Kevin Drum

When Housing Prices Become Fish Stories, the Economy Suffers

| Thu Mar. 27, 2014 1:30 PM PDT

Over at Wonkblog, Christopher Ingraham points us to new research from Ireland suggesting that an awful lot of people don't know how much they paid for their houses. I've adapted the main chart from the study on the right. As you can see, most people who get this wrong underestimate how much they paid—sometimes by gigantic amounts. Very few people overestimate how much they paid, and virtually no one overestimates by more than a quarter or so.

What accounts for this? As it happens, the authors are mostly concerned with how this poor recall affects estimates of the wealth effect—which I admit I didn't really understand.1 Because of this focus, they don't spend a lot of time speculating on the underlying causes. But they do mention that the older the loan, the less accurate people are; that younger people remember better than older people; and that errors are smaller among the well-educated.

But none of this explains why the bad recall is overwhelmingly on the low side. So here's my guess: people lie. Or, more charitably, they're in denial. They don't want to admit to themselves or their friends how much they lost during the housing crash. Or, when prices are rising, they like to brag about how much they've made. Everyone else claims to have made a killing, so they slice a little bit off their buying price to make it seem like they made a killing too. No one wants to be a sucker, after all. Do this enough times, and eventually you come to believe it yourself.2

1The authors say that "An increasing number of micro based estimates of the housing wealth effect use the recall house price as an indicator of housing wealth." So if recall prices are systematically lower than the actual prices paid, this would lead to estimates of the wealth effect that are too low.

That's fine, and it's a reasonable topic for a research paper. It's important to know just how the wealth effect works. But why would anyone use the recall price for this in the first place? Shouldn't wealth effect estimates be based on how much people think their houses are worth right now? Or on how much equity people think they have, which would actually be higher if they underestimate the original price of their house? I'm a little stumped by this.

2Here's another guess: people tend to remember loan amounts more than the actual price of the house. If they put 10 percent down on a $300,000 house, the amount of the loan is $270,000, and that's what they remember. I'm not sure I buy this, but it's a possibility.

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How Big Is the National Debt?

| Thu Mar. 27, 2014 11:22 AM PDT

As a public service, I would like to present this FAQ from the Treasury Department explaining the national debt. Here it is, complete and unedited:

What is the National Debt?

The term national debt refers to direct liabilities of the United States Government. There are several different concepts of debt that are at various times used to refer to the national debt:

  • Public debt is defined as public debt securities issued by the U.S. Treasury. U. S. Treasury securities primarily consist of marketable Treasury securities (i.e., bills, notes and bonds), savings bonds and special securities issued to state and local governments. A portion is debt held by the public and a portion is debt held by government accounts.
  • Debt held by the public excludes the portion of the debt that is held by government accounts.
  • Gross federal debt is made up of public debt securities and a small amount of securities issued by government agencies.

Debt held by the public is the most meaningful of these concepts and measures the cumulative amount outstanding that the government has borrowed to finance deficits.

As of yesterday, total public debt amounted to $17.555 trillion. Debt held by the public amounted to $12.579 trillion. The term "national debt" can refer to either one. Just make sure it's clear which one you're talking about.

Sponsored Content Really Not a Big Deal, Folks

| Thu Mar. 27, 2014 10:35 AM PDT

Earlier today Josh Marshall announced that TPM had launched a new section called "IdeaLab: Impact," sponsored by PhRMA, the famously ubiquitous pharmaceutical industry lobby. Henry Farrell was distinctly unimpressed by the news:

In that spirit, I’d like to introduce a very cool new non-sponsored section myself, “Bullshit Lab: Impact,” focused on the very cool ways in which PhRMA lobbying is affecting real human lives and impacting people and communities living on the margins of global wealth and on the margins of the technological transformations. Except losing the “impacting,” since it isn’t a verb ever seen outside corporate press releases. How, for example, is PhRMA lobbying advancing the ball on shoving insanely demanding requirements into international trade agreements? What are the impactful ways in which PhRMA is impacting high drug prices? What are the cutting edge techniques in which PhRMA is pushing back on patent reform for AIDS drugs in South Africa....Feel free to treat this post’s comments sections as an opportunity to provide further examples, and unleash the real world impacts of innovative lobbying innovations!!

