Kevin Drum

Is Republican Concern About Middle-Class Wage Stagnation Just a Big Con?

| Wed Feb. 11, 2015 4:10 PM EST

Over the past few weeks, Republicans have become oddly troubled about the state of the American economy. It's not just that recovery from the Great Recession has been slow. Their big concern is that income inequality is growing. Middle-class wages are stagnating. GDP growth is benefiting corporations and the rich, but no one else. The economy is becoming fundamentally unfair for the average joe.

This is certainly a sharp U-turn for a party that's traditionally been more concerned with cutting regulations on businesses and lowering taxes on the rich. Why the sudden unease with the fact that the rich are doing so well?

The cynical side of me says the answer is simple: Republicans don't really care about the growing unfairness of the economy any more than they ever have. They've just decided to attack Democrats on their strongest point, not their weakest. This was a favorite tactic of Karl Rove's, and over the past decade or two it's become a fairly conventional strategy. If Hillary Clinton thinks she can make hay by pointing out how the well the rich are doing at the expense of everyone else—well, let's just defuse that right from the start by agreeing with her. Thomas Edsall puts it like this:

The danger for Democrats is that they will lose ownership of the issues of stagnation, opportunity and fairness. But they also face what may be a deeper problem: What happens when their candidates are not the only ones who can harness the emotional power that stems from the anger many Americans feel as they helplessly watch the geyser of wealth shooting to the top?

The less cynical view is that the Republican Party is finally responding to the views of the "reformicons," a loose group of youngish thinkers who have urged the GOP to adopt a more populist, family-friendly economic agenda. This, goes the story, is pushing Republicans in a more centrist direction, and is responsible for their increasing attention to issues of economic fairness. As Edsall says, they have to move to the center if they want to win in 2016. However, Yuval Levin, one of the most prominent of the reformicons, says this is just flatly wrong:

A lot of [Edsall's] confusion would be resolved if he considered the possibility that we are actually trying to drag the party to the right, not the center—on the tax question that is his focus, and on the other issues we have taken up.

....Edsall’s treatment of the tax question as the one on which the reformers have stepped furthest from traditional conservative arguments is a good illustration of his failure to see this dynamic....The kind of proposals that “reform conservatives” tend to call for, and the sort that Lee and Marco Rubio have advanced in Congress, consist of the same basic components as most of the successful conservative tax reforms of the last three decades....[However,] it does emphasize the business tax code in pursuit of growth more....It does emphasize marginal rate reductions less....It does deliver more of its tax relief through payroll-tax cuts....It does prominently feature the over-taxation of parents among the distortions it seeks to correct.

....This approach to tax reform is precisely an application of longstanding conservative principles and goals to contemporary circumstances....So on taxes, the question between some reform conservatives and some other conservatives is how best to move Republicans to the right....At its core, at least as I see it, “reform conservatism” is just applied conservatism. In many areas of policy, we’re trying to move Republicans from merely saying no to the left, or worse yet saying “yes, but a little less,” to showing what the right would do instead.

I remain unsure what to think of this argument. In one sense, it just seems opportunistic. Reformicons have so far made little headway with a Republican Party that's been relentlessly moving to the right, so now they're trying to insist that their agenda is more conservative than even the tea party agenda. Honest. You just have to squint at it in the right way.

But in another sense, I buy Levin's pitch. Most of the reformicons really are trying to shrink the size of government and lower the overall tax take. The fact that their proposals are perhaps more likely to get adopted in the real world makes them, in a practical sense, more conservative than a firebrand who just wants to scream about taxes with no real chance of ever getting a conservative tax plan passed.

That said, I still think Levin underestimates some of the differences here. The reformicons, he admits, do emphasize marginal rate reductions less than traditional conservatives. But this is not just some minor point of tactics. Ever since Reagan, lowering marginal rates on the rich has been one of the two or three unshakeable Holy Grails of the conservative movement. You see this over and over again when Republicans actively oppose tax cuts if they don't include a rate cut at the top. They don't want to reduce payroll taxes. They don't want to increase child tax credits. What they want is to cut tax rates on the rich. The evidence on this point could hardly be more crystal clear.

