Kevin Drum

Fed to Unemployed: Drop Dead

| Thu Jul. 8, 2010 12:22 AM EDT

When I read this headline at the Washington Post:

Federal Reserve weighs steps to offset slowdown in economic recovery

I was encouraged. Hey, at least someone is thinking about doing something. But then I read further into the article and saw phrases like "modest steps" and "not imminent." As it turns out, the ideas under consideration are modest indeed:

One pro-growth strategy would be to strengthen language in Fed policy statements that the central bank's interest rate target is likely to remain "exceptionally low" for an "extended period." The policymakers could change that wording to effectively commit to keeping rates near zero for even longer than investors now expect.

They might strengthen the language in their policy statements! That oughta do it! In fairness, there are a couple of other ideas under consideration that are a bit more concrete, but not, unfortunately, much more ambitious. For now, anyway, it looks like no one thinks the economy is in bad enough shape to actually bother doing anything about it.

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The Future of Online News Magazines

| Wed Jul. 7, 2010 5:16 PM EDT

Time magazine has decided to take a lot of its print content off the web and make it available solely to print and iPad subscribers. Felix Salmon asks a good question:

If the 1990s saw news organizations set up massive parallel online operations, then, and the 2000s saw the integration of the online operations with the legacy operations, then is this the beginning of the 2010s backswing, where the two become bifurcated again?

My guess is that the answer is no, and that this is just a case of Time making a tactical decision which makes no strategic sense. It wants to sell lots of copies of its iPad edition at $5 a pop, but [if iPad content can be read] for free just by firing up the web browser, it fears that sensible consumers won't bother. So rather than improve the iPad app and make it worth the money, Time is artificially crippling its website.

As a magazine blogger it's probably counterproductive for me to ask this, but my question is the opposite of Felix's: why do news magazines bother putting all their content on the web in the first place? The answer, of course, is advertising revenue, but that's pretty much turned out to be a bad joke, hasn't it? Reliable figures are hard to come by, but IAB estimates online display advertising amounted to $8 billion last year, and I'd be surprised if more than a quarter of that came from magazine sites. So let's be generous and say that magazines generated $2 billion in online advertising, or roughly 10% of the $20 billion they generate in print advertising. Assuming that news magazines work on about the same ratio, is that even worth keeping their websites alive for if it eats even moderately into print revenue?

I know, I know: it's not as if print advertising is going gangbusters either. And if print is dying, then news magazines had better have nifty websites or else they'll be out of business entirely. But I have my doubts about that logic. If it's online or nothing, I doubt that a news magazine like Time can afford to operate at all. Protecting print and subscription revenue at all costs may not work, but it doesn't strike me as an obviously stupid strategy. And the usual magazine strategy of putting content online several days or weeks after the print magazine has hit the stands obviously won't work in the news world.

I'm not being antediluvian here. I've spent the last eight years of my life writing online, after all. But after well over a decade to sort things out, online journalism still doesn't seem to have found a business model that makes sense. There are exceptions here and there (Politico, Gizmodo), but those do more to highlight the massive number of mainstream failures than to prove that there really is a replicable online model for others to follow.

But maybe I'm way off base here. Are magazines generating — or on track to generate — more online revenue than I think? Are there hybrid models out there that I'm unaware of? Or is the future of online versions of existing print journalism as bleak as it looks? Comments?

Kaplan on Romney

| Wed Jul. 7, 2010 2:24 PM EDT

Yesterday I read Mitt Romney's attack on the New-START treaty with Russia, which cuts back on both sides' nuclear arsenals, and even though I don't know much about this stuff I was left scratching my head. A commission can broadly amend the treaty? (Not likely.) We aren't allowed to load ICBMs on bombers? (ICBMs don't go on bombers, do they?) We aren't allowed to convert ICBM silos into missile defense sites? (Do we even want to?) Etc. etc.

Well, it turns out it's even worse than that. Fred Kaplan does know a lot about this stuff, and his epic takedown is here. There is, almost literally, not a single meaningful word in Romney's entire piece. But I guess that's a feature, not a bug. It's a great bit of base pandering for the Republican Party's 2012 primaries, and that's pretty obviously what it's aimed at.

