Kevin Drum

Carter's Legacy

| Fri Jan. 8, 2010 2:48 PM EST

Matt Yglesias pushed back yesterday against the idea that the only people who think Jimmy Carter was a good president are "people who are too young to actually remember the Carter years." But then he conceded: "Does that mean Carter was a great president? No. Obviously, he left little in the way of enduring achievements."

I think that deserves some pushback of its own. Carter was president during a difficult period, and politically he turned out to be fairly tone deaf and ineffective. As someone who didn't vote for his reelection in 19801 I won't defend him as a great president, but substantively he left behind more in the way of enduring achievements than most people give him credit for. He was the first president to make human rights a centerpiece of our foreign policy, a stance that Ronald Reagan adopted to great effect and something that's been a part of American diplomatic relations ever since. He managed to return the Panama Canal to Panama, a brave, politically costly fight that could have been disastrous if he'd lost it. He helped make peace between Israel and Egypt at Camp David. He appointed Paul Volcker as Fed chairman and allowed him to begin squeezing inflation out of the economy — something that very possibly cost him the 1980 election. He began the wave of deregulation that Reagan and others extended for the next 30 years. He started the secret war against the Soviets in Afghanistan. And although his efforts to push energy conservation died after he left office, they look prescient now.

This is actually a pretty substantial legacy — but it isn't entirely liberal or conservative. Liberals generally look favorably on Carter's work on human rights and the Middle East. Conservatives favor — or should favor, if they're being honest — his deregulatory efforts, the appointment of Volcker, and his willingness to engage the Soviets in Afghanistan. I've always suspected this is why Carter gets so little love: his overall legacy has too many conservative elements for liberals to really embrace him, but his non-hawkish attitude toward the Cold War and his inability to rally the country make him a conservative bête noir. And of course, his achievements have been overshadowed by his ultimate association with stagflation, oil shocks, and the Iranian hostages. But none of that alters the fact that, for better or worse, he changed the country more substantially than I think most people realize.

1Since I always get asked this, no, I didn't vote for Reagan. I voted for John Anderson.

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Leverage and the Housing Bubble

| Fri Jan. 8, 2010 1:08 PM EST

Paul Krugman and Megan McArdle agree: the housing bubble wasn't caused by either predatory lending or the evil CRA. How do they know? Because if either of those were the explanation, then only residential housing would have been affected. But in fact, commercial real estate went through essentially the same boom/bust cycle,as shown in the chart on the right.

I think that's basically right. There was plenty of predatory lending, but I suspect that causation goes in the other direction: the bubble provided more opportunity for predatory lending, not the other way around. And the right-wing theory about the Carter-era Community Reinvestment Act being responsible for the bubble has never been anything other than crazy. There's just no evidence for it at all.

The one thing that does tie together both the residential and commercial bubbles, however, is leverage. In both cases, prices were propped up by vastly increased use of debt and leverage at all levels. Home buyers were allowed to take out mortgages with tiny (or no) down payments. Loan-to-value ratios (the rough equivalent in the CRE world) took off. The resulting mortgages were securitized and sold off so they wouldn't count against bank capital requirements. Those in turn were transformed into derivatives with lots of additional baked-in leverage. The derivatives were then insured via credit default swaps to essentially remove them from bank balance sheets. And all along the way, both the SEC and international regulators obligingly reduced bank capital requirements. Put together, all of this allowed effective leverage ratios at big banks and hedge funds to soar and debt levels among consumers to reach record heights.

All of that affected the pool of money that drove both the residential and commercial real estate booms in multiple countries. It's not the only explanation for the bubble (fraud and predatory lending helped feed the fire, as did Ben Bernanke's "savings glut" and the insane belief in the ability of derivatives to hedge away all risk), but it's at the core. It was at the core of this bubble, just as it was at the core of the collapse of Long Term Capital Management, the Asian crisis of 1998, the Nordic bubble of the early 90s, the Japanese bubble of the late 80s, and, if you want to back further still, the stock market crash of 1929. If you want to control asset bubbles, you have to control leverage. Not eliminate it, but control it. The fact that neither U.S. nor European regulators have seriously taken this on over the past year is a very discouraging sign that all we're doing with regulatory reform is tinkering around the edges. If we don't get serious about leverage, 2008 is going to happen all over again in another decade.

