Kevin Drum

BREAKING: Economy Continues to Stagnate

| Fri Aug. 29, 2014 10:32 AM EDT

If, despite my warnings, you allowed yesterday's upward GDP revision to kindle a tiny spark of excitement about the economy, today's news should bring you right back down to earth:

Household spending fell in July, a sign that cautious consumers could hold back economic growth in the second half of the year....Personal income, reflecting income from wages, investment, and government aid, rose 0.2% in July—the smallest monthly increase of the year....Meanwhile, the report showed a key measure of inflation—the personal consumption expenditures price index—rose 1.6% in July from a year earlier. That matched the prior month's annual gain, and is below the Federal Reserve's 2% long-run target for the 27th straight month.

Spending is down, which is no surprise since personal income is pretty much flat. This suggests that perhaps we could tolerate a wee bit higher inflation as a way of getting the economy moving, but of course we can't do that. Sure, inflation has been below its target for 27 months, but you never know. The 28th month might be different! And even the prospect of a single month of moderate inflation runs the risk of turning us into Zimbabwe.

So instead we just sit and stagnate.

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Will Democrats Keep Control of the Senate This Year?

| Fri Aug. 29, 2014 12:09 AM EDT

Sam Wang of the Princeton Election Consortium thinks that Democrats currently have a 72 percent chance of retaining control of the Senate this year. Most other forecasting outfits think Republicans have a 60-70 percent chance of winning control. Why the difference?

In most cases, added assumptions (i.e. special sauce) have led the media organizations to different win probabilities — which I currently believe are wrong....The major media organizations (NYT, WaPo, 538)...all use prior conditions like incumbency, candidate experience, funding, and the generic Congressional ballot to influence their win probabilities — and opinion polls.

....Longtime readers of PEC will not be surprised to know that I think the media organizations are making a mistake. It is nearly Labor Day. By now, we have tons of polling data. Even the stalest poll is a more direct measurement of opinion than an indirect fundamentals-based measure. I demonstrated this point in 2012, when I used polls only to forecast the Presidency and all close Senate races. That year I made no errors in Senate seats, including Montana (Jon Tester) and North Dakota (Heidi Heitkamp), which FiveThirtyEight got wrong.

I'd sure like to believe this. PEC is my go-to political polling site, after all. But it sure doesn't feel like Democrats are in the driver's seat right now, does it? All of my political instincts scream that Wang's forecast is wrong.

That's probably because I'm a pessimist by nature. But you either believe in poll aggregation or you don't. I do, and PEC has performed well in every election for the past decade. So just as I wouldn't "deskew" bad poll results I didn't like, I guess I won't try to second-guess good poll results that don't seem quite right. If Wang thinks Democrats are currently favored to keep control of the Senate, then so do I.

Quote of the Day: "We Don't Have a Strategy Yet."

| Thu Aug. 28, 2014 5:31 PM EDT

From President Obama, asked if he needs congressional approval to go into Syria:

I don't want to put the cart before the horse. We don't have a strategy yet.

That's not going to go over well, is it? Three years after the Syrian civil war started and (at least) half a year after ISIS became a serious threat in Iraq, you'd think the president might be willing to essay a few broad thoughts about how we should respond.

Don't get me wrong. I think I understand what Obama is doing here. He's basically trying to avoid saying that we do have a strategy, and the strategy is to do the absolute minimum possible in service of a few very limited objectives. And generally speaking, I happen to agree that this is probably the least worst option available to us. Still, there's no question that it's not very inspiring. You'd think the brain trust in the White House would have given a little more thought to how this could be presented in a tolerably coherent and decisive way.

In the meantime, "We don't have a strategy yet" is about to become the latest 24/7 cable news loop. Sigh.

Oh, and the tan suit too. It's quite the topic of conversation in the Twittersphere.