Overall, then, I'd say Edsall has the better of this argument, and he's right to be a bit befuddled. The reformicons may say that their agenda is both more populist and more conservative than traditional Republicanism, but that's a hard argument to swallow. And when it comes to issues other than taxes, the problems get even worse. Reformicons mostly want to accept the welfare state but transform it into something more efficient. That's not a message that the modern Republican Party is open to. Ditto on social issues, where reformicons tend to simply stay quiet. But in real life, politicians don't get to stay quiet. They either toe the line on social issues or else they're drummed out of the movement.

The bottom line remains the same as it's always been. To the extent that reformicons are successful, it's because they aren't really reformers. To the extent that they're true reformers, they aren't successful. Maybe that will change in the future. But not yet.

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Scott Walker Would Be the Most Conservative GOP Presidential Candidate in 50 Years

| Wed Feb. 11, 2015 12:07 PM EST

For those of us who are sort of fascinated by the rise of Scott Walker as a Republican presidential contender, here's an interesting chart from Jason McDaniel, a political science professor at San Francisco State University. It shows the relative conservative-ness of GOP presidential nominees in the past six contested elections, and it demonstrates what an outlier Walker would be if he won next year's primary: He'd be the first candidate since Ronald Reagan who's more conservative than the average of the Republican field. And by McDaniel's measure,1 he'd actually be the most conservative recent nominee, period—even more right-wing than Reagan:

Walker is well to the right end of the conservative spectrum, residing in the ideological neighborhood of Ted Cruz and Rand Paul…It is not a stretch to argue that if nominated, Walker would be the most conservative Republican nominee since Barry Goldwater in 1964.

…In contrast, Jeb Bush's ideological position closely resembles previous Republican nominees. Bush most closely resembles John McCain in 2008…In Scott Walker versus Jeb Bush, party elites and primary voters are presented with clearly contrasting visions of the future direction of the Republican party…If the recent history of Republican nomination contests is any guide, the party is likely to decide that Scott Walker is too ideologically extreme to be the Republican nominee in 2016.

Of course, the fact that this chart seems surprising is one of Walker's big strengths. He may be as conservative as, say, Ted Cruz or Rand Paul, but he doesn't seem as conservative. He doesn't have Cruz's bombast and he doesn't go around hinting that we should go back to the gold standard, like Rand Paul. In practice, that may put him closer to the center of the field than his actual positions warrant.

Still, McDaniel's data is worth taking note of. If Walker remains hardnosed in his views, it may be hard to hide this from the voters. Eventually he's going to say something that will cause the Jeb Bushes and Chris Christies to pounce, and that might expose him as too much of an ideologue to win the mainstream Republican vote. It all depends on how well he learns to dog whistle and tap dance at the same time. But then, that's true of everyone running for president, isn't it?

1Using data from Adam Bonica, as McDaniel points out via Twitter.

Republicans Need to Speak Up About Alabama Gay Marriage Ruling

| Wed Feb. 11, 2015 11:08 AM EST

Steve Benen has a question for Republican presidential candidates:

Last week, after Gov. Chris Christie (R-N.J.) and Sen. Rand Paul (R-Ky.) made controversial comments about vaccines, almost immediately political leaders in both parties were asked to explain their own position on vaccinations. Within a day or two, every likely presidential candidate was on record, endorsing an anti-disease position.

It’d be nice if we saw similar scrutiny today about developments in Alabama. There are all kinds of political figures poised to launch presidential campaigns, and last week they told us what they think about vaccines. Maybe this week they can tell us whether they’re comfortable with Alabama counties ignoring the federal courts?

