Kevin Drum

Chart of the Day: The Job Market For College Grads is Tougher Than Ever

| Thu Jan. 16, 2014 2:46 AM EST

A new report from the New York Fed offers a grim take on the job prospects of recent college grads. It finds that underemployment (i.e., working at a job that doesn't require a college degree) has averaged around 40 percent for the past two decades, going down a bit during economic expansions and up a bit during recessions.

But if the rate of underemployment itself hasn't changed very much, the nature of underemployment sure has. It's gotten worse. Take a look at the thick lines in the chart on the right. They show what happens to recent college grads who can't get college-level jobs. The number who get good non-college jobs has plummeted from 50 percent to 35 percent. The number in low-wage jobs has risen from 15 percent to 20 percent. And needless to say, these grads also have quite a bit more student loan debt than grads from the early 90s.

Getting a college degree is still worth it. But there's not much question that today's college grads have it tougher than previous generations did. And the 40 percent who don't find good jobs have it the toughest of all.

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Opposing View: Yes, We Should Keep Adding "Gate" to Every Flap

| Wed Jan. 15, 2014 11:04 PM EST

USA Today's media columnist, Rem Rieder, is tired of the rest of us tacking gate onto the end of every conceivable scandal. Here's his argument:

It's not cute. It's not cool. It's not clever.

I will give it knee-jerk. And lazy. And oh, so predictable.

But it's not supposed to be cute, cool, or clever. It's supposed to be knee-jerk, lazy, and predictable—or, as the rest of us refer to this quality, instantly recognizable. Tomato, tomahto, my friend.

Perhaps recognizing the tenuousness of his case, Rieder adds this:

But there is a more serious reason to show gate to the gate. By awarding the suffix to everything from serious government misconduct to the exposure of Janet Jackson's breast during the halftime show of Super Bowl XXXVIII (surely you remember Nipplegate), you create a false equivalency that ends up trivializing everything.

That certainly was the take of Sam Dash, who served as chief counsel to the Senate Watergate Committee all those years ago. "When people hear this proliferation of 'gates,' they feel the press is telling them this is the same as Watergate, and whatever Watergate has stood for has lost its meaning," Dash told Suzan Revah of American Journalism Review.

I dunno. We've been slapping gate on the end of things for 40 years now, and Richard Nixon's notoriety remains safe. So I don't really think this argument holds water. Besides, gate actually has a very specific meaning. Watergate was the first big example of scandal as public spectacle during the media age, and because of this gate is generally reserved for spectacles large and small. But it's not used for things that go beyond the realm of political spectacle. There's no such thing as Benghazi-gate because that was a tragedy in which people died. Likewise, there's no Surveillance-gate or Waco-gate. Its use is actually surprisingly specialized.

Still, what if we did all get tired of gate? What would we replace it with? It would be even more boring to just call all these things scandals, and that wouldn't clearly identify them anyway. But maybe we could poach some other scandal-related suffix? What options do we have? Teapot Dome. Crédit Mobilier. The Plame Affair. Iran-Contra. The XYZ Affair. The Keating Five. Chappaquiddick. The vicuna coat. Let's try these out to see how they sound as a replacement for Bridgegate:

  • Bridgedome
  • Bridgemobilier
  • Bridgeplame
  • Bridgecontra
  • Bridgexyz
  • Bridgekeating
  • Bridgechappaquiddick
  • Bridgevicuna.

It's hopeless. Teapot Dome is the only one that works—though I'll confess that Bridgexyz has certain possibilities depending on how you pronounce it. So that's that. We either keep using gate or else switch to dome. I think we're better off sticking with gate.

It's Time to Fix the Housing Finance Market

| Wed Jan. 15, 2014 4:18 PM EST

Yesterday I mentioned Brad DeLong's belief that the biggest problem with the economy right now is the weak housing market:

I find it very hard to escape the conclusion that the big bad thing going on in the third millennium is not the excess construction of the mid-2000s housing bubble--a sum of 7.5% points of annual GDP....but rather the additional 20% points of annual GDP of residences not built since 2007 because of the financial crisis, resulting depression, and breaking of housing finance.

The chart above shows what DeLong is talking about. Housing was overbuilt in the aughts, but we've more than made up for that. The shortfall in new housing starts since 2008 is far larger than the excess between 2002 and 2007.

So what's the problem? Felix Salmon, keying off a New York Times piece today, writes that a big reason for the continuing weakness of the housing market is the inability of even people with good credit to get mortgages.