Sponsored content is all the rage these days, so this was probably inevitable. In fact, I was just reading about it the other day on my Dell Venue 11 tablet. I had just gotten back from Target, which was having a sale on DiGiorno frozen pizzas, and hopped onto Internet Explorer while I waited for the pizza to heat up in my Breville toaster oven. I wanted to read about NYT Now, a "compelling new iPhone® app with quick summaries and updates of top stories from our editors" that the Times announced a couple of weeks ago at South By Southwest Interactive. I found a few blurbs via Google News, but I still want to know more. It sounds exciting! I wonder if I'll be able to read it on the HTC One Android phone I'm planning to buy from T-Mobile?

Anyway, like I said, the whole sponsored content thing is probably inevitable, but I doubt it has much actual effect on what journalists choose to write about. Nothing to get worked up about, Henry.

Christie Lawyers Engage in Special Pleading For Their Client

| Thu Mar. 27, 2014 9:40 AM PDT

A couple of months ago, Chris Christie hired a legal firm to investigate whether Chris Christie knew about the September 9-12 lane closures on the George Washington Bridge. So they went off and investigated. Among other things, they investigated the charge from David Wildstein that he had mentioned the lane closures to Christie during a September 11 memorial ceremony. Check out the way Christie's legal firm dealt with this:

There is, however, no evidence we have seen that the Governor and Wildstein actually had any substantive discussion of the Fort Lee lane realignment at that public event.

To begin with, it seems incredible that, in a public setting leading up to a 9/11 Memorial event, surrounded by other government officials and scores of constituents seeking photographs and handshakes, anything substantive or inculpatory would have been discussed.

Moreover, the context of Wildstein’s counsel’s claim that “evidence exists” of the Governor’s alleged knowledge of the lane realignment is critically important....Wildstein’s counsel’s letter was a not-too-subtle attempt to press the Port Authority into granting Wildstein indemnification while, at the same time, to induce federal authorities to grant Wildstein immunity in exchange for Wildstein’s information here.

....In any event, even if credited, any passing reference by Wildstein—made in a social, public setting at the time of a public 9/11 Memorial event—to a traffic issue in Fort Lee would not have been meaningful or memorable to the Governor. Indeed, it seems highly unlikely such a brief mention, even if made by Wildstein to the Governor, would have registered with the Governor at all. Only a more substantive conversation about the ulterior motive behind the Port Authority’s traffic study would have registered, and in that public setting, any claim that such a conversation occurred would lack credibility. In any event, the Governor recalls no such exchange.

Tell me: does this sound like a dispassionate review of the evidence? Or does it sound like the closing arguments to a jury on behalf of a client accused of corruption?

I have no real opinion about whether Christie knew about the lane closures. My guess is that he didn't, though that's mainly because I credit him with not being a complete moron. At this point, my guess remains that Christie set up a nakedly political operation in his office; made it clear what he expected of them; and then let them freewheel without much supervision. The result was a bunch of eager beavers who eventually decided they were invulnerable and started doing really stupid things.

But those are just guesses. My real interest in this passage is the tone of voice. And that tone is plain: these guys are going out of their way to spin the evidence to exonerate Christie. I suspect the entire report should be read with that in mind.

Was Crimea Mainly a Diversion From Putin's Burgeoning Olympic Scandal?

| Thu Mar. 27, 2014 8:29 AM PDT

Kimberly Marten suggests that the main reason for Vladimir Putin's invasion of Crimea was entirely domestic. He needed something to divert public attention from a huge unfolding scandal:

Putin’s scandal was the corruption surrounding the Sochi Olympics. As we all know by now, the construction costs associated with Sochi facilities and infrastructure exceeded $50 billion.

....Putin has stayed in power for so long because he has been able to control the snake-pit of competing informal political networks that surround the halls of power in Russia....Members of that network told some Americans privately in 2013 that they believed some kind of reckoning over corruption in Sochi would happen this spring, perhaps when it became clear that tens of billions of dollars in state loans could not be repaid....The public might never have known or understood what was happening, but Putin would have lost face where it matters most—inside Kremlin walls, where he is supposed to be the great informal network balancer. Putin’s Crimean adventure neatly shifted the conversation to other topics, and no one is likely to bring it up again anytime soon.

