Kevin Drum

Here's Why Greece Is Having Such a Hard Time Getting European Agreement to Europe's Own Proposal

| Sat Jul. 11, 2015 2:54 PM EDT

The Greek austerity proposal has been approved by parliament, and since it's essentially identical to the European demands of two weeks ago, everything should now be hunky dory, right? The Europeans will accept the Greek capitulation and move on.

Um, no. Emergency talks in Brussels are being held around the clock this weekend, and there are still a couple of big sticking points.

First: The new proposal is much bigger than the previous one. Back in June, Greece was asking for about €7 billion in loans that would cover its needs for a few months. Now it's asking for €53 billion over three years, and European experts think even that number is too optimistic. Greece will really need about €74 billion—plus additional funds to recapitalize Greek banks, which have basically disbursed all their cash over the past couple of weeks. This raises several concerns:

  • The European proposal in June was meant to set conditions for releasing the final €7 billion in loans that were part of Greece's second round of bailouts. But the new Greek proposal essentially wants to use these same conditions as the basis for a third round of bailouts that would be bigger and longer-lasting. European finance ministers are skeptical, with many suggesting that the June proposal was never meant to cover a whole new round of bailouts. Something tougher is now required.
  • The fact that Greece estimates its needs at €53 billion and European technocrats estimate it at €74 billion suggests to many Europeans that Greece still can't get its finances straight. This does little to boost confidence in the Syriza government.

Second: No one trusts Greece even slightly. The Europeans have never trusted the Greeks to implement the deals they agree to, and they still don't. "What guarantees can Greece give they are actually going to implement what they propose?" Austrian finance minister Hans Jorg Schelling asked bluntly, echoing similar questions from the Dutch finance minister and others. Even Greek allies like France need to be convinced of Greek goodwill. "Confidence has been ruined by every Greek government over many years which have sometimes made promises without making good on them at all," said French finance minister Michel Sapin.

After the events of the past two weeks, the issue of trust is even worse. Dutch state secretary Eric Wiebes notes that the commitment of the Greek government is a key concern. "That has been the weak point because, after all, we are discussing a proposal from the Greek government that was fiercely rejected a week ago." And to make things worse, although the Greek parliament approved the latest proposal, it caused a serious schism in the Syriza party, with many members voting against it. "The parliamentary majority of the government now in Athens is being eroded," Irish finance minister Michael Noonan said, "and they may not have the capacity to implement the measures they have agreed as time goes by."

Things have now degraded to such a dire point that German finance minister Wolfgang Schauble has even floated the idea of a "temporary" five-year Greek exit from the euro. This is so batty that almost everyone else at today's talks—including some of Greece's strongest skeptics—thinks it's both ridiculous and probably illegal too. But even though it's not likely to be taken seriously, it does indicate just how frosty the Germans are toward any new bailout deal with Greece. It also gives ammunition to Greek critics who have maintained for weeks that Germany's real goal is to kick Greece out of the euro.

So there you have it. The June proposal from the Europeans may have been OK two weeks ago, but it's now past its sell-by date. Getting European buy-in to a new, third bailout for Greece continues to be a very delicate and knotty problem. Stay tuned.

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Friday Cat Blogging - 10 July 2015

| Fri Jul. 10, 2015 3:00 PM EDT

Hopper was up in her usual spot on my stomach, but when I crossed my legs she sort of slid on down into the crook between my knees. She seemed pretty happy with it, though in this picture I think she's telling me impatiently to hold still and stop shifting my legs around. So I did. A few minutes later she was snoozing away, saving up energy for her next round of mayhem and destruction. Someday she's going to catch that laser pointer!

No, Hillary Clinton Doesn't Need a Plan For Passing Gun Control Legislation

| Fri Jul. 10, 2015 2:37 PM EDT

Lots of political observers are surprised that Hillary Clinton is talking about guns. That's a loser for Democrats, isn't it? Paul Waldman isn't so sure:

The truth is quite a bit more complicated than that — in fact, pushing for measures like expanded background checks is likely to help Clinton in the 2016 election. But if she’s going to promise to make headway on this issue, she needs to offer some plausible account of how as president she could make real progress where Barack Obama couldn’t.