Healthcare and Wages

| Fri Jan. 8, 2010 12:35 PM EST

Do increases in healthcare costs restrain wage growth? Or, put another way, can we blame skyrocketing healthcare premiums for the fact that cash wages over the past three decades have been largely stagnant for the middle class?

There was some discussion of this topic while I was away, but I think it got a bit confused because there are actually two questions here. First, if employers have to pay more for healthcare, will they pay less in wages? I don't think there's any question that this is the case. Austin Frakt rounds up the academic evidence here, but frankly, you hardly need it. The effect of healthcare costs will vary over short-term periods thanks to economic conditions and general wage friction, but over the long term employers are plainly willing to pay only a certain amount for certain jobs. That amount includes wages, benefits, retirement, payroll taxes, and so forth. There's just no way around that. Money paid for healthcare is not some magical source of income that doesn't count against a company's income statement, and every company in the world bigger than your local dry cleaner works on the basis of total burdened payroll, not just cash wages.

But the second question is quite different. Lawrence Mishel of EPI tries to argue here that healthcare premiums don't have much effect on wages, but all he really shows is that the correlation is imperfect over short time periods. That's not controversial. Over the long term, however, it's simply not plausible that healthcare costs don't affect total compensation on pretty much a 1:1 basis.

But Mishel does answer the second question: can we really blame healthcare for stagnant middle class earnings?

Health care costs were just 7.6% of total compensation and 9.4% of total wages (all wages paid, including premium pay, paid leave, and so on) in 2007. The share of health care in total wages (in nominal, non-inflation adjusted terms) grew from 7.2% in 1989 to the 9.4% in 2007, suggesting that the expanded role of health costs could have reduced wage growth by 2.2% over this entire 18-year period, or 0.12% each year.

A couple of months ago, I did a quick and dirty calculation of healthcare costs over the past decade and concluded that their overall effect was small. In pure cash terms, median wages went down about 4%. If you add in healthcare premiums, median wages went up 1%. That's a difference of about 0.5% per year, which is nothing to sneeze at, but the fact remains that even if you count healthcare premiums, average incomes were almost completely flat. I've done the same rough calculation for the past three decades and come to the same conclusion over that period: There's no question that healthcare premiums have an effect on wages, but even when you account for them, median income still grew very slowly. Healthcare simply isn't more than a modest part of the explanation for sluggish wage growth.

Uganda and "Kill the Gays"

| Thu Jan. 7, 2010 5:27 PM EST

Flickr/eye2eye (Creative Commons).Flickr/eye2eye (Creative Commons).Over at Digby's place, tristero highlights this section of my post on Uganda's proposed "Kill the Gays" law:

...it's been hard for [Andrew] Sullivan to find examples of the National Review or the Weekly Standard or the American Conservative or Commentary denouncing the Ugandan law. The writers at those magazines may disagree with Sullivan on a lot of things, but I suspect they think it's pretty obvious to most Americans that executing gay people is wrong.

But not all conservatives think executing gay people is wrong, tristero says:

I doubt - except when I'm in a particularly unforgiving mood - that any American evangelical directly told anyone in Uganda to sponsor a "kill the gays" law. But the concept is far more common among American christianists than Nick Baumann realizes, and I have no doubt that the language those evangelicals did, in fact, use in Uganda, made capital punishment for homosexual behavior sound like a reasonable idea....

There's a larger point here: Christianists, and the modern GOP, are far more radical than many people, no matter how well-meaning and intelligent, realize. Buffoons they certainly are, but they are very, very powerful buffoons. The Ugandan law is a direct outgrowth of radical American christianism and its high-level reach within our national politics.

There are a lot of good points in there, and the whole post is worth a read. Part of what I was trying to get at in my post is that one reason conservative writers might be reluctant to make detailed arguments against the Ugandan law is that doing so would force them to confront the more unpleasant parts of their coalition. It's not good politics (or particularly pleasant) to be seen associating with people who need to be convinced that gays shouldn't be executed or that slavery is bad. The reason that most people don't realize how radical some "Christianists" are is that smart politicians keep their most controversial views and associations close to the vest. It's not good politics if you're known to be associated with an organization whose members (according to Jeff Sharlet) were supposedly behind the Ugandan "kill the gays" bill. In other words, there's a reason that the Family is a secret organization.