....Diversion could not have been Putin’s only motive. There are certainly deep nationalist, historical, and triumphalist reasons for Putin’s actions, as Joshua Tucker wrote about here in The Monkey Cage last week. But it is striking how little Putin gained in Crimea. The region was subsidized by the rest of Ukraine, and he will now have to fund those subsidies out of the Russian state budget. Russian generators are now keeping the Crimean capital of Simferopol lit, as Ukraine turns off the electricity flowing in from the mainland. Crimea does have a crucial Russian naval base, but Putin already controlled that base without needing to occupy Crimea, because of a treaty that lasted through 2042.

The only thing that surprises me about this is that it's presented as a novel thesis. I thought this was widely taken for granted. Obviously there were international triggers for Putin's actions—the EU association agreement, the downfall of Yanukovich, the expansion of NATO, etc.—but it's still striking that Putin was willing to give up so much on the international stage for something that, as Marten says, gets him almost nothing in return. By nearly any measure, Crimea simply isn't much of a plum. If this was his idea of reasserting the Russian empire, Putin has a mighty cramped view of empire.

But it was massively popular domestically. Whatever else you can say about it, it's certainly gotten the Russian public firmly on Putin's side for the time being. I don't know if anyone can say for sure that this was his primary motive—frankly, I'm not sure Putin himself even knows what his primary motive was—but it seems almost certain that it was a significant one. After all, Putin would hardly be the first world leader to shore up his public standing with a lovely little war abroad.

Obama Should Have Personally Announced the Latest Obamacare Deadline Extension

| Wed Mar. 26, 2014 9:49 PM PDT

Chris Hayes used his program tonight to highlight a deadline extension for a health care program—one that happened back in 2006. Here's how Knight Ridder reported it at the time:

With pressure mounting to extend next Monday's enrollment deadline for the Medicare prescription-drug benefit, the Bush administration took another small step in that direction Tuesday, waiving penalty fees for very low-income seniors and people with disabilities who sign up late....The move follows a recent administration decision to allow the same impoverished beneficiaries to sign up for Medicare drug coverage until Dec. 31.

"In other words, you can apply after May 15th without penalty. And that's important for low-income seniors to understand," President Bush told a group of older Americans in Sun City Center, Fla., on Tuesday.

This is mostly being used to show Republican hypocrisy. They're all yelling and screaming about President Obama's "lawlessness" in extending the deadline for Obamacare signups, but none of them uttered a peep of protest when President Bush did the same thing. What a bunch of partisan hacks.

And fair enough. But I have a different lesson to take from this: You'll notice that Bush treated his extension like something worth taking credit for. He personally announced it. In a speech. That showed up on television. And people heard about it because the press pays more attention to things when the president says them.

Obama's deadline extension, by contrast, was passively conveyed to the media via anonymous "administration officials." Granted, Obama is in Europe at the moment, and maybe he'll say something personally when he gets back. But even if he does, it'll be old news by then and nobody will bother with it.

That's a missed opportunity. And it's especially unfortunate given today's news that 61 percent of the currently uninsured are unaware of the March 31 deadline. It sure seems like the deadline extension would have been a handy excuse to put the president in front of the cameras to tell everyone that they had only a few days left to start the signup process.

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Republicans Prepare Bill to End NSA Phone Metadata Program

| Wed Mar. 26, 2014 4:18 PM PDT

Earlier this week President Obama announced a proposal to shut down the NSA's bulk collection of telephone metadata. I thought that was great, but wondered if Republicans would go along. After all, it's an election year, and it might make a good political football even if lots of Republicans are already on record opposing the program.

Well, apparently Republicans plan to go along. Dave Weigel reports:

By Tuesday morning the Republican-run House Intelligence Committee was polishing and promoting the End Bulk Collection Act of 2014, which would grudgingly achieve much of what the White House grudgingly asked for. On Tuesday afternoon, Sens. Rand Paul, Ron Wyden, and Mark Udall strolled into a Senate hallway bustling with reporters to accept the NSA’s partial surrender.