In case you missed it—not likely, but I guess you never know—earlier this week a federal judge struck down Alabama's law banning same-sex marriage. Alabama's chief justice then ordered local judges to ignore the federal ruling and refuse to issue marriage licenses to same-sex couples. A hearing to resolve the issue in federal court is scheduled for Thursday.

But tomorrow's hearing isn't really at issue. A federal court has made a ruling, and the Supreme Court has already declined to issue a stay. The court's decision is now good law. So the question is: should local judges follow the law, or should they continue to oppose same-sex marriage and refuse to issue licenses?

Like Benen, I'd sure like to hear what everyone has to say about this. The tap dancing would be entertaining. Chris Christie would probably pull his usual cowardly schtick and simply refuse to take a position. Jeb Bush might insist that it's strictly a matter for Alabama and it would be improper for him to take a position. Mike Huckabee would probably counsel civil disobedience. And Scott Walker? Good question. I don't know what he'd say. But I'd like to find out.

Jon Stewart Picked a Good Time to Retire From the Daily Show

| Wed Feb. 11, 2015 10:49 AM EST

I guess I'm curious about something. How many of you think Jon Stewart made the right decision stepping down from the Daily Show? I'm reluctant to say this because I've long been such a pretty devoted follower, but the truth is that Marian and I gradually stopped watching him last year. It wasn't any single thing, or any big change in what he did. It was just a growing sense that we weren't really laughing as much as we used to. There were still good bits, and the correspondents still had their moments, but they were fewer and farther between than in the past.

Are there others who feel the same way? I don't want to turn this thread into a pile-on, especially if you happen to be someone who's never liked Stewart's brand of comedy. I've always been a big fan. But over the past year he seems to have lost a lot of his edge. Or is it just me?

Personal Health Update

| Wed Feb. 11, 2015 12:46 AM EST

I got back my final lab results today. We were mainly looking for two things. First, the volume of the antibody that corresponds to the particular type of blood plasma cell that had become cancerous. In my case, that's the IgG antibody, and over the course of the chemotherapy its volume has fallen from 6200 to 1580. This puts it—barely!—within the normal range. Second, the level of a protein marker that tells us what percentage of my plasma cells are healthy vs. cancerous. This has gone down from 4.2 to 1.18. Ideally I think it would be closer to zero than that, but it's still a pretty good number.

Bottom line: the first stage of my chemotherapy has been successful and is now over. Hooray! The side effects are going to linger for a while, but hopefully not for more than a month or so. At that point, I'll be ready for stage 2, which is an autologous stem cell transplant—that is, a procedure in which they draw out stem cells from my blood and then transplant them back into my body later. You can google the gory details if you really want them.

That will all happen in about a month or so, and will probably put me out of commission for a couple of weeks. In the meantime, I get several weeks of recovery time along with a whole bunch of pre-op workups. Should be loads of fun.

But the important thing is that stage 1 is over and I'm basically in remission. I'm now crossing my fingers and hoping that stage 2 is equally successful.

Growing Income Inequality Was What Made the Great Recession so Great

| Tue Feb. 10, 2015 3:57 PM EST

A couple of years ago a new narrative emerged about the role that income inequality may have played in the boom/bust cycle that ended in the Great Recession. In a nutshell, it goes like this:

  • Middle class incomes stagnated during the aughts.
  • Income gains went mostly to the rich, who got ever richer.
  • To sustain its accustomed lifestyle, the middle class began borrowing more. The rich eagerly provided them with loans, since there were limited opportunities to invest the huge pool of money flowing their way.
  • This worked fine, until it didn't. Eventually the middle class couldn't borrow any more, and the music stopped. The result was an epic crash driven by high household debt levels.

This view is strongly associated with Raghuram Rajan (in his book Fault Lines) and others. But a few days ago Bas Bakker and Joshua Felman wrote a piece suggesting that there's more to the story. The rich, they say, did more than just provide money that fueled a middle-class consumption boom and bust. The rich participated actively themselves. That is, the rise and fall of the consumption of the rich had as big an effect as that of the middle class—maybe even bigger.