In the Restaurant Biz, It Pays To Be a Man

| Thu Aug. 28, 2014 1:22 PM EDT

Via Wonkblog, here's a chart showing the pay gap between men and women in the restaurant industry. It comes from a recently released EPI report, and as you can see, not only are men better paid in virtually every category, but the premium goes up for the highest paying jobs. Bussers and cashiers are paid nearly the same regardless of gender. But when you move up to cooks, bartenders, and managers, the premium ranges from 10-20 percent.

This data isn't conclusive. There are other reasons besides gender for pay gaps, and the EPI report lists several of them. Whites make more than blacks. High school grads make more than dropouts. Older workers make more than younger ones. You'd need to control for all this and more to get a more accurate picture of the gender gap.

But in a way, that misses the point. There are lots of reasons for the gender gap in pay. Some is just plain discrimination. Some is because women take off more time to raise children. Some is because women are encouraged to take different kinds of jobs. But all of these are symptoms of the same thing. In a myriad of ways, women still don't get a fair shake.

Mitch McConnell Doesn't Get to Decide if Republicans Will Threaten Another Government Shutdown

| Thu Aug. 28, 2014 12:15 PM EDT

Are congressional Republicans threatening once again to shut down the government this year unless they get their way on a bunch of pet demands? Over at TNR, Danny Vinik doesn't think so: "There is no excuse for the news media to inflate the quotes of Republican politicians to make it seem that they are threatening to shut down the government again," he says. But Brian Beutler thinks Vinik is being too literal. It's true that no one is explicitly using the word shutdown, but no one ever does. Still, he says, "the threat is clear."

I'm with Beutler, but not because of any particular parsing of recent Republican threats. It's because of this:

The truth is practically irrelevant to the question of whether [recent saber rattling] presages a government shutdown fight. Just as it doesn’t really matter whether Senate Minority Leader Mitch McConnell actually has a government shutdown in mind when he promises to strong-arm Obama next year, or whether he intends to cave.

In either case he’s threatening to use the appropriations process as leverage to extract concessions. That's a government shutdown fight. And no matter how he plays it, he will unleash forces he and other GOP leaders have proven incapable of restraining. They can’t control the plot.

Yep. It's just not clear that McConnell has any real leverage over Ted Cruz or that John Boehner has any leverage over Michele Bachmann. Once they implicitly endorse the rider game, they cede control to the wingnuts. And the wingnuts want to shut down the government. Fasten your seatbelts.

Stock Buybacks Are a Symptom, Not a Disease

| Thu Aug. 28, 2014 11:42 AM EDT

Paul Roberts writes in the LA Times today about stock buybacks:

Here's a depressing statistic: Last year, U.S. companies spent a whopping $598 billion — not to develop new technologies, open new markets or to hire new workers but to buy up their own shares. By removing shares from circulation, companies made remaining shares pricier, thus creating the impression of a healthier business without the risks of actual business activity.

I agree: that statistic is depressing. In fact, back in the days of my foolish youth, when I dabbled a bit in stock picking, one of my rules was never to invest in a company that had done a share buyback. I figured it was a sign of tired management. If they couldn't think of anything better to do with their money than that, what kind of future did they have? Moving on:

Share buybacks aren't illegal, and, to be fair, they make sense when companies truly don't have something better to reinvest their profits in. But U.S. companies do have something better: They could be reinvesting in the U.S. economy in ways that spur growth and generate jobs. The fact that they're not explains a lot about the weakness of the job market and the sliding prospects of the American middle class.

....Without a more socially engaged corporate culture, the U.S. economy will continue to lose the capacity to generate long-term prosperity, compete globally or solve complicated economic challenges, such as climate change. We need to restore a broader sense of the corporation as a social citizen — no less focused on profit but far more cognizant of the fact that, in an interconnected economic world, there is no such thing as narrow self-interest.

I agree with some of what Roberts says about American corporations increasingly being obsessed with short-term stock gains rather than long-term growth. It's also true that stock buybacks are partly driven by CEO pay packages that are pegged to share price. Those have been standard complaints for decades. But it's misleading to suggest that US companies could be spurring the economy if only they'd invest more of their profits in growth. That gets it backwards. Companies will invest if they think they'll get a good return on that investment, and that decision depends on the likely trajectory of the macroeconomy. If it looks like economic growth will be strong, they'll invest more money in new plants and better equipment. If not, they won't.