....“It’s very clear now that the administration agrees with us,” said Wyden....“They’re looking for congressional permission to stop doing what they’re doing,” said Paul....“The Congress ought to codify what the president’s done so the message is sent to future presidents,” said Udall.

....It was exactly what the administration and the NSA’s defenders wanted to hear. They’d never wanted to end metadata collection. They defended it for months....“I passionately believe that this program saved American lives,” said Rogers at an hourlong press conference with Rep. Dutch Ruppersberger, the committee’s ranking member, where they outlined their bill to end bulk metadata collection....“I started out with, maybe we ought to stick with the program that has been tested, legally overseen, and protects civil liberties. Well, we’re beyond that. We get that.”

We don't know exactly what the EBCA will contain, or what it will look like once it's gone through the sausage factory. At the moment, though, it looks likely that Congress will indeed end the NSA's metadata collection program. That's good news. It's better to have it come from Congress than from an executive order.

New Dwarf Planet Named After Joe Biden

| Wed Mar. 26, 2014 2:27 PM PDT

Guess what? Joe Biden now has a dwarf planet named after him:

The new planetoid, estimated about to be about 250 miles wide, is now 7.7 billion miles from the sun. That is about the closest it gets. At the other end of its orbit, the planetoid, which for now carries the unwieldy designation of 2012 VP113, loops out to a distance of 42 billion miles....For convenience, the scientists shorten the 2012 VP113 designation to VP, which in turn inspired their nickname for planetoid: Biden, after Vice President Joseph R. Biden.

Appropriately, the actions of the Biden dwarf suggest the presence of something more powerful in the neighborhood:

Intriguingly, the astronomers said that details of the orbits hint at perhaps an unseen planet several times the size of Earth at the solar system’s distant outskirts....Trujillo and Dr. Sheppard point out that Sedna and 2012 VP113 have similar values for one orbital parameter known as the argument of perhelion, as do several other bodies at the edge of the Kuiper Belt. That could be a sign of the gravitational influence of an unseen planet.

Computer simulations showed that the data could be explained by a planet with a mass five times that of Earth at a distance of 23 billion miles from the sun, too dim to show up in current sky surveys.

The bad news is that if this turns out to be true, it "could reopen the debate over the definition of 'planet.'" Please. Not that. Haven't we done enough damage to the solar system already?

Opposition to Obamacare Appears To Be Shrinking as Problems Get Resolved

| Wed Mar. 26, 2014 11:00 AM PDT

The latest Kaiser Health Tracking Poll is out, and Greg Sargent summarizes the highlights: "Views of the ACA remain unfavorable, but the gap is narrowing.....Support for repeal continues to shrink....Crucially, a majority, 53 percent, say they are tired about hearing about the law and want to move on to other issues....Most of the ACA’s individual provisions are wildly popular."

There's one other interesting note from the latest poll, along with one frustrating note. First the interesting note. On Monday I mentioned that views of Obamacare had become dramatically less favorable among the uninsured. Apparently that was short-lived. Here's the latest:

This suggests that the main reason for the blip was Obamacare's well-publicized rollout problems. Once those got addressed, and people were able to sign up without too much hassle, opinions turned back around.

And now for the frustrating note. I've mentioned several times before that a simple approval/disapproval question about Obamacare is misleading. The problem is that there's a fair chunk of the population that disapproves of Obamacare not because it's a government takeover of health care, but because it doesn't go far enough. These are people who are perfectly happy with the idea of national healthcare, but want Obamacare to do more. This is obviously not part of the standard conservative critique that we automatically think of whenever we hear about "disapproval" of Obamacare.

This month, Kaiser asked about this in more detail than before. Among those who disapprove, they asked why they disapproved. Here's what they got:

So close! The bottom two answers are clearly right-wing concerns. But the first one is mixed. "Cost concerns" is split between people who think the subsidies are too low (left-wing criticism) and those who think it's a budget buster (right-wing criticism). Those are very different things. This was a great opportunity to really get a read on how much right-wing opposition there really is to Obamacare, but this poll  doesn't quite do it. Maybe next time.