The chart on the right shows the authors' estimate of consumption patterns by income class. As you can see, from around 2003 to the present, it was fairly flat for the bottom 90 percent. But for the well off, consumption rose substantially from 2003-06, dropped conspicuously between 2006-09 and then began increasing again at a quick pace:

The model suggests something truly striking. The top decile explains the bulk of overall consumption growth. Between 2003 and 2013, about 71% of the increase in consumption came from the rich. Much of the slowdown in consumption between 2006 and 2009 was the result of a drop in consumption of the rich. The rich also played a key role in the subsequent recovery.

Their conclusion:

Our results suggest that the standard narrative of the Great Recession may need to be adjusted. Housing played a role, but so did financial assets, which actually accounted for the bulk of the loss in wealth. The middle class played a role, but so did the rich. In fact, the rich now account for such a large share of the economy, and their wealth has become so large and volatile, that wealth effects on their consumption have started to have a significant impact on the macroeconomy. Indeed, the rich may have accounted for the bulk of the swings in aggregate consumption during the boom-bust.

In some ways, this shouldn't come as a surprise. If the bulk of income gains are going to the rich, it stands to reason that their consumption will vary substantially as those incomes go up and down. Middle-class consumption still plays a big role here, and the loss of housing wealth after 2006 still explains a great deal of why the Great Recession was so deep and so long.

But if Bakker and Felman are right, it's far from the whole story. Consumption patterns of the rich are even more volatile than those of the middle class, and when they're getting most of the income gains, then overall consumption patterns become more volatile too. If more income had been flowing to the middle class during the aughts, there would have been less borrowing and a more even pattern of consumption. The boom would have been more moderate and the bust would have been less catastrophic. Growing income inequality made the economy ever more fragile and ever more unstable, and we all suffered as a result.

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Needed: More Bourgeois Buses for the Middle Class

| Tue Feb. 10, 2015 10:41 AM EST

Josh Barro thinks our cities are building too much light rail. It's expensive, often slow, and offers virtually no advantage over simply opening up a bus line. The problem, according to a 2009 report from the Federal Transit Administration, is that "Bus-based public transit in the United States suffers from an image problem." But what if transit agencies tackled that image problem head on?

That 2009 transit report gives reason to believe it’s possible. The researchers conducted focus groups with “choice riders” in Los Angeles: people who have cars but sometimes use transit. These riders had an unsurprising preference for trains. “Riding the bus carries a ‘shame factor,’ ” the researchers found. “Most of the choice riders would not consider using it, or if they did, they would feel ashamed and keep it a secret.”

But what the local transit agency marketed as the “Orange Line” — really just a bus route in the San Fernando Valley with high frequencies on a dedicated right of way — managed to gain acceptance among “choice riders.” Focus group participants “used terms like the ‘train-bus’ or the ‘bourgeois bus’ to describe the Orange Line service,” the researchers said. The Orange Line has repeatedly beaten its ridership estimates, and nearly half its riders have access to a car, compared with just a quarter on regular local bus routes in Los Angeles. That performance shows it is possible to overcome anti-bus bias with the right amenities and marketing.

My experience here is vanishingly small since I own a car and rarely use the bus, but I'd add the "danger" factor to the "shame" factor. I can recall a few occasions where I've ridden a local bus for one reason or another, and when I mentioned this my friends were agog. They acted as if I'd literally taken my life in my hands. "Isn't that dangerous?" they asked. Well, I dunno. I got on, paid the fare, sat down, and waited until the bus got to my stop. Then I got off. End of adventure.

So perhaps we need a two-pronged marketing campaign if we want to attract more suburbanites onto buses. They need to be convinced that new bus lines are both bourgeois1 and safe. I might add that although Barro doesn't highlight this particular feature, the Orange Line mentioned in the report also has "high frequencies." That's a key feature too, and it costs money. But it still costs less to run a high-frequency bus than an above-ground light rail system.

