Kevin Drum

Blogging for the Media Octopus

| Thu Sep. 9, 2010 2:36 PM EDT

Andrew Sullivan on the difference between blogging for yourself vs. blogging for a media site:

It's salient, isn't it, that even aggregator sites like Huff and Drudge are anchored by a personality embedded in their very titles. In the end, what's unique online is what's unique in life: the human individual....I've struggled with this, of course, myself. Why not just be an independent site, like TPM? The very difficult and entirely new attempt to integrate the Dish into, first Time and now the Atlantic has been a work-in-progress and sometimes confoundingly tricky.

The only reason this struck me is that my experience has been so different. When I moved from my own personal site to the Washington Monthly in 2004, there wasn't even a glimmer of struggle. I had to bookmark a new URL to enter blog text, and that was about it. Almost literally, nothing else changed. When I moved from the Monthly to Mother Jones, ditto. I pointed my browser to a different place and just kept on doing exactly the same thing.

Maybe I've just been lucky, but at both places I've had editors who were happy to let me do my thing without interference, and since I work out of my home I hardly even noticed the change. I wonder how common my experience is compared to Andrew's?

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The Great Income Shift

| Thu Sep. 9, 2010 1:19 PM EDT

Tim Noah is doing a long series of articles in Slate about the growth of income inequality in the United States, and the first part after the introduction is titled "The Usual Suspects Are Innocent." Actually, that could stand in for parts two and three as well. Gender and racial gaps don't explain it. Immigration doesn't explain it. And the explanation most beloved of wonks and libertarians worldwide, skill-biased technological change, doesn't explain it either. SBTC theory, roughly, says that over the past few decades the world has become more complex and therefore rewards education and smarts more than it used to. Thus, there's relatively more income going to the highly skilled and relatively less going to the unskilled and semi-skilled. There are several reasons to think that SBTC doesn't actually explain an awful lot, but the simplest is this concession from MIT economist David Autor:

Autor readily concedes that computer-driven job polarization can't possibly explain the entire trend toward income inequality in the United States, because income inequality is much greater in the United States than it is in Europe.

Hmmm. Yes. They have computers and electricity and cell phones in lots of countries, but not every country has seen vast increases in income inequality. The chart on the right is from Winner-Take-All Politics, by Jacob Hacker and Paul Pierson, and it shows the share of national income that goes to the top one-percent in various countries. In the United States it's doubled since 1973. In France, Germany, and Japan it's barely budged. But those other three countries are all as technologically advanced as we are. So what gives?

More about that later. Tomorrow morning, in fact. And of course, Tim Noah's series will continue through next week, so we'll see what he decides to finger as the main culprit. Stay tuned!

Privatizing the Post Office

| Thu Sep. 9, 2010 12:34 PM EDT

The Washington Times reports on a scandal within the United States Postal Service: is Priority Mail™ really as profitable as they say it is?

Two recent reviews by the Postal Service's office of inspector general have raised concerns about whether postal officials understated advertising costs to promote Priority Mail. The reduced ad expenses could make Priority Mail appear more successful in reports submitted to postal regulators and, in turn, to the public.

....At issue is how the Postal Service split advertising expenses. For every dollar spent to promote Priority Mail, postal managers reported spending 70 cents on Priority Mail while reporting the other 30 cents as "institutional" advertising to promote the overall postal brand, records show.

But the inspector general found that the Postal Accountability and Enhancement Act of 2006 required managers to allocate all ad costs directly to the product, though not all postal executives agree. Postal officials declined to comment Tuesday, but stood by a written response submitted to the inspector general.

Stuff like this almost makes me a fan of privatizing the postal service once and for all and being done with it. As a former product manager, I'm aware in mind-numbing (and often infuriating) detail of the vagaries of cost accounting and expense allocation among product lines, and there's just not much science to it. Does 30% of all those Priority Mail ads actually promote the general USPS brand? 40%? 10%? Who knows? In a normal corporation, a couple of product managers would duke it out with competing self-serving arguments, someone in accounting would make a decision, and that would be the end of it. (Until the losing product manager decided to renew the battle.) But in the USPS this produces not one, but two full-fledged investigations from the inspector general. Yeesh.

You know, if the postal service were allowed to account for its pensions the same as anyone else, it would be in fine financial shape and there'd be no talk of killing off Saturday service. So why not privatize and let them? Because of the universal service requirement, of course. If you allowed private competition in first class mail, someone would very quickly snap up delivery in dense urban and suburban areas for less than 44 cents an ounce. The postal service, stuck with its universal service requirement, would then have to raise rates astronomically until eventually it would have virtually no business left except for rural areas at two bucks an ounce or something. So much for universal service.

Of course, if you don't care about universal service, then privatizing the post office might be a great idea. Let 'em set different rates for different areas and then fight it out with anyone else who wants to deliver first class mail too. Any takers?