Taxing Sugary Soda

| Wed Jul. 7, 2010 1:07 PM EDT

Via Matt Yglesias, here's a chart from a recent Dept. of Agriculture study suggesting that a 20% tax on sugary soft drinks would reduce overall consumption of said beverages and thereby reduce our net calorie intake from all beverages:

By assuming that 1 pound of body fat has about 3,500 calories, and assuming all else remains equal, the daily calorie reductions would translate into an average reduction of 3.8 pounds over a year for adults and 4.5 pounds over a year for children.

Not so fast, I say. Even assuming that all the assumptions in the report are correct, all it does is show that our net calorie intake from beverages would, on average, go down. But if you switch to diet soda, it's pretty likely that you'll just make up the calories somewhere else. In fact, if this study is correct, it's possible that you might increase your total calorie intake.

I'd actually be interested in some large state imposing a tax like this purely for research purposes, and since I don't drink sugared soda I'd be happy to nominate California. We need the money anyway. But my guess is that the results would disappointing. People might end up swilling less high-fructose corn syrup, but they'd probably just eat more corn nuts to make up for it.

Is Our Kids Studying? – Take 2

| Wed Jul. 7, 2010 11:33 AM EDT

After I posted a couple of days ago on the subject of whether or not college students are studying less than they used to, I got a long email on the subject from Paul Camp, a physics professor at Spelman University. This is pretty far outside my wheelhouse of expertise, but his take was so interesting that I wanted to repost it here just so that everyone would have a chance to comment on it. Here's what he told me:


I've been engaged in a few conversations about this in the past couple of years. I can offer the following data that correlates with anecdotal evidence from other professors at a variety of institutions.

Since the early 1990's, I have pre and post tested all of my introductory mechanics classes using a research based diagnostic instrument, the Force and Motion Conceptual Evaluation. This instrument is based on research by Ron Thornton at Tufts that identified a reproducible sequence of intermediate states that all people seem to pass through in the process of gaining a Newtonian understanding. So it can give me not only a do they get it/do they not measure, but also, along several conceptual dimensions, a measure of how close they are to getting it.

My first job out of graduate school was at an unranked tier 4 institution in Myrtle Beach, South Carolina. Coastal Carolina "University" to be specific. It was the 13th grade. There were a few brilliant students — I've learned that for a variety of reasons you can find exceptional students anywhere — but for the most part the student body was composed of people who were there for financial reasons or because they thought it would be a cool idea to go to school at the beach. The first four pages of our brochure described the beach, not the college. We knew which side our bread was buttered on.

I pretty reliably got 50-60% normalized gains on the FMCE.

Normalized gain is the ratio of how much their scores increased compared to how much they could have increased — (post-pre)/(100-pre). 50-60% is actually pretty stupendous on this particular measure. It means they were typically getting 80-90% of the questions right.

I left that job in a huff. There's a very long story, but the short version is that I was ordered by my dean to give everyone a passing grade and I wouldn't do it. I spent 5.5 years in a research position at Georgia Tech before coming to Spelman.

Spelman is a top 75 liberal arts college, according to US News, and top 10 according to the Washington Monthly. My personal impression of the students is that the average is generally much higher than it was at Coastal. These are students who can think around a few corners. Also, since they are able to cross register in some considerably easier classes at other AUC institutions, I tend to get classes of students who are there because they choose to be there and are therefore more engaged and thoughtful about their efforts.

I think I'm at least as good an instructor as I used to be, and probably a lot better. I know quite a bit more about developmental psychology and cognitive science as a result of my job at Georgia Tech and I think that improves my instruction considerably.

And yet, in a good year I get about 20-30% normalized gains.

I don't really know what is different but something clearly is.

Right now, I'm blaming No Child Left Behind, but that is less because of data than of general suspicion of high stakes testing. In fact, I am also now quite skeptical of pre/post testing (I could send you a research paper on that if you're interested) but not enough that I can account for the difference in the data.

My job at Georgia Tech involved, among other things, observing curriculum implementations in middle schools. I was in the schools at least once a week, and at one point three days out of five for 10 weeks. What I saw was deeply disturbing.

In Georgia, the tests come at the beginning of May so on the first of March all education comes to a screeching halt. From that point on, the entire day is filled with drilling on multiple choice practice tests, pep rallies about how great we're going to do on the tests, and so on. After the test, the school year is over. Until the second week in June, every day is field day, movie day, recess day . . . since you can no longer affect the test, there's really no longer any point in school, now is there?

This means that compared to when I was in school (in Georgia), the school year has been shortened by a third and the one things that students have the most experience with by far is multiple choice testing.