Allow me to impolitely disagree. Presidential campaigns are extended exercises in affinity marketing. No presidential candidate ever has to explain how they're going to enact legislation. The most they have to do is offer a bit of breezy blather about crossing the aisle and focusing on areas of agreement and Americans not really being as polarized as the media makes them out to be. That's plenty.

Oh sure, there are a few thousand annoying know-it-alls like Waldman and me who are going to write blog posts about how this or that promise ain't gonna happen because the politics are impossible. But hell, even we don't care. We're still going to vote for whoever we planned to vote for anyway. It's not as if any of the other candidates are going to work miracles either.

Now, it's true that some candidates run on a theme of competence, of "getting things done." Scott Walker is doing it this year. Michael Dukakis did it in 1988. But I don't think there's any evidence that even this pale shadow of "how I'm going to get things done" has much effect on voters. They just vote for the candidate who seems to be generally on their side, or generally most reasonable, or generally good to have a beer with. The details can be left to the wonks.

Why Do Americans Love Tech Startups More Than Europeans?

| Fri Jul. 10, 2015 2:12 PM EDT

Jim Pethokoukis muses again today about the relative success of tech startups in America vs. Europe. He notes that apparently Europe is getting better in this regard, but still lags the US, and offers a few conventional reasons for the US advantage (plenty of capital, lots of talent, risk-loving culture, etc.) and then adds a few other possibilities from comments. This one in particular struck me:

Startups need customers. My experiences is American businesses are generally more likely to take a chance on a new company’s product if they think it will be advantageous, even if that company might not be exactly stable. I say generally, because it is certainly not universal. I was in the past deeply involved with another startup in the U.S. that generated most of its revenue from the UK for its first several years because for this particular market the major players in the UK were more change-seeking than their counterparts in the US. Ironically, this was largely because we addressed some pain points related to labor and energy that were not as painful for similar companies in the U.S.

Back when I was in the tech biz, we introduced a new version of a product we'd been selling for several years. It was already reasonably successful in Europe, though still a bit of a tougher sell than in the US. But the new version was a problem. It worked well. It introduced new capabilities that were pretty useful. And it was basically just a plug-in to the original product. All of that was fine. The product itself was not the problem. Its name was the problem.

No, this is not a funny story about accidentally naming something "cow dung" in Croatian. It was all in English. The problem was this: our new product added the ability to support remote users via the internet, so we called it AC Internet Server (AC being the original product name). Our European distributors and sales force were aghast. They told us no one would buy it if it had "Internet" in the name.

We in marketing were nonplussed. This was 1999, not 1990. Everyone wanted internet versions of existing products. Hell, they wanted them even if internet connectivity didn't make sense for a particular product. It was hot and new. When we were brainstorming names for the new product, we were willing to consider just about anything. The only rule was that "Internet" had to be in the name somewhere.

But in Europe—in 1999—they wanted no part of that. To them, the internet didn't suggest hot and new. We were told in no uncertain terms that it suggested fragile and unreliable.

Now, in retrospect, you can certainly argue that Americans went overboard on all things internet in the late 90s. But even in retrospect, I'm still gobsmacked that a lot of large European companies were unwilling to get on the bandwagon at all. Not for anything mission critical, anyway. And this despite the fact that internet connections were roughly as good and as cheap in Europe at the time as they were in the US. This wasn't a problem of outdated infrastructure.

But there you have it. European companies do seem to be less willing to roll the dice and try something new that might not be fully ready for prime time. Americans, for better or worse, seem almost gleeful about it. Sometimes that spells disaster. But over the long run, it means that (a) our startups do indeed have a bigger pool of potential buyers and (b) new technology gets a quick trial by fire and then gets adopted rapidly if it works. Even when this produces lots of epic failures like pets.com, it probably works out better for everyone in the long run.

Is this still true of European companies? Are they generally less willing to adopt new technologies? Are they generally less willing to buy products from startups with an uncertain future? I don't know. This all happened 15 years ago and I have no experience since then. Feel free to chime in via comments if you have something to add.