Anecdotally, it’s much harder to get a mortgage now than it used to be. In the NYT article, the Center for American Progress’s Julia Gordon says that “a typical American family” with a credit score in the low 700s is “being left out”: that’s a very long way from subprime, which is what you’re considered to be when your credit score is below 620.

Meanwhile, here in Manhattan, no one in my condo building has been able to sell or refinance for the past couple of years, thanks to an ever-shifting series of rules at various different banks, all of which are clearly designed to just give them a reason to say no.

The chart below shows this dramatically:

Needless to say, mortgages were too easy to get in 2006, and we don't want to go back to that level. But neither do we want to be where we are now. Salmon believes the problem is fairly simple: it’s not because of new rules about qualified mortgages or anything else regulatory, it's simply because 30-year fixed mortgage rates are currently running at about 4.5 percent. "Would you lend money fixed for the next 30 years at a rate of less than 5%?" he asks.

The 30-year fixed mortgage is mostly a creature of Fannie Mae and Freddie Mac, who have historically bought up and securitized 30-year fixed mortgages so that banks didn't have to keep them on their books. They aren't doing that as energetically as they used to, and this has depressed the entire mortgage market. So what to do? DeLong suggests the answer lies with the government: "Have Mel Watt's FHFA end policy uncertainty about housing finance and rebalance the construction sector to fill in our current 20%-point of annual GDP housing capital deficit." Salmon suggests the answer might be the opposite: "Phase out the 30-year fixed-rate mortgage entirely, since it’s a product no private-sector financial institution would ever offer." But both agree that the mortgage market is a crucial part of getting the economy back on its feet. Here's Salmon:

One thing is clear: for all that the Fed has been pumping billions of dollars into mortgage securities as part of its quantitative easing campaign, all that liquidity has failed to find its way to new homebuyers. I’m in general a believer in renting rather than buying, but the US is a nation of homeowners, and in such a country, a liquid housing market is a necessary precondition for economic vitality. Right now, we don’t have one — and we don’t have much hope of getting one in the foreseeable future, either.

With household deleveraging having now run its course, this is a good time to start thinking more seriously about the housing market. It's not a silver bullet, but there are plenty of families out there willing to fund more residential construction if only they could get a mortgage. Not a go-go-no-doc-no-down bubble mortgage, just a normal mortgage for normal people. This is something that President Obama should probably be thinking pretty hard about.

Quote of the Day: How Dare You Use Notes in My Presence!

| Wed Jan. 15, 2014 1:45 PM EST

From Supreme Court Justice Antonin Scalia, to a lawyer making his first appearance before the court:

Counsel, you are not reading this, are you?

I'll second Josh Blackman's reaction: this is a dick move by Justice Scalia. Maybe it's time for him to step down and take over the Andy Rooney spot on 60 Minutes. That seems to be more his speed these days.

We're Passing a Budget, But Not a Debt Ceiling Increase? Why?

| Wed Jan. 15, 2014 1:27 PM EST

Ed Kilgore comments on the imminent passage of the recently agreed trillion-dollar spending bill:

It seems leaders of both parties in Congress have decided to low-key the whole thing. Republicans are supposed to like the bill because it reduces domestic spending below the levels that prevailed when George W. Bush left office, and contains a lot of conservative policy riders. Democrats are relieved it restores funding from sequestered accounts, and that the riders mostly aimed at the capillaries of major progressive priorities. And everyone can shrug and say the bill just implements December's budget "deal," which Congress already approved.

Still, the deadly duo of Heritage Action and Club For Growth are opposing the omnibus bill as a "scored" vote, which means the ratings of Members for voting "wrong" will be affected. And you'd better believe conservative primary challengers around the country will be uniformly opposing the bill and trying to make it an issue. So even if omnibus appropriations slide through Congress without a lot of noise, markers are being laid down that could matter down the road.

Maybe I'm naive, but why aren't both parties also in favor of adding a debt ceiling increase to this bill? Democrats should favor it because it avoids another dumb fight down the road. Republicans should favor it because they're already taking a scoring hit over this vote anyway, so why not toss in the debt increase and avoid a second scoring hit later in the year?

I know, I know, Republicans are still vainly hoping to use the debt ceiling to screw some concessions out of Obama. And perhaps they don't want to set (or revive, actually) the precedent that spending bills which create deficits should approve the payment of those deficits at the same time. Still. It sure seems like everyone would be better off getting this whole thing off the table at once. Don't Republicans want to spend the rest of the year complaining about Obamacare, not losing yet another debt ceiling fight?