Maybe we need more celebrities to ride the bus. I'll bet if George Clooney took the bus to work, it would suddenly become a lot more popular. You'd probably need to increase service to accommodate all the paparazzi, but surely that's a small price to pay?

1I confess to some curiosity here. Did focus group participants really refer to the Orange Line as a "bourgeois bus"? That seems a bit unlikely to me.

Quote of the Day: Who Would Be Dumb Enough to Trust Republicans With the Economy Yet Again?

| Mon Feb. 9, 2015 4:24 PM EST

From Kevin Hassett, a conservative economist who's advised both John McCain and Mitt Romney, explaining what Hillary Clinton's economic message should be in the 2016 presidential campaign:

The Republicans gave us a crappy economy twice, and we fixed it twice. Why would you ever trust them again?

Not bad, Kevin! Thanks. This comes via Ed Kilgore, who's similarly impressed: "Wow, no kidding. Hillary Clinton should say that. It would almost fit on a bumper sticker, and with a few photos would make killer text for a 30-second ad."

Iran's Supreme Leader Signals Support for Nuclear Deal

| Mon Feb. 9, 2015 4:12 PM EST

Hmmm:

Iran's supreme leader offered a new signal of support Sunday for a deal to scale back his country's controversial nuclear program as negotiators race to meet an upcoming deadline.

Ayatollah Ali Khamenei, whose recent public pronouncements have usually been skeptical about the talks, promised in a speech to Iranian air force officials that "I would go along with the agreement in the making," the official Islamic Republic News Agency reported.

It is not for nothing that they call him the Supreme Leader. If Khamenei really is suggesting publicly that he might be willing to approve a nuclear agreement with the West, that's a potentially big deal. It's never really mattered much what anyone else thinks about the negotiations, after all.

So does this mean I should raise my expectation of a deal from 50-50 to, say, 60-40? Maybe. But I'm not sure I'm there yet.

Jason Chaffetz Opens Up Dumbest Investigation of Obama Yet

| Mon Feb. 9, 2015 2:06 PM EST

I understand why net neutrality is a big deal for internet service providers, who oppose any new rules that restrict what they can do and how much they can charge. Ditto for content companies like Google, who support net neutrality because they don't want to be extorted by ISPs for access to high-speed pipes. Ditto again for activists who believe internet access should be on a level playing field for everyone.

But it's also become a bête noire of the tea party crowd, and it's a lot less clear to me why these folks care. But maybe I'm overthinking it. Perhaps they oppose net neutrality simply because President Obama supports it. Here's the latest evidence on this score:

Rep. Jason Chaffetz (R-Utah), chairman of the House Oversight and Government Reform Committee, has written to FCC Chairman Tom Wheeler asking for all documents related to communications and meetings involving White House and agency officials concerning the issue....Republicans have charged that Obama unduly influenced Wheeler's proposal. Senate Commerce Committee Chairman John Thune (R-S.D.) said Wheeler "succumbed to the bully tactics of political activists and the president himself."

....Chaffetz said in a letter dated Friday that he was investigating reports indicating "views expressed by the White House potentially had an improper influence" on development of Wheeler's proposal. He cited a Wall Street Journal article last week that reported that two White House aides led a "secretive effort" to build support from outside groups for tough net-neutrality regulations.

Chaffetz must really be desperate. Does he seriously think that the president of the United States isn't allowed to try to mobilize outside support for his policy proposals? Or even that the White House isn't allowed to lobby FCC commissioners? That's just crackers.

But Chaffetz is a certified up-and-comer in the Republican ranks, and I guess that means he has to make sure his tea party bona fides never get rusty from disuse. This time, though, he's really digging through the bottom of the barrel. Unless he wants to join up with the crazytown contingent for good—something he's managed to avoid so far—he should think twice about dumb theatrics like this. He's better off when he keeps at least one foot planted in realityville.