Alexis Tsipras' Secret Plan for Bailing Out Greece Has Been Brilliant

| Fri Jul. 10, 2015 12:41 PM EDT

Some anonymous drone at Free Exchange notes the damage done by the Greek decision to call a referendum on the European austerity proposals:

A lamentable feature of the Greek crisis of the past few months is the extent to which it has restoked national antipathies, on the part of both the Greeks and the Germans....But it is not just political damage that the referendum has done to Greece’s cause. The decision to call it and the extraordinary uncertainty that generated at home as well as abroad inflicted a body blow to the economy by causing the banks to be closed now for two weeks as the ECB capped the emergency central-bank lending that was allowing cash to be withdrawn by anxious Greeks fearing a return to the drachma that would slash the value of their deposits. As a result Greece now needs more money and over a longer period — €53.5 billion ($60 billion) until 2018.

Such is the bad blood on both sides, particularly the Greeks and the Germans, that there is still scepticism about whether they can come together at this latest eleventh hour.

Hmmm. Here's a Slatepitchy suggestion. Maybe it's all going according to plan. Consider this. It's late June and prime minister Alexis Tsipras is trying to negotiate an agreement with the Europeans. It doesn't go well, but he knows he has no choice but to swallow hard and accept their terms. As galling as it is, it's the only way to save Greece. But he knows that if he simply signs off on the agreement, his party will revolt and parliament will reject it. So he comes up with a cunning plan.

The plan is this: piss off the Germans beyond the bounds of reason. Step 1: denounce the European proposal and call a referendum. Step 2: Go home and campaign loudly for a No vote on the proposal. Step 3: The Germans, now so angry they're practically shaking with rage, press the ECB to cut off Greek banks, causing economic chaos. Step 4: Tsipras wins the referendum, thus getting the backing of his people. Step 5: Tsipras cools his heels for a day or two to let the economic chaos really sink in. Step 6: Tsipras heads to Brussels. After making everyone wait a few more days just to show that he can't be pushed around, he tables an austerity plan that essentially caves in completely to the European proposal that he knew he'd have to accept eventually. Step 7: Tsipras returns home to Athens, where economic chaos has become so severe that no one cares anymore what's in the damn proposal he just agreed to. They just want the banks to open and the local pharmacies to have stocks of insulin. Step 8: He signs the proposal. Step 9: The ECB opens the spigots, life gets back to normal, and Tsipras is a hero.

Not likely, you say? Tsipras isn't that smart? Probably so. Still, it's quite likely that Tsipras isn't as stupid as some people are making out. He knew perfectly well that defaulting would lead to economic chaos and an exit from the euro, but he also knew that Greeks didn't really believe this in their guts. They needed a demonstration. So he gave them one. If his goal all along wasn't Grexit, but (a) an agreement with Europe that (b) would be accepted by the Greek population, he did a pretty good job.

Very clever, Mr. Tsipras!

If Little Clouds of Doom Follow You Around, There Might Be Money In It For You!

| Fri Jul. 10, 2015 11:33 AM EDT

Via Tyler Cowen, here's an intriguing new paper that claims certain kinds of customers are—not to mince words—"harbingers of failure":

We show that some customers, whom we call ‘Harbingers’ of failure, systematically purchase new products that flop. Their early adoption of a new product is a strong signal that a product will fail — the more they buy, the less likely the product will succeed. Firms can identify these customers either through past purchases of new products that failed, or through past purchases of existing products that few other customers purchase. We discuss how these insights can be readily incorporated into the new product development process. Our findings challenge the conventional wisdom that positive customer feedback is always a signal of future success.

There's a chart, naturally, because Science™. For example, if repeated harbingers (dotted green line) account for half your sales, you're pretty much screwed. Your shiny new product has less than a 10 percent chance of success. The reason I find this all intriguing is that I have lately begun to wonder if I myself belong to this group. I use Firefox and I think it's great. Chrome sucks. I think Windows 8 is terrific on a tablet, far superior to either iOS or Android. And I read all my books on the Nook reader, which I like better than the Kindle reader.

Now, Firefox has had a pretty good run and may very well stay around for a while. But it's not looking like a winner these days. Likewise, Windows tablets account for—what? Maybe 2 percent of the market, despite Microsoft's massive marketing campaigns. And Nook, of course, is already officially dead, hanging on in limbo until it gives up the ghost for good.

So here's the deal: I'm willing to rent out my services as a harbinger. Send me your new tech products while they're still in testing, and then cross your fingers and hope that I don't love them. If I do, it's back to the drawing board.