Chart of the Day: How the Kids Are Doing

| Thu Sep. 9, 2010 11:50 AM EDT

After reading Bob Somerby's post about test scores yesterday, I decided to create a handy chart showing how our school kids have been doing over the past few decades. When I was done, though, I realized I didn't really have anything urgent to say about the subject, so I didn't write a post. But there's no sense letting a good chart go to waste, so here it is:

These charts show scores on the NAEP math and reading tests, which are widely considered the most reliable ones out there. I chose the data for 17-year-olds, even though it gets a bit skewed by dropout rates, because I figure that, in the end, that's what we're most interested in.

As I said, though, I don't really have a point to make. You can say that black and Hispanic scores have risen dramatically since the early 70s. Or you can say that black and Hispanic scores have stagnated (or even dropped slightly depending on how you cherry pick your dates) since the early 90s. Or you can say that white kids have made slight gains. Or you can say that the black-white gap closed considerably for a while but hasn't changed much lately.

But for what it's worth, what you can't say is that schools today are performing any worse than schools in the past. At most you can say they aren't doing much better than they were 20 years ago. But there's certainly no dramatic dropoff in performance. As a rough rule of thumb, ten points on the NAEP test equals one grade level, and over the past 20 years scores on both tests for all three ethnic groups have bounced around within a range of half a grade level or so. There's just not much there there.

Mitch Daniels Revisited

| Thu Sep. 9, 2010 11:33 AM EDT

After plowing my way through the Mitch Daniels saga yesterday, I was surprised to read Ezra Klein today agreeing that Daniels had proposed a conventional stimulus plan:

The parties disagree on a lot of things, but they don't disagree over the idea that the government should act to increase demand when the economy sags. The theory behind a payroll tax cut (the government increases its deficit in order to get more money to people who can spend it so they will increase demand) and an infrastructure investment (the government increases its deficit in order to get more money to businesses who can spend it) is not theoretical, but practical: Do you think one is more stimulative than the other, and do you think one is more worthwhile than the other?

And Matt Yglesias agreed. Daniels' plan isn't as praiseworthy as all that, he says, but "that doesn’t mean it wouldn’t be effective stimulus relative to the policy status quo, and viewed in that light much is forgivable."

Am I missing something? In Ezra's interview with Daniels yesterday, Daniels addressed some of the confusion from his original op-ed and made it crystal clear that he didn't intend for his plan to increase the deficit either in the short term or the long term. In fact, he went so far as to say that if his spending cuts turned out to be smaller than he hoped, he'd cut back on the payroll tax holiday in order to keep things deficit neutral.

Would this act as a stimulus anyway? It might, possibly, at the very margins. Perhaps a payroll tax cut has a higher multiplier than than the TARP and ARRA spending Daniels wants to cut. Or maybe it would have a faster effect. But those are tiny effects at best. If Daniels intends for his plan to be deficit neutral, it's not neo-Keynesian or neo anything else. It's just a temporary tax cut, and even the supply siders don't give temporary tax cuts any credit for stimulating the economy. I don't think anyone else would either.

Boehnerizing the Election

| Thu Sep. 9, 2010 12:18 AM EDT

Josh Marshall watched the president's stump speech this morning and says:

Obama rolls out fully Boehnerized new stump speech. Did I mention Boehner?

I caught a few minutes of the speech and had sort of a split reaction on several occasions. Initial reaction: Ooh, he's about to really gut punch Republicans. Fun! 20 seconds later: Ooh, he kinda pulled back a bit at the last second. Too bad.

But still, it was clearly a more partisan speech than he usually gives, and, as Josh says, it was also notable for his frequent mentions of John Boehner. Which suggests something interesting: was this just because Boehner is a local boy who happened to have given a speech in Cleveland a few weeks before? Or is this part of a broader strategy to nationalize the election around Boehner's neck? I don't think this would change the course of the election or anything, but if it's the latter I'll bet it's a good idea. Boehner is well tanned and has a great TV voice, but he comes across (to me, anyway) as robotic and evasive, sort of a junior grade Mitt Romney. If Democrats put Boehner front and center ("Do you trust this man to be Speaker of the House?") it might damage the Republican brand a bit. He's not their best spokesman.

Just a thought. I doubt this is in the cards, but given the de facto parliamentarization1 of our political system, making sure the public knows who the opposition leader is might be better politics than in the past. Especially if it's a guy like Boehner.

1That's not a word, is it? But it should be! It means that the United States is slowly becoming more like a parliamentary system in practice but without any of the machinery that makes a parliamentary system work.

UPDATE: Speaking of Boehner, John Sides points out that Public Policy Polling decided to poll Boehner's tan the other day. Funny!