Forgive me if I point out that this isn't really the best preparation for college.

I can't really say that this is a correct account. I can say that many faculty I have spoken with have expressed similar observations without me prompting them, but the difference between me and them is that I have data. I know what I used to get at a crappy college with surfer students, and I know what I now get at a top tier college with highly engaged students, and it isn't consistent with ought to be happening, all other things being equal.

So that's my data point. I suppose I could always have had some kind of mental excursion and become a bad teacher without knowing it, but I don't think so and my students don't think so either, and neither do my peers in and out of the physics department. So I'm going to provisionally discount that explanation.

I left Coastal in 1998. I started at Spelman in 2004. You tell me what changed during that time frame.

Donald Berwick (Temporarily) Appointed CMS Head

| Wed Jul. 7, 2010 11:23 AM EDT

Yesterday Barack Obama decided that the Center for Medicaid and Medicare Services really couldn't go leaderless any longer, so instead of waiting fruitlessly for Senate Republicans while they obstructed his nominee for another few months he made a recess appointment. Donald Berwick is now the head of CMS.

And what do I think of Berwick? Who cares? I mean, what do I know about the guy? He seems to be a serious, well-respected wonk who's an expert on healthcare delivery and eminently qualified to run CMS, and I don't think the Senate should be wasting its time confirming positions like this anyway. It should just be a straight presidential appointment. But via Ezra Klein, Berwick wins my heart forever by making this #2 on his list of proposed hospital reforms:

Patients would determine what food they eat and what clothes they wear in hospitals

The rest of his reforms are pretty good too — though I guess I'm not sure how practical #5 is. In any case, sign me up as a Berwick fan!

And on a less lighthearted note, I repeat that he appears to be a serious, well-respected wonk who's an expert on healthcare delivery and eminently qualified to run CMS. It's way past time to put an end to the farcical regime of Senate confirmation that prevents the president from appointing a guy like this. Ezra:

If Berwick cannot find a smooth confirmation, then no industry leaders who are nominated in a time of political polarization can. And that'll mean, in the long run, that the best people will hang up the phone when they get that call from the White House, as they don't want to see their past quotes pulled out of context and picked apart, and they don't want to spend a year in limbo only to settle for a recess appointment, and they won't be under any illusions that respect from both sides of the aisle and an unimpeachable record will be armor enough.

Roger that.

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Quote of the Day: Arizona's Legislature

| Wed Jul. 7, 2010 10:56 AM EDT

From Ken Silverstein, describing a state that was effectively taken over by the Tea Party years ago:

The general unsightliness of the capitol makes it a fitting home for today's Arizona legislature, which is composed almost entirely of dimwits, racists, and cranks.

C'mon Ken, don't hold back. Tell us what you really think.

The Problem with GPOs

| Wed Jul. 7, 2010 12:32 AM EDT

Controlling healthcare costs is hardly a new concern. In the 90s the hot topic was HMOs. In 80s it was capitation and vertical integration. And in the 70s it was GPOs, or group purchasing organizations. In the current issue of the Washington Monthly, Mariah Blake explains:

The underlying idea was simple: because suppliers generally give price breaks to customers who buy large quantities, hospitals could get better deals on, say, gauze or gloves, if a group of them came together and bargained for ten cases, rather than each hospital buying a case on its own.

A good idea! But then things changed: hospital collectives started spinning off GPOs as standalone for-profit subsidiaries that other hospitals could join by paying dues. By the end of the 70s, virtually every hospital in America belonged to a GPO — which might still have been a positive development if it weren't for one further thing:

In 1986 Congress passed a bill exempting GPOs from the anti-kickback provisions embedded in Medicare law. This meant that instead of collecting membership dues, GPOs could collect “fees” — in other industries they might be called kickbacks or bribes — from suppliers in the form of a share of sales revenue. (For example, in exchange for signing a contract with a given gauze maker, a GPO might get a percentage of whatever the company made selling gauze to members.) The idea was to help struggling hospitals by shifting the burden of funding GPOs’ operations to vendors. To prevent abuse, “fees” of more than 3 percent of sales were supposed to be reported to member hospitals and (upon request) the secretary of health and human services.

But, as with many well-intended laws, the shift had some ground-shaking unintended consequences. Most importantly, it turned the incentives for GPOs upside down. Instead of being tied to the dues paid by members, GPOs’ revenues were now tied to the profits of the suppliers they were supposed to be pressing for lower prices. This created an incentive to cater to the sellers rather than to the buyers....This situation only grew thornier in 1996, when the Justice Department and the Federal Trade Commission overhauled antitrust rules and granted the organizations protection from antitrust actions, except under “extraordinary circumstances.” Once again, the idea was to help struggling hospitals, this time by allowing the buying groups to grow big enough to negotiate the best deals for their members. But the decision led to a frenzy of consolidation. Within a few years, five GPOs controlled purchasing for 90 percent of the nation’s hospitals, which only amplified the clout of big suppliers.

The net result, Mariah reports, is that today GPOs sign exclusive sweetheart deals with huge suppliers, and these deals prevent smaller, more innovative companies from breaking into the healthcare market. The exemption from the anti-kickback law was passed with the best of intentions — but then, that's what the road to hell is paved with, isn't it?

Via email, Mariah adds: "Interestingly, despite all the focus on health care costs in the run up to health care reform, GPOs never entered the conversation." But they probably should. The whole piece is worth a read.

How To Pass a Temporary Stimulus

| Tue Jul. 6, 2010 4:04 PM EDT

Matt Yglesias on the problem of credibly committing to a "temporary" stimulus:

If we paid tons of people to dig ditches and then fill them in, I think it would be easy to convince people that we intended to stop doing that once unemployment fell. But conservatives recognize that, in general, liberals think the government should be spending more money on infrastructure projects and public services. So if we get to pass some spending increases at a time when the case for temporary stimulus is strong, who believes we’ll really give the spending up? And the same thing applies to conservatives and tax cuts.

Actually, I think there's an easy solution to this quite aside from automatic stabilizers like extended unemployment insurance, which will automatically come down as the recession eases. And that solution is: a temporary payroll tax holiday paid out of the general fund. At this point, if we're going to pass a second stimulus I think it needs to be something that takes effect quickly, and a payroll tax holiday is about the fastest possible stimulus you could ask for. What's more, it's pretty effective, since the benefits primarily go to middle and working class families, who are more likely to spend it than rich families. And making it credibly temporary isn't hard either. Just set it on autopilot with a gradual phaseout: maybe a full holiday for two quarters, followed by a 75% holiday, a 50% holiday, and finally a 25% holiday. Or something like that. That would be easy to stick to and would avoid the problem of withdrawing all the stimulus at once just as the economy was starting to seriously pick up steam.

Would Republicans agree to this? Probably not. But some of them might, and public opinion would probably be pretty favorable even among the tea partiers, who prefer tax cuts to deficit reduction by a margin of 49%-42%.

Even if you think federal spending is the first best solution to stimulate the economy, a payroll tax holiday is a pretty good second best solution. It's faster, easier, and more likely to get some Republican support. Liberals could do worse than to start putting their weight behind something like this.

How Dangerous is al-Qaeda in Afghanistan?

| Tue Jul. 6, 2010 2:37 PM EDT

Via Glenn Greenwald, here is Newsweek's Michael Isikoff interviewing Michael Leiter, director of the National Counterterrorism Center, about the current threat from al-Qaeda in the AfPak region:

Isikoff: Let’s get a sense of what the overall threat picture looks like right now. [White House chief of staff] Rahm Emanuel said [recently] that about half of Al Qaeda has been eliminated in the last 18 months. How many people is that, and how many people are left in the other half?

Leiter: I think [CIA director] Leon Panetta said on Sunday, and I agree with him, that in Afghanistan, you have a certain number, a relatively small number, 50 to 100. I think we have in Pakistan a larger number.

How many?

Upwards — more than 300, I would say.

When I wrote about Panetta's estimate a week ago, I cautioned that he had only talked about Afghanistan, not Pakistan. But now Leiter has given us an estimate for Pakistan, and it looks like there's no more than 400-500 al-Qaeda members in the entire AfPak region. This is, obviously, not the only consideration for assessing the continued U.S. presence in Afghanistan, but it's sure a mighty big one. (And the others don't necessarily point in the direction of staying either. See Matt Yglesias here, for example.)

At this point there's not a lot left to say about this that hasn't been said a hundred times before, but just to restate the obvious, it's getting harder every day to justify the continued loss of life and continued multi-billion dollar expense of a full-out counterinsurgency campaign there if it's truly aimed at no more than a few hundred extremists living in caves. Maybe Joe Biden had this one right.