Kevin Drum

Quote of the Day: The Minimum Wage is Lame, Dude

| Tue Jul. 14, 2015 12:10 PM EDT

From boring Midwestern governor Scott Walker:

The left claims that they’re for American workers and they’ve just got just really lame ideas — things like the minimum wage.

Well, there are some economists who would agree with him, but essentially no ordinary Americans. The minimum wage is almost as beloved as Social Security. In fact, ordinary Americans not only like the minimum wage, but about 70 percent of them think it should be raised. So Walker is definitely taking a bold stand here.

Oddly enough, as Steve Benen points out, this has become sort of a thing among Republicans lately. They've always opposed increases to the minimum wage, of course, but now a lot of them oppose the minimum wage itself. Where has this suddenly come from? Perhaps someone who follows the right-wing idea network can give us a rundown. I mean, sure, Milton Friedman opposed the minimum wage, but conservatives apparently abandoned anything remotely Friedmanesque during the Great Recession. So it can't be that.

So what is it? Why has this suddenly jumped from mumblings in Heritage Foundation white papers to campaign platforms for presidential candidates?

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Here's How the Iran Nuclear Deal Is Supposed to Work

| Tue Jul. 14, 2015 11:04 AM EDT

Apparently this is Let's Make a Deal week. First the Greeks, now the Iranians. The deal with Iran restricts their supply of uranium, cuts down the number of centrifuges they can run, forces them to account for past activity, and puts in place strict verification measures. So when does it take effect: Here's the Washington Post:

The agreement will not take effect until Iran is certified to have met its terms — something Iran says will happen in a matter of weeks but that Western diplomats have said could take at least until the end of the year.

Hmmm. That's not necessarily a good start. So when will sanctions be lifted?

From the Post: A senior Obama administration official said that, until Iranian compliance is verified, an 18-month old interim agreement restricting Iran’s activities, and sanctions, will remain in place.

From the New York Times: Diplomats also came up with unusual procedure to “snap back” the sanctions against Iran if an eight-member panel determines that Tehran is violating the nuclear provisions.

The members of the panel are Britain, China, France, Germany, Russia, the United States, the European Union and Iran itself. A majority vote is required, meaning that Russia, China and Iran could not collectively block action. The investigation and referral process calls for a time schedule of 65 days, tight compared to the years the atomic energy agency has taken to pursue suspicious activity.

And here's the Guardian with a bullet list of the main points of the agreement:

  • Iran will reduce its enrichment capacity by two-thirds. It will stop using its underground facility at Fordow for enriching uranium.
  • Iran’s stockpile of low enriched uranium will be reduced to 300kg, a 96% reduction. It will achieve this reduction either by diluting it or shipping it out of the country.
  • The core of the heavy water reactor in Arak will be removed, and it will be redesigned in such a way that it will not produce significant amounts of plutonium.
  • Iran will allow UN inspectors to enter sites, including military sites, when the inspectors have grounds to believe undeclared nuclear activity is being carried out there. It can object but a multinational commission can override any objections by majority vote. After that Iran will have three days to comply. Inspectors will only come from countries with diplomatic relations with Iran, so no Americans.
  • Once the International Atomic Energy Agency (IAEA) has verified that Iran has taken steps to shrink its programme, UN, US and EU sanctions will be lifted.
  • Restrictions on trade in conventional weapons will last another five years, and eight years in the case of ballistic missile technology.
  • If there are allegations that Iran has not met its obligations, a joint commission will seek to resolve the dispute for 30 days. If that effort fails it would be referred to the UN security council, which would have to vote to continue sanctions relief. A veto by a permanent member would mean that sanctions are reimposed. The whole process would take 65 days.

Overall, the deal seems to address most of the issues brought up by skeptics. Sanctions won't be lifted right away. There's an expedited process to reimpose them if Iran cheats. Military sites will be open to inspectors. Conventional weapons bans will continue for five years.

Benjamin Netanyahu is nevertheless apoplectic, of course, but who cares? He would be no matter what the deal looked like. At first glance, though, it looks reasonable. And since President Obama can—and will—veto any congressional attempt to disapprove the agreement, it will take a two-thirds vote to torpedo it. Presumably Obama can manage to scrape up at least a third of Congress to support it, so it should be pretty safe. That vote will take place in about two months.

Chart of the Day: The Recession Still Isn't Over For Most Of Us

| Mon Jul. 13, 2015 11:00 PM EDT

Jared Bernstein points us today to this chart from the Bureau of Labor Statistics. It shows how much worker compensation has changed since 2007.

The red line is the one to look at: it displays total compensation, including benefits like health insurance, paid leave, and so forth. As you can see, 80 percent of all workers—that is, everyone with an income less than about $65,000—saw their compensation fall. Only the top 20 percent saw their compensation go up, and only the top 10 percent saw it go up by more than a pittance.

The recession might be over for those with high incomes, but not for anybody else. For everyone with modest or low incomes, they're still making less than they made in 2007.

Yeah, Scott Walker Is Boring. But It's Not Like He's the Only One.

| Mon Jul. 13, 2015 3:10 PM EDT

This is officially Scott Walker day, since today he's officially announcing his candidacy. So what can we say about him that's new and interesting? Nothing, really, and Brian Beutler thinks that's still his most serious problem:

Walker's biggest liability may be this: He is incredibly dull. Not just plodding-speaker dull, though he’s often that, too, but an actually boring person. Mitt Romney is nobody’s caricature of a party animal, but he could legitimately boast of being an industrial titan, a fixer, and a man of the world. Hillary Clinton isn’t particularly charismatic, but her life story is filled with dramatic tension, and nobody who masterminded #Benghazi can be credibly dismissed as boring.

Walker, by contrast, is painfully boring. His boringness is evidenced by this sequence of 37 tweets, which go back more than four years.

Walker abbrevi8es like a tween. His life turns on snow, dairy, hot ham, Kohls, haircuts, Packers, Badgers, and watching American Idol while eating chili. His critics err when they mock him for lacking a college diploma, but they could be forgiven for observing that his intellectual incuriousness is symptomatic of lacking ambition outside politics.

Oh, snap! He abbrevi8es like a tween! But give the guy a break. His two kids are 20 and 21, and Walker probably learned to tweet from them back when they were tweens. Now he's stuck in a time warp.

As for those 37 tweets, I guess we'll find out soon enough if America finds Kohl's and hot ham boring and unpresidential, or heartwarmingly ordinary and in touch with the common man. Or if, more likely, they don't read his tweets at all.

Anyway, yes, Scott Walker is boring. Maybe he'll get better with practice. Or maybe boring goes over surprisingly well with voters. Oddly enough, most world leaders aren't really very charismatic. I've never quite figured out why that is. And in any case, if Walker wins he'll be going up against Hillary Clinton, who's never going to win any awards for charisma either.

And there's more! In the first debate later this month, the big guns he'll be going up against are Jeb Bush and Marco Rubio, who are only slightly more interesting than Walker. And all of them will have Donald Trump on the stage, who's going to make boring look really, really good by comparison. Should be a fun show.

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.

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.

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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.