,” he said, minutes after the Kremlin denied reports it had reached a ceasefire with Ukraine. As NATO leaders gather to consider imposing additional economic sanctions on Russia, Obama hailed the success of the U.S.-led sanctions regime, which has hurt the Russian economy but without stopping additional Russian military aggression in Ukraine.

This was not the only issue on which he left gray areas.

For excellent reasons, foreign policy statements nearly always include gray areas, so it would hardly be news if that were the case here. But it's not. In fact Obama's statement was unusually straightforward. He said the same thing he's been saying for months about Ukraine, and it's really pretty clear:

  • We are committed to the defense of NATO signatories.
  • Ukraine is not part of NATO, which means we will not defend them militarily.
  • However, we will continue to seek a peaceful settlement; we will continue to provide military aid to Ukraine; and we will continue to ratchet up sanctions on Russia if they continue their aggression in eastern Ukraine.

You might not like this policy. And maybe it will change in the future. But for now it's pretty straightforward and easy to understand. The closest Obama came to a gray area is the precise composition of the sanctions Russia faces, but obviously that depends on negotiations with European leaders. You're not going to get a unilateral laundry list from Obama at a press conference.

The rest of Scherer's piece is about ISIS, and it's at least a little fairer to say that policy in this area is still fuzzy. But Obama has been pretty forthright about that, and also pretty clear that a lot depends on negotiations with allies and commitments from the Iraqi government. That's going to take some time, and there's nothing wrong with that.

I should add that nobody on the planet—not even John McCain!—knows how to destroy ISIS. Everybody wants some kind of magic bullet that will put them out of business without committing any ground troops, but nobody knows what that is. So until one of the blowhard hawks comes up with an actual plan that might actually work, I'll stick with Obama's more cautious approach. I figure he'll do something, but only when politics and military strategy align to provide a plausible chance of success. In the meantime, mindlessly demanding more bombs—the only action that most of Washington's A-list apparently considers worthy of a commander-in-chief—is just stupid.

How Hackable Are Your Security Questions?

| Wed Sep. 3, 2014 12:15 PM EDT

Kevin Roose writes today that security questions are ridiculously easy to hack and we should get rid of them:

There are all kinds of ways to lock down your most important accounts — Gizmodo's guide is a good place to start....Eventually, some advanced form of biometric authentication (fingerprints, retina scans) may become standard, and security questions may get phased out altogether.

But until then, when so many better options exist, there's no reason a company like Apple should be relying on questions like "What was the model of your first car?" for password recovery in 2014. If that's the best way we have of making sure a user is legit, we might as well change all of our passwords to "1234" and hope for the best.

All kinds of ways? I was intrigued. So I clicked on the Gizmodo link and found....two suggestions. The first is two-step authentication, which is a fine idea for anyone with a cell phone. The second is encrypting all your data. But like it or not, this is much too hard for most people to implement. There's just no way it's going to become widespread anytime in the near future.

So, basically, there aren't all kinds of ways to lock down your most important accounts. There's one. And even it only works on some accounts. If my bank doesn't offer it, then I can't use it.

I'd offer a different perspective. First, the level of security you need depends on who you are. If you think the NSA is after you, then your security better be pretty damn good. If you're a celebrity, then it needs to be pretty good. If you're just some regular guy, then the truth is that fairly ordinary measures are adequate. You should use decently secure passwords, but that's probably about all you need to do for most of your accounts. Two-step authentication is a good idea for cloud accounts.

As for security questions, I suppose I'm on Roose's side. Just get rid of them. They're too easy to guess, especially for friends and family. Instead, either use a password manager or else create random passwords for your accounts and write them down on a piece of paper that you hide somewhere. I know you've been told forever to never write down your passwords, but the truth is that low-tech paper is actually pretty damn secure compared to anything digital.

Still, I can't help but take Roose's post as something of a challenge. Can we come up with security questions that don't suck? At a minimum they need two characteristics. First, the answers have to be clear and distinct. I've never been able to use "first pet," for example, because that's a little fuzzy. I can think of several possibilities. Second, the answers need to be genuinely hard to guess, even for family and friends—but still easy to remember for you. They don't need to be perfect, but they should certainly be better than "first car." Any ideas?

UPDATE: Also, I'm curious about something. For us ordinary mortals, there has to be some way to recover lost passwords. What should it be?

Needed: A New Marketing Strategy For Defending the Indefensible

| Wed Sep. 3, 2014 11:29 AM EDT

Richard Fink, the Koch brothers' top political strategist, explained recently why they're having trouble reaching the "middle third" of the country that's relatively non-ideological:

Yeah, we want to decrease regulations. Why? It’s because we can make more profit, OK? Yeah, cut government spending so we don’t have to pay so much taxes,” said Fink. “There’s truth in that....But the middle part of the country doesn’t see it that way.”

“When we focus on decreasing government spending, over-criminalization, decreasing taxes, it doesn’t do it, OK? We’ve been reaching the [middle] third by telling them what’s important — what we think is important should be important to them. And they’re not responding and don’t like it, OK? Well, we get business — what do we do? We want to find out what the customer wants, right, not what we want them to buy,” he said.

Imagine that. When the middle third of the country hears the message that regulations should be cut back so that corporations can make more money, it doesn't respond well. So what's the answer? Find out what they do respond to and use that as an excuse for less regulation instead. Ixnay on the ofitpray!

As Fink says, this is pretty ordinary marketing. Still, it'll be interesting to see what they come up with. Obviously the Kochians feel like they need a new set of selling points for reduced corporate regulation, and it needs to be something that Joe and Jane Sixpack can identify with. I wonder what it's going to be?