Kevin Drum

Hillary Clinton's Big Economic Speech Abridged to 500 Words

| Mon Jul. 13, 2015 1:48 PM EDT

Hillary Clinton gave her big economic speech today. As is my wont, I plowed through the transcript and excerpted only those parts that are actual policy proposals. This is sometimes a judgment call, but I think I got most of them. I didn't include any vague prescriptions that she promised to explain in detail in later speeches.

By my count, Hillary's laundry list includes 26 specific proposals, some with more detail than others. Not bad, even for a Clinton. So for those of you who aren't interested in the blah blah blah, and just want the meat, here's the Reader's Digest version of the speech, condensed to about two minutes of reading time.

Let me begin with strong growth.

....Empower entrepreneurs with less red tape, easier access to capital, tax relief and simplification.... business tax reform to spur investment in America, closing those loopholes that reward companies for sending jobs and profits overseas....comprehensive immigration reform....infrastructure bank that can channel more public and private funds, channel those funds to finance world-class airports, railways, roads, bridges and ports....greater investments in cleaner, renewable energy right now.

....Fund the scientific and medical research that spawns innovative companies and creates entire new industries....breaking down barriers so more Americans participate more fully in the workforce — especially policies....fair pay and fair scheduling, paid family leave and earned sick days, child care are essential to our competitiveness and growth.

....Beyond strong growth, we also need fair growth.

....We have to raise the minimum wage and implement President Obama’s new rules on overtime....crack down on bosses who exploit employees by misclassifying them as contractors or even steal their wages....defending and enhancing Social Security....encourage companies to share profits with their employees....reforming our tax code....Buffett Rule....closing the carried interest loophole....the decline of unions may be responsible for a third of the increase of inequality among men....we have to get serious about supporting workers.

....Every 4-year old in America [should] have access to high-quality preschool in the next ten years....80% of your brain is physically formed by age of three....intervention to help those often-stressed out young moms understand more about what they can do and avoid the difficulties that stand in the way of their being able to get their child off to the best start....reviving the New Markets Tax Credit and Empowerment Zones to create greater incentives to invest in poor and remote areas.

....The third key driver of income alongside strong growth and fair growth must be long-term growth.

....A new $1,500 apprenticeship tax credit....reform capital gains taxes to reward longer-term investments that create jobs more than just quick trades....[Make] sure stock buybacks aren’t being used only for an immediate boost in share prices....Empowering outside investors who want to build companies but discouraging “cut and run” shareholders who act more like old-school corporate raiders.

....Serious risks are emerging from institutions in the so-called “shadow banking” system....I will appoint and empower regulators who understand that Too Big To Fail is still too big a problem....ensure that no firm is too complex to manage or oversee....prosecute individuals as well as firms when they commit fraud or other criminal wrongdoing....when the government recovers money from corporations or individuals for harming the public, it should go into a separate trust fund to benefit the public.

And the obligatory paean to bipartisanship and comity:

....You know passing legislation is not the only way to drive progress. As President, I’ll use the power to convene, connect, and collaborate to build partnerships that actually get things done. Because above all, we have to break out of the poisonous partisan gridlock and focus on the long-term needs of our country.

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Chart of the Day: Obamacare Keeps On Working

| Mon Jul. 13, 2015 11:46 AM EDT

I got distracted on Friday and failed to pass along the latest Gallup poll of health insurance coverage in the US. As you can see, it's dropped once again, from 11.9 percent last quarter to 11.4 percent this quarter. In case that seems a little bloodless, that means that over a million Americans are now insured who weren't last quarter. For the entire year, nearly 4 million people are newly insured. Since the peak just before Obamacare went into effect, 16 million Americans have gained health insurance. And if Republican-controlled states hadn't thrown a collective temper tantrum and refused to accept Obamacare's Medicaid expansion, the total number would be more like 20 million.

Not bad. Still a lot of work to do, but not a bad start.