Kevin is traveling today.

Why Richard Blumenthal is Popular

| Thu Jan. 7, 2010 3:43 PM EST

Flickr/kellynigro (Creative Commons).Richard Blumenthal | Flickr/kellynigro (Creative Commons).Sen. Chris Dodd announced his retirement on Wednesday. Later that day, Richard Blumenthal, Connecticut's attorney general, announced he would run for Dodd's seat. Democrats are psyched because they know they have a better chance to hold on to the seat with the very popular Blumenthal on the ticket as opposed to the unpopular and scandal-tainted Dodd. But who is this Dick Blumenthal? And why is he so popular?

Back in 2000, David Plotz wrote a great piece for Slate about Blumenthal, who was about to enter his second decade as Connecticut's attorney general:

Blumenthal was supposed to be "the Jewish Kennedy." Now the 54-year-old finds himself in the autumn of his career fighting for Joe Lieberman's sloppy seconds. Blumenthal is blessed with every political virtue except recklessness and luck. His résumé makes Gore's look like a high-school dropout's....

What Lieberman had begun [as Connecticut attorney general before him], Blumenthal perfected. He turned consumer advocacy into high art and helped lead the nationwide trend of AG activism. According to Yale legal scholar Akhil Reed Amar, Reagan-era deregulation and congressional gridlock left a power vacuum, especially in antitrust law and consumer protection. AGs, always trolling for power and press, rushed to fill it. Blumenthal proved a master. Ambitious, independent, and fiercely committed to progressive activism, he was creative in finding causes related (however tenuously) to the well-being of Connecticut. He joined the anti-tobacco posse early then led the AGs as they piled on the Justice Department's Microsoft suit. Blumenthal spearheaded the national campaign against deceptive sweepstakes mailings and has taken a prominent role in negotiating with gun manufacturers.

In 2007, Mother Jones' own Stephanie Mencimer wrote about Blumenthal's No. 1 foes: big business lobbies like the US Chamber of Commerce and the Competitive Enterprise Institute:

[T]he Competitive Enterprise Institute issued a "study" on the nation's "Top Ten Worst State Attorneys General." CEI has been heavily funded by tobacco, auto, and utility companies and has been active in fighting off attempts to mitigate global warming. Public enemy No. 1 for CEI is Connecticut attorney general Richard Blumenthal.

In all this is a clue to Blumenthal's popularity. He's visible—he's always in the news, taking on "bad guys" and suing corporate villains. And he has a job in which it's really easy to be on the side of "the people."

I grew up in Connecticut. When people had a problem with a company, they seemed just as likely to go straight to the AG's office as they were to call the Better Business Bureau or their state representative. And when you complain to the AG's office about a problem and they end up doing something about it, you remember it. Blumenthal has two decades worth of individuals who his office helped, and two decades worth of suing companies like Countrywide that were the focus of populist rage. Those companies hate him for it, of course, but ordinary people tend to like him—a lot.

This is part of why liberals shouldn't shed too many tears for Dodd. Blumenthal's a better candidate, but he also has a chance to eventually become a better senator. He doesn't have Dodd's ties to Washington or Wall Street. He has all the right enemies. And he has lots of experience fighting the same interests that Dodd was seen as too cozy with. Blumenthal pioneered the concept of the modern state AG—Eliot Spitzer (first AG, then governor of New York) and Sheldon Whitehouse (first AG, then senator from Rhode Island) were just following in his footsteps. Now it's finally Blumenthal's turn.

Kevin is traveling today.

Chuck Lane Annoys Liberals

| Thu Jan. 7, 2010 2:41 PM EST

Peter Sarsgaard as Chuck Lane in the movie Shattered Glass. When they make Bureau of the Corn, I hope to be played by Zac Efron. (Promotional photo.)Peter Sarsgaard as Chuck Lane in the movie Shattered Glass. When they make Bureau of the Corn, I hope to be played by Zac Efron. (Promotional photo.)The