Obama Plans No Significant Changes to NSA Surveillance

| Wed Jan. 15, 2014 12:23 PM EST

Well, it looks as if our surveillance practices are going to be "reformed" in such a way that basically nothing changes at all:

Mr. Obama plans to increase limits on access to bulk telephone data, call for privacy safeguards for foreigners and propose the creation of a public advocate to represent privacy concerns at a secret intelligence court. But he will not endorse leaving bulk data in the custody of telecommunications firms, nor will he require court permission for all so-called national security letters seeking business records.

The emerging approach...suggested a president trying to straddle a difficult line in hopes of placating foreign leaders and advocates of civil liberties without a backlash from national security agencies....The decision to provide additional privacy protections for non-American citizens or residents, for instance, largely codifies existing practices but will be followed by a 180-day study by the director of national intelligence about whether to go further. Likewise, instead of taking the storage of bulk data out of government hands, as recommended by a review panel he appointed, Mr. Obama will leave it in place for now and ask lawmakers to weigh in.

I think it's safe to say that the director of national intelligence will not be recommending any serious changes after he undertakes his study. My read of this piece is that Obama will recommend a few cosmetic changes; mandate better security to prevent any future Snowdens; and punt the rest to Congress, knowing perfectly well they'll do nothing.

This is no surprise. But it's disappointing anyway. The military-surveillance complex has pretty obviously won this round.

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Quote of the Day: The War Party Is Working Hard to Make Iran Look Like a Victim

| Wed Jan. 15, 2014 2:37 AM EST

Jeffrey Goldberg:

It would be quite an achievement to allow Iran, the world’s foremost state sponsor of terrorism, to play the role of injured party in this drama. But the Senate is poised to do just that.

Goldberg is talking about the possibility that the Senate will pass a sanctions bill against Iran just as the Iranians have finally agreed to come to the table and negotiate an agreement to dismantle their nuclear program. As Goldberg says, this makes sense only if you're hellbent on a military strike against Iran and flatly eager to sabotage anything that might lead to a peaceful settlement. It's hard to believe that this is the position of the entire Republican Party as well as a pretty good chunk of the Democratic Party, but apparently it is. It's especially hard to believe given the realities of what it would accomplish:

While it could set back (though not destroy) Iran’s nuclear program, it could also lead to the complete collapse of whatever sanctions remained in place. In addition, it could unify the Iranian people behind their country’s unelected leader, Ayatollah Ali Khamenei — a particularly perverse outcome. And in some ways, an attack would justify Iran’s paranoia and pursuit of nuclear weapons: After all, the regime could somewhat plausibly argue, post-attack, that it needs to defend itself against further aggression. A military campaign should be considered only when everything else has failed, and Iran is at the very cusp of gaining a deliverable nuclear weapon.

....So why support negotiations? First: They just might work. I haven’t met many experts who put the chance of success at zero. Second: If the U.S. decides one day that it must destroy Iran’s nuclear facilities, it must do so with broad international support. The only way to build that support is to absolutely exhaust all other options. Which means pursuing, in a time-limited, sober-minded, but earnest and assiduous way, a peaceful settlement.

This is exactly right. As it happens, I doubt that we'll be able to reach a final deal with the Iranians. In the end, I think Iran's hawks have too much influence and just won't be willing to give up their nuclear ambitions. What we'll do then is anyone's guess. But as Goldberg says, even if you're a hawk who favors a military strike, surely you're also in favor of demonstrating to the world that we did everything humanly possible to avoid it. What possible reason could you have for feeling differently?

When It Comes to Process, We Are All Hypocrites

| Tue Jan. 14, 2014 7:49 PM EST

Just before lunch I wrote a post suggesting that if conservatives win their fight against Obama's recess appointments, they're probably just shooting themselves in the feet since the most likely victims will be fellow conservatives. Over at The Corner, Charles C. W. Cooke takes exception:

As a matter of practical politics, this may be true. Nevertheless, the “nice work, conservatives” line only makes sense if one presumes that all that matters in a system of government is raw political power, and that the role of the citizenry is to try to bend the rules for the short-term favor of their chosen party. I can only speak for myself and for the many conservatives who, like me, have kicked up a fuss over this, but I can assure you that the checks and balances contained within the Constitution really do matter to us.