Greece Surrenders to Europe -- For Now

| Mon Jul. 13, 2015 10:48 AM EDT

Well, it appears that Greece has accepted the European deal. This means austerity as far as the eye can see, and no guarantees from Europe except that negotiations over the real agreement will begin soon. Greek opinion on the street was mixed:

Miltiades Macrygiannis, proprietor of an antiques store in Athens, Art and Craft Interiors, said he was hopeful and relieved that a so-called Grexit — a Greek exit from the eurozone — appeared to have been avoided. But he was also disgusted.

“It’s simple: We wasted five months,” Mr. Macrygiannis said. In the end, he added, the austerity measures that had to be taken appeared to be worse than what the creditors had been willing to give five months ago, when the new Greek government took office.

All true. And banks will remain closed for at least another week until Greece passes legislation implementing the preconditions just to get talks started. After that, who know? But Grexit is still a live possibility. Alexis Tsipras has chosen against it for now, but there's no telling if he'll remain opposed once the Europeans really start twisting the knife.

In any case, if he's smart he'll start up all the plans for Grexit so he's ready to go if that's the way things turn out. There's not much point in keeping it secret, either. Everyone knows it's a real option now, so he might as well have drachmas and government IOUs ready to go if the day comes. Grexit may never come, but if it does, there's no point in making it even more chaotic than it has to be.

Europe's Message to Greece: Don't Let the Door Hit You On Your Way Out

| Mon Jul. 13, 2015 1:25 AM EDT

A few days ago everyone thought Greece had capitulated completely to European demands for further austerity. It turns out that was all sorts of wrong. Over the weekend, Europe's finance ministers met in Brussels and eventually released a statement that showed Greece what real capitulation looks like. Marcus Walker of the Wall Street Journal summarizes things pretty well:

Sunday’s statement on Greece by eurozone finance ministers will go down as one of the most brutal diplomatic démarches in the history of the European Union, a bloc built to foster peace and harmony that is now publicly threatening one of its own with ruination unless it surrenders.

....The other 18 euro members were late Sunday pushing Greece to implement all of the austerity measures and broader economic overhauls its voters have twice rejected—in elections in January and in a referendum on July 5—not in return for new rescue loans, but as a precondition for even talking about them.

....The demands from the so-called “Eurogroup” of finance ministers range from handing Greek public assets to a fund in Luxembourg to auction off to giving international technocrats powers to approve or veto draft laws in Athens.

Yep. Greece not only has to agree to additional conditions, that's just the starting point. It has to actually pass them into law before the rest of Europe will even agree to open further talks—at which point Greece will learn what Europe really wants from them. Considering that Germany has already demanded they hand over €50 billion in public assets for eventual privatization to pay off loans, it's hard to know just how much more they could demand. But apparently there's more. Much more.

A senior EU official described this as an "exercise in extensive mental waterboarding," and that seems pretty appropriate. Actual shooting wars have ended with the victors demanding less onerous terms than these.

Greece hasn't responded yet, and it's hard to know what their next move will be—primarily because it's hard to know what's really behind the European demands. Are they harsh but nevertheless made in good faith? Or have they deliberately been crafted to be impossible to accept because the rest of Europe is fed up and simply wants Greece to exit the eurozone?

Nobody knows. France presumably wants Greece to stay. Germany gives every indication that it wants Greece to get the hell out and go its own way. In any case, Alexis Tsipras's gamble that the threat of default and Grexit would scare the rest of Europe has obviously backfired spectacularly. Even Greece's friends—relatively speaking—seem not to care much anymore. Maybe they'd prefer Greece to stay and the eurozone to remain intact, but if it doesn't happen, they'll shrug and move on.

As for the consequences, my guess is that whatever comes next will matter only to Greece. The rest of Europe will be largely unaffected. If Greece accepts austerity, Greece will suffer and everyone else will sigh. If Greece defaults and exits the euro, European institutions will barely notice that a supposedly key pillar of the EU—that the euro is inviolable—has been shattered. For now, anyway, Greece is seen as unique: a singularly reckless country that lied to get into the euro in the first place and never should have been part of it. Nobody thinks this debacle will repeat itself.