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A Tax Cut Republicans Don't Like

| Wed Sep. 8, 2010 3:44 PM EDT

Ezra Klein makes some phone calls:

I've asked a number of Republican offices whether they'd be willing to work with the Democrats on a payroll-tax holiday. Without fail, they've told me no, that they no longer support a payroll-tax holiday given the size of the deficit.

The scale of the cynicism here is pretty spectacular. Republicans don't support payroll tax cuts because it would increase the deficit, but they do support extending Bush's tax cuts on the rich because, you know, cutting taxes is really important during a recession. The effect on the deficit, needless to say, is about the same for both proposals.

Are there any Republican economic policies left that aren't just thin covers for handing out goodies to corporations and the rich? Even just one or two for show? Not that I can think of. And they all come packaged with a well-honed and well-rehearsed intellectual superstructure that's carefully designed to keep the chumps from figuring things out and to keep liberals like me busy arguing over ephemera. Where are the pitchforks when you need them?

How Far Does Housing Have to Fall?

| Wed Sep. 8, 2010 1:58 PM EDT

How much further do housing prices have to fall? David Leonhardt frames the debate this way:

Do you believe that housing is a luxury good and that societies spend more on it as they get richer? Or do you think it’s more like food, clothing and other staples that account for an ever smaller share of consumer spending over time?

If you believe housing resembles a luxury good, then you’ll end up thinking house prices will rise nearly as fast as incomes in the long run and that houses today aren’t terribly overvalued. If housing is a staple, though, prices will rise more slowly — with general inflation, as food tends to.

....Perhaps most persuasive is a statistic that [Robert] Shiller sent me when I asked him about this debate. It shows that the share of consumer spending — and, by extension, of income — devoted to housing has not fallen over time....As societies get richer, they do spend more and more on housing.

Some of this spending, Mr. Shiller notes, comes in the form of bigger, more expensive houses. These houses don’t do anything to lift the value of a smaller, older house — which is what matters to individual homeowners. But McMansions are not the only factor.

I think I'm mostly on Leonhardt's side — though with a caveat. My view when the housing bubble started to burst was that prices wouldn't revert to their historical mean. They'd drop to a point about 10-20% higher. I figured this was due to a few factors: incomes may have risen slowly over the past few decades, but they have risen, and that means people can afford more house. At the same time, higher incomes also mean that people can afford to spend a bigger piece of their income on housing. In the past, conventional wisdom said not to spend more than 25% of your income on housing, but that's since gone up to 30% or even 35%. And finally, there really are some built-up areas (mostly on the coasts) where there's simply a shortage of land to build more houses, and that's going to push up average prices. Bottom line: housing prices still have a way to fall, but probably only about 15-20% more, not the 25-30% it would take to get back to historical levels.

But then there's the caveat: it's possible that this is right in the long term but not in the short term. In the short term, it's possible that the housing bubble will overcorrect, partly for purely psychological reasons and partly because the economy is in such poor shape. So I'm not sure what I think anymore. If you held a gun to my head, I'd say that nationwide prices will end up settling at around 110-120 on the Case-Shiller scale, not 100. But you'd probably have to keep that gun to my head to make me put my money where my mouth is.

The Mitch Daniels Plan for Even More Unemployment

| Wed Sep. 8, 2010 1:06 PM EDT

Ezra Klein says he was impressed with Mitch Daniels' op-ed today in the Wall Street Journal that spelled out his plan for economic prosperity. So I hopped over to take a look. I guess I'm — well, let's say I'm a wee bit less impressed.

Here's the nickel version: reduce taxes, rescind TARP spending, cut federal pay 10% across the board, and slash regulations. Bold! Innovative! Daniels' plan calls for reducing payroll taxes, which I guess is an improvement over jumping on the usual Republican bandwagon for tax cuts on the rich, but there's not much else good that can be said for it. It's the same old same old.

Which is OK, I guess. After all, my plan is the same old same old too: I don't care all that much how we do it, but we need higher deficits right now, not lower ones. Daniels' plan simply has no stimulative power at all, even in theory. And no matter how often he repeats the same stale bromides, it's simply not true that we're going the way of Greece; it's not true the federal spending hasn't worked; it's not true that healthcare reform is holding back job creation; and it's not true that businesses are afraid to spend because of uncertainty over new regulations. What's holding back the economy is that lots of people are out of work, lots more people are cutting back in order to pay down debt, and the result is sluggish consumer demand. We need more money in circulation, not less. Daniels is selling the same tired economic snake oil as every other Republican in the country, and it won't work. This isn't worth getting impressed over.