Narrow Networks Are Going to Bite a Lot of Obamacare Customers

| Wed Mar. 26, 2014 9:54 AM PDT

A few days ago, reader JF sent me an email about a problem he's had with his new Obamacare policy:

I’m a single dad living in LA. I have been underemployed/unemployed for the past few years, and until January had been paying through the nose for an individual policy for myself and my son. I am very familiar with the ins and outs of health insurance and I’m used to checking with every provider beforehand to quantify out of pocket costs. It was a godsend to have affordable insurance as of January. I qualified for a heavily subsidized Silver plan. I want the ACA to work, and to work well.

It didn’t for me. Here’s what happened. The first time I sought care under my new policy it was in January for a standard annual checkup. I’m a healthy guy so for me it’s a few questions from the doctor and then they draw blood. My ACA plan allowed me to get this care with a co-pay of $3.

Then I got the bill from the blood lab for $800. The doctor sent it to a lab outside the ACA network. Yeah, I know, I could have double checked with the doc to make sure the blood was sent to an in-network lab (I had already checked once). Bottom line is that a CBC blood test is going to cost me EIGHT MONTHS worth of my subsidized insurance premiums.

Here’s the bad story on the horizon: Imagine what’s going to happen when millions of newly insured people, not savvy about how to police health care costs, start to get bills that far exceed what CoveredCA or healthcare.gov promised them? “My Obamacare policy cost me $800 for a blood test” is the next headline. It’s in line with the horror stories from Steven Brill last year.

I think progressives need to start talking about this because it should be addressed by our side, not just to avoid mid-term election embarrassment, but because poor folks can be harmed by it. Hand waving this away as “we got poor people insurance, our job is done” is a mistake.

How common are experiences like this? Common enough that a recent Commonwealth Fund report explicitly addresses this precise problem. Andrew Sprung saw the report, and it triggered his memory about a similar problem he had a few years ago when he checked himself into an ER with chest pains:

The ER team decided to keep me overnight and informed me that I would be checking out against advice if I left early. By the time I'd had two EKGs it was clear nothing was wrong with my heart, but I subjected myself to a CT-scan with stress test, an ultrasound, and a $20k tab of which we paid nothing except maybe a $100 deductible (and which the self-insured hospital network essentially paid itself, I suppose).

So I was weak and foolish — with one exception. At the beginning, I had to sign a release agreeing to pay for any out-of-network care I received in-hospital. The attending doctor was at hand at the time. I asked him if he was in-network. He said he didn't know. I said, how can you not know? He said his office dealt with "hundreds" of insurance plans. He offered to check. I said please do. He came back a few minutes later and said he had confirmed that he accepted the insurance plan provided to employees of the hospital he was standing in.

So there are several lessons here. First, narrow networks aren't unique to Obamacare. They've been a growing problem with private insurance plans for years (see chart on right). Second, it gets worse with Obamacare in some states because of the narrow networks supported by nearly all ACA insurers. For example, JF confirmed to me that he had a Blue Shield plan, but that's not the whole story. "The blood lab in question is in network for Blue Shield, but not for Blue Shield CoveredCA plans, as per everyone I’ve spoken to about it."

Third, it's really hard to be alert enough all the time to avoid this. You have to remember to ask every time. You have to ask every doctor, and you have to ask for every lab test. And most doctors don't know, and don't really want to be bothered finding out. So you have to be very, very persistent.

And most of us aren't very, very persistent. Especially if, say, we're in an ER worried that chest pains might be an indication of an oncoming heart attack.

How big a deal is this? I don't have any way of knowing. But JF is certainly right that it's the kind of thing that can give Obamacare a bad name if it happens often enough. Unfortunately, there's no plausible legislative tweak to address this, since Republicans are implacably opposed to improving Obamacare in any way, shape, or form. At best, there might be a way to partially address it with HHS regulations.

In any case, buyer beware. If you have any kind of health coverage at all, this is probably something to keep in mind. If you have an Obamacare policy, especially in a narrow-network state like California, it's something to keep doubly in mind.