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Greece Caves In

| Thu Jul. 9, 2015 7:59 PM EDT

Our story so far: On June 22nd, Greece proposed an austerity package of spending cuts and tax increases worth about €8 billion over two years. European leaders called it a credible proposal, the first they had ever seen from Greece. By June 24th, they had changed their tune. They were roughly OK with the €8 billion figure, but didn't like the Greek tax and spending plans for getting there. Later in the day, the Europeans responded by making substantial changes to the Greek proposal and sending back a heavily red-lined revision.

The Greek prime minister, Alexis Tsipras, was apoplectic, arguing that what mattered was meeting the deficit target, not meeting it in specific ways. "This odd stance seems to indicate that either there is no interest in an agreement or that special interests are being backed," he said. Two days later he abandoned the talks and called a referendum on the European proposal. Last Sunday the Greek population overwhelmingly rejected the European plan 61-38 percent.

So how did that work out for Greece? Not so well:

Under a 10-page blueprint completed late Thursday, the country said it would undertake austerity measures worth between 12 billion and 13 billion euros ($13 billion to $14 billion), including raising taxes on cafes, bars and restaurants.

The amount is significantly higher than the package of cuts that Greek voters rejected in a hastily called referendum on the bailout Sunday. But nearly two weeks of a banking shutdown that has brought the economy to a virtual standstill have left this Mediterranean nation with few other options to avoid sliding into bankruptcy.

The Greek blueprint for pension cuts and VAT increases is essentially copied word-for-word from the June 24 European proposal. There may still be sticking points elsewhere (I haven't done an exhaustive line-by-line comparison of the two documents), but VAT and pensions were always the key areas of difference. Combine those concessions with the higher deficit target in the new blueprint and Greece hasn't just caved in to the Europeans, it's all but prostrated itself and begged not to be kicked out of the eurozone.

Or so it seems. There's always the possibility of gotchas hidden away in a stray word or two. But at a first glance, it looks like total capitulation. Two weeks of bank closings and import stoppages has given the Greeks a vivid taste of what life would be like if Europe forced it to abandon the euro—as it seemed they were all too willing to do—and that short taste was quite enough, thank you very much. Viewed through that lens, apparently another few years of German-enforced austerity didn't look so bad after all.

Quiz of the Day: What Is This Map?

| Thu Jul. 9, 2015 1:59 PM EDT

This map was released today as part of a 14-page research report. What is it?

Here are your choices:

  1. Donald Trump's claim of how many states Republicans will win if they nominate him for president.
  2. The creeping spread of socialism in Barack Obama's America.
  3. Other than white, the predominant color in each state's flag.
  4. Which states make it easy to look up health care prices.

Yeah, the answer is #4. Red means your state got a letter grade of F. In other words, 45 out of 50 states do exactly nothing to make health care pricing transparent for their residents. Here's how this plays out in real life:

If any single fact illuminates why reining in health care spending is going to be easier said than done, it might be this: we don't even really know why a typical, low-risk childbirth costs $1,200 at some hospitals and $12,000 at others.

....In Massachusetts, a state that passed a law in 2012 to make health care costs more transparent [but still gets a grade of F anyway. –ed.], a research team trying to track down the price of a simple left knee MRI without a contrast dye found themselves transferred to six or seven departments and playing phone tag for days. Among 22 hospitals in a survey by Barbara Anthony, a senior fellow at the Pioneer Institute, a free market public policy think tank, it took anywhere from 10 minutes to nearly a week and a half to get an answer. If it's that difficult to figure out how much it will cost to get a short scan to look at your knee, good luck trying to pin down the cost of the miracle of life.

Is there any other significant area of life where it's virtually impossible to find out how much something will cost before you decide to buy it? I sure can't think of one.

The full report is here, but it warns that "you will find little progress since last year and, in some cases, regression." Sounds like a fun read.

Will the Real Death Panel Please Step Forward?

| Thu Jul. 9, 2015 12:31 PM EDT

Death panels are in the news again. But it's confusing. First, here's the proposal:

Federal health officials are proposing that Medicare begin paying doctors to discuss end-of-life issues with their patients, six years after the “death panel” controversy erupted in the early days of the debate over President Obama’s health-care legislation.

....Sarah Palin, the Republican vice presidential candidate in 2008, ignited a political firestorm in 2009 when she denounced a provision in the health-care legislation that would have allowed Medicare to reimburse doctors for discussing living wills and other end-of-life issues with older patients. She said it would create a “death panel” that could decide who received care. The provision was removed from the final Affordable Care Act legislation.