The macroeconomy doesn't depend on either companies or individuals acting altruistically. You can't pass a law banning stock buybacks and expect that companies will invest in plant expansion and worker training instead. They'll only do it if those investments look likely to pay off. Conversely, forcing them to make investments that will lose money does nothing for the economy except light lots of money on fire.

You want companies to invest in the future? The first step is supporting economic policies that will grow the economy. If we were willing to do that, corporate investment would follow. If we don't, all the laws in the world won't keep the tide from coming in.

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Economy Doing Ever So Slightly Better Than We Thought

| Thu Aug. 28, 2014 9:58 AM EDT

The economy is doing ever so slightly better than we thought:

Gross domestic product, the broadest measure of goods and services produced across the economy, grew at a seasonally adjusted annual rate of 4.2% in the second quarter, the Commerce Department said Thursday. The agency had previously estimated the second quarter's growth rate at 4%, relying on incomplete data for international trade, inventories and other sectors.

Nobody should mistake this for anything meaningful. Obviously it's better for GDP to be revised up than down, but this particular change is so small that it's not really noticeable. GDP growth for the first half of the year now clocks in at about 2.1 percent instead of 1.9 percent, but that's pretty anemic either way.

Have We Reached Peak Kevin?

| Wed Aug. 27, 2014 4:28 PM EDT

In the Guardian today, Paula Cocozza writes about her effort to hunt down the origin of the phrase "peak X." She turned to linguist Mark Liberman, who runs the Language Log blog, but he says it's a hard idiom to track:

There is some good news, though. Liberman remembers the first time he noticed the phrase. It was in 2008, when the US writer John Cole blogged that "we may have hit and passed Peak Wingnut", a derogatory term for rightwingers.

Cole's post is nearly six years old, but can he recall what inspired the phrase? "I came up with 'peak wingnut' because I was shocked," Cole says. "The Republicans seemed to get crazier and crazier. The source of it is [US blogger] Kevin Drum. At the Washington Monthly, one of the things he was always talking about was peak oil."

This comes as news to Drum, who now writes for the web magazine Mother Jones. He was not the only person writing about peak oil, of course, but he was the one Cole read. "I'm very proud of that," he says. "I had no idea that I had been so influential."

So now I have three items for my future obituary: creator of Friday catblogging, popularizer of the lead-crime theory, and just possibly the kinda sorta inspiration for the Peak X meme. Not bad!

New Discovery Cuts Brainwashing Time in Half

| Wed Aug. 27, 2014 1:43 PM EDT

The frontiers of science continue to expand:

In experiments on mice, scientists rewired the circuits of the brain and changed the animals' bad memories into good ones. The rewriting of the memory wasn't done with drugs but by using light to control the activity of brain cells. While science is a long way from achieving a similar feat in people, it adds to a body of research that is starting to uncover the physiological basis of memory.

Yes, I know what you're wondering. And the answer is yes:

The researchers said they were able to do the opposite as well—change a pleasurable memory in mice into one associated with fear.

So I guess that wraps up both Brave New World and 1984 all in one nice, neat package. What could go wrong?

Quote of the Day: Let's Just Drop a Few Bombs and See What Happens

| Wed Aug. 27, 2014 12:45 PM EDT

From Bill Kristol, during an appearance on conservative radio host Laura Ingraham's show, bringing his megawatt analytic powers to bear on the problem of ISIS in Iraq:

What’s the harm of bombing them at least for a few weeks and seeing what happens? I don’t think there’s much in the way of unanticipated side effects that are going to be bad there.

You can't make this stuff up. We liberals often accuse folks like Kristol of mindlessly advocating military action all the time, no matter what. But we're exaggerating, aren't we? Nobody literally wants to unleash an air campaign just to see what happens. Nobody just casually ignores the possible drawbacks. That's ridiculous! Why do we insist on juvenile caricatures like this?

I don't know. Why do we?