....Republicans and Democrats alike ignore the Constitution when it suits them. Indeed, that politicians are self-interested and that they will subjugate principle to personal political profit is precisely why we have a codified charter of power. This notwithstanding, there is no reason for unaffiliated writers to look at these questions with such a cynical, will-to-power eye — especially when they write for an outlet that sees itself as continuing the traditions of a woman whose raison d’être was, she said, to “abide where there is a fight against wrong.”

Let's stipulate that I'm pretty cynical when it comes to this kind of stuff. But am I wrong? My take is that liberals and conservatives tend to be tolerably consistent and principled on matters of policy. Working politicians obviously tailor their messages depending on when, where, and to whom they're speaking, but generally speaking, liberals aren't going to suddenly oppose national healthcare just because Obamacare is having some growing pains and conservatives aren't going to suddenly favor high capital gains rates just because bankers have become a wee bit unpopular.

However, when it comes to matters of process, neither liberals nor conservatives tend to be very principled. Both sides have switched their view on filibuster reform based on who happens to be in power, for example. Likewise, they've traded places on their tolerance for broad claims of executive power between the Bush and Obama administrations.

Both sides will claim that there are subtle differences that justify these switches. Spare me. It happens too often to be anything other than picking whichever rule happens to favor your side. So here's my question:

  • How many examples can we come up with in which either liberals or conservatives have consistently supported a matter of process that works against their own interests?

I'm not interested in individuals here. I'm not interested in policy issues. I'm not interested in positions that are being taken right this moment. I'm looking for things in which a significant majority of one side or the other has consistently supported a procedural matter that works against their own policy interests. Help me out here.

Conservatives Shoot Own Feet In Recess Appointment Case

| Tue Jan. 14, 2014 3:31 PM EST

Can a president make a recess appointment if the Senate leaves town but declares itself in session anyway? The Supreme Court heard arguments on this question yesterday, and judging from the questioning, it looks like the answer is going to be no. Even the liberal justices seem inclined to tell President Obama that it's up to the Senate to decide when it's in recess, even if the recess is a bit of a sham. Jonathan Bernstein provides some of the background here.

Fair enough, I suppose. But it sure is bad timing for the conservatives who are pressing this case. After all, it doesn't really matter anymore, now that Harry Reid has done away with the filibuster for presidential confirmations. Obama no longer needs to make any recess appointments because Democrats can just confirm his nominees in the usual way. That could change after the midterm elections if Republicans take back the Senate, but it probably won't. And either way, the electoral landscape almost guarantees that Democrats will retain (or regain) control of the Senate in 2016.

In other words, effectively doing away with recess appointments probably won't hurt Democrats at all over the next few years, but might very well hurt Republicans if they win the White House in 2016. Nice work, conservatives.

Ignore the Republicans: Obamacare Is Doing Fine

| Tue Jan. 14, 2014 2:21 PM EST

I've been writing a bit less lately about Obamacare, and there's a reason for that: It's a done deal. It's not going to be repealed; the website woes have mostly been fixed; and we're now at a point where we're simply not going to know how it works out until it's been up and running for a while. Obsessing over every interim report and every Republican screamfest doesn't make much sense. We just have to wait and see.

For example: the latest bit of manufactured Republican hysteria concerns an interim report showing that 2.1 million people signed up on the exchanges through January 1 (not bad, really), but only 24 percent of them are young people. That's potentially a problem, since insurers rely on a certain mix of old and young when they set their premium levels. Older people tend to be sicker, so if there are more older people than they expect then they'll have to raise premiums.

As it happens, this is almost certainly not a real problem. Younger people tend to wait longer to sign up for insurance, and that 24 percent number will most likely rise through the end of the year. But what if it doesn't? As it turns out, nothing much will happen. Ezra Klein explains:

The risk of a "death spiral" is over. The Kaiser Family Foundation estimates that if the market's age distribution freezes at its current level — an extremely unlikely scenario — "overall costs in individual market plans would be about 2.4% higher than premium revenues." So, in theory, premiums costs might rise by a few percentage points. That's a problem, but it's nothing even in the neighborhood of a death spiral.

There are additional details that make this even less of a problem than that, but who cares? That's enough. The 24 percent number is extremely likely to go up; the impact will be very small if it doesn't; and there are transitional policies that smooth out any problems in the first few years anyway. Bottom line: Republicans are trying to make hay with this, but that's just Republicans being Republicans. You can safely ignore them. There's really nothing much to worry about here.