UPDATE: Jon Chait piles on:

Wow, look at that! You have a plan! With numbers! Hooray for you!....Sure, you rely on magical Constitutional thinking and empirically false analysis of federal pay. And your savings only make it 9% of the way to your stated goal. And the four revenue offsets you promised is really only three offsets plus one unrelated ideological hobbyhorse. But it was a good try. Look at Sarah Palin and Newt Gingrich over there — they fell down after only a few yards! You should really think about running for president.

UPDATE 2: Ezra goes back to the well to defend Daniels here. I think maybe I'm even less impressed now. Let's review the bidding:

  1. Daniels clearly and vigorously says in his op-ed that our growing national debt is a disaster and that his proposed tax holiday will be offset twice over by his spending cuts.
  2. Jon quite clearly demonstrates that Daniels' spending cuts don't even come within a light year of offsetting his tax cuts.
  3. Ezra says that's the whole point: Daniels repeatedly uses the word "emergency" in his piece, and as an old OMB hand that has a very specific meaning. It means his tax cuts don't have to be offset.

So which is it? Ezra says he's making calls to figure that out. But come on. Daniels knows perfectly well how to use the English language. He's either deliberately fibbing about the size of his spending cuts so that his Journal readers won't realize he's proposing a gigantic piece of deficit-driven stimulus, or else he's deliberately trying to trick budget wonks with his use of the word "emergency" and doesn't actually have the slightest intention of backing any proposal that isn't deficit neutral.

This is simple stuff. If Daniels means one or the other, he can say it easily enough. Until he clears this up in plain English, I remain unimpressed.

UPDATE 3: Daniels responds here. He says his proposal includes only about $400 billion in tax cuts and he thinks he's identified about $400 billion in spending cuts. And if it doesn't work out that way, he'd scale back the payroll tax holiday.

So this is a deficit-neutral tax cut of medium size. It would almost certainly have no noticeable effect on the economy at all.

Obama and Climate Change

| Wed Sep. 8, 2010 12:26 PM EDT

Joe Romm says Barack Obama blew it by prioritizing healthcare over climate change. Matt Yglesias comments:

I’m sympathetic to this view. My main reason for voting for Barack Obama over Hillary Clinton in the 2008 Democratic primaries, was the difference on Iraq. But an important secondary reason for me was that the leading health care wonks I knew — and especially Ezra Klein and Jon Cohn — kept disparaging Obama’s commitment to health care reform. Unlike Hillary Clinton, they told me, he didn’t seem that invested in this issue. He seemed to think it was perhaps of secondary importance and that climate and energy mattered more. Well that sounded to me like Obama had the right priorities! And I know it sounded correct to Nancy Pelosi as well.

But obviously what wound up happening was that the White House prioritized health care over energy and Pelosi certainly didn’t stand in the President’s way.

Really? Is that what healthcare wonks were saying back in the day? It sure never seemed that way to me. In fact, on the Hillary front, I can remember two sides to the whole story. Side #1 suggested that healthcare was Hillary's life work and she wouldn't rest until she had passed a healthcare reform bill. But side #2 suggested that her experience in 1994 had scarred her so badly that she was unlikely to risk her presidency on healthcare at all. I always figured #1 was the better argument, but it was hardly a slam dunk. And on the Obama front, his dedication to healthcare reform, even though he initially opposed the individual mandate beloved of wonks everywhere, always seemed pretty strong.

So....I don't know about this. I'm just guessing here, but I'd say that Obama probably prioritized healthcare for a couple of reasons. First, it seemed like a better political win. It promised goodies for voters, after all, whereas climate change legislation promised nothing except higher electricity bills. Second, I'll bet that after a few months in office his legislative folks concluded that a decent climate change bill could never pass the Senate. And I think they were right. My take on things is that even a half-ass climate bill tops out at 55 votes, and even that's only with a ton of arm twisting. Climate change never really had a chance.

Would things have been different if Obama had campaigned on a serious climate platform? Maybe. But I doubt it, and I'm more sympathetic to the power of the bully pulpit than most political science types. In the end, though, Obama never tried. As I said in 2008:

To paraphrase an old military saying, the opposition gets a vote too. And the opposition's message to a public already tired of high gasoline prices is going to be simple: Liberals want to raise energy prices. Your energy prices.

And make no mistake. Barack Obama's cap-and-trade plan to reduce carbon emissions may be technically one of the best we've ever seen, but it will raise energy prices. That's the whole point. So once the public understands that there's more to Obama's plan than green-collar jobs and serried ranks of windmills on the Great Plains, they're going to have second thoughts. And those congressional majorities, who face election in another couple of years, are going to have second thoughts too.

And guess what? Obama's congressional majority did indeed have second thoughts, especially since the green-collar jobs and serried ranks of windmills had already largely been funded in the stimulus bill. The high-water mark for public opinion on climate change was in 2005 or so, and we've been losing ground ever since. Until we get it back, Congress is going to continue to do nothing.