But is this really Sarah Palin's "death panel"? Here's what she actually said:

Who will suffer the most when they ration care? The sick, the elderly, and the disabled, of course. The America I know and love is not one in which my parents or my baby with Down Syndrome will have to stand in front of Obama's "death panel" so his bureaucrats can decide, based on a subjective judgment of their "level of productivity in society," whether they are worthy of health care.

Later on, Palin said that she was referring to the idea of paying physicians to discuss end-of-life preferences with older patients. But that sure doesn't sound like what she was talking about. It sounds like she was talking about rationing care, and that's always been code for the Independent Payment Advisory Board—IPAB—which was tasked with keeping Medicare costs below a certain target. Here is National Journal a few weeks ago:

If a "death panel" never rationed health care, did it really earn the name?

That's the question for Congress this week: The House soon will vote to repeal the Independent Payment Advisory Board established by the Affordable Care Act, dubbed at various times a "death panel" and rationing board by its opponents.

...."These 15 political appointees will make all the major health care decisions for over 300 million Americans," then-Rep. Michele Bachmann said in 2011 during one of the Republican presidential debates. "I don't want 15 political appointees to make a health care decision for a beautiful, fragile 85-year-old woman who should be making her own decision."

So which one is the real death panel? Neither one, of course. It was all nonsense from the start. But apparently federal officials are going to take a crack at bringing back the one we killed, while Congress is going to take a crack at killing the one we kept. So we could end up with two death panels or with none.

But wait! There's more! You may recall that Republicans are also suspicious of evidence-based medical research. They were convinced that "comparative effectiveness" research was just a stealth measure to take treatment decisions out of the hands of local doctors and instead centralize them in the hands of green-eyeshade DC bureaucrats. In other words, a death panel. So there are actually three death panels. They're everywhere!

But don't worry about it. End-of-life counseling has always had bipartisan support, and only lost it in the frenzy of passing Obamacare. It's bound to come back eventually. And IPAB is simply a board tasked with recommending ways to keep Medicare spending under legislative targets. It does no rationing, and everyone knows it. However, Medicare spending has been so low recently that the board has had nothing to do. That's the only reason it might be killed off. (Though President Obama has promised to veto any attempt to get rid of it.)

For more on all this, check out Michael Mechanic's explainer on the end-of-life controversy here.

This Year, Everyone Is In Disarray

| Thu Jul. 9, 2015 11:18 AM EDT

Democrats in disarray!

The ongoing debate over trade legislation within the Democratic Party between pro-business and pro-labor forces has put deep divisions in the party on public display....It is in this context that many in the labor movement, and on the left generally, view the Trans-Pacific Partnership, now in the final negotiating stages, as an unmitigated disaster. From this vantage point, Republicans who vote for trade agreements are working on behalf of their corporate supporters. Democrats who support the TPP are worse, however, seen by many as traitors to their constituents.

....While the left is ascendant, the likely scenario for a resolution of the intraparty disagreement over trade is as follows: Until she secures the nomination, Hillary Clinton will voice the level of criticism of the TPP necessary to prevent the issue from serving as a mobilization tool for her rivals. Then, if she actually wins the presidency, she will most likely follow the path of her predecessor....After winning the presidency as an adversary of free trade, Obama in office became an advocate.

Republicans in disarray!

The party is warring over funding for disease research, bickering over an education bill and deeply divided on the possible renewal of the Export-Import Bank, an object of scorn among the far right.

....The broad disagreement on so many fronts lately is striking. Congress is almost certain, again, to fail to come to a timely agreement on a long-term highway bill. Republican leaders had to abruptly pull the emergency brake on a sweeping reauthorization of the Federal Aviation Administration, amid a tiff about privatizing air traffic controllers. As if all that wasn’t enough, a showdown over government funding is fast approaching.

....All of this acrimony has led some top Republican officials to wonder whether they’ll ever be able to get things in line.

So who's in more disarray, Democrats or Republicans? Sounds to me like the answer is Republicans, though I suppose it depends on just how bitter the TPP fight gets. In any case, Congress is off for the entire month of August, so most of this stuff won't blow up until September. Just in time for a government shutdown! Booyah!