It doesn't matter if this is true or not. What matters is that it's widely accepted, and that means Greece no longer has any leverage. They either become a ward of Brussels—Europe's Detroit, if you will—or they default and leave the euro. That's it.

Given that, I'd say I've moved from being about 50-50 on either option, to being about 80-20 in favor of default and Grexit. Make no mistake: the economic and social devastation would be immense. But eventually things would get better. Conversely, given the events of this weekend, it's no longer clear if that would be the case if Greece stays in the euro. The pain would be all but unending. At long last, Grexit now looks not only possible, but maybe even inevitable. If so, better now than later.

It's Time to Cool It On "People Need to Work Longer Hours"

| Sat Jul. 11, 2015 5:18 PM EDT

Maybe I'm just being naive here, but I wonder if liberals could give it a rest mocking Jeb Bush for saying "people need to work longer hours"? Yeah, he really did say it, but then again, Obama really did say "You didn't build that." Little snippets taken out of context can make anyone sound dumb.

In this case, Bush pretty quickly clarified that he was talking about the underemployed, people who want to work more hours but can't get them. This didn't sound to me like some hastily concocted excuse. It probably really was what he meant, and it just didn't come out quite right. That's common in a live setting.

Now, after the idiotic way Republicans plastered "You didn't build that" everywhere short of Mount Rushmore in 2012, maybe they deserve a taste of their own medicine. And sure, politics ain't beanbag. You get your licks where you can find them. Still, there's a limit to how hackish we all should be. We're pretending Bush meant one thing when we all know perfectly well he meant something else. Let's be better than the Republicans, OK?

UPDATE: Let me respond briefly to a few criticisms of this post. First, over at the New Republic, Brian Beutler says, essentially, that Obamacare makes it easier to work fewer hours, since workers no longer depend on a full-time job to get health insurance. Bush opposes Obamacare, which means he opposes things that allow people to work fewer hours. By inference, he's therefore in favor of using "economic policy as a cattle prod" to get people to work more hours whether they want to or not. Your mileage may vary, but this strikes me as a real stretch.

On Twitter, Dean Baker says that Bush's clarification doesn't fit with his previous positions on work. In fact, his original statement is "consistent with his plans to raise Social Security retirement age. He wants more work." But that's a stretch too. "Work longer hours" just isn't the same thing as raising the SS retirement age. No one would phrase it that way.

Via email, Michael Hiltzik points out that average hours worked swung sharply up after the recession and the number of involuntary part-timers swung sharply down. "It raises the question of where exactly Bush’s longer hours are supposed to come from. Any way you slice it, he seems to be blowing smoke and not have a coherent picture of the employment situation." I agree that Bush doesn't have any kind of coherent economic plan, but that's a very different thing than suggesting he wants full-time workers to start putting in 50-hour weeks instead of 40-hour weeks.

More generally, I'd make two points:

  • First, it's not enough to say that Bush really does want people to work longer hours because it's "consistent" with some of his other stated policies. We should just criticize those other policies, not twist them like a pretzel to fit the theory we're trying to sell.
  • Second, does anyone seriously think that Bush believes full-time workers in the US should be working more late nights and weekends? That flatly makes no sense. His clarification about the underemployed, on the other hand, makes perfect sense. It might make only a small dent in his goal of 4 percent growth—something he probably doesn't realize—but it's still a reasonable component of it.

The real problem here is that Bush has things backwards. You don't get growth from workers deciding to work more hours. You get growth from good macroeconomic policies that spur employers to offer more hours. So the question is: What is Bush's economic plan? If it's a good one, then the underemployed will work more hours. If not, they won't. The horse needs to pull the cart, not the other way around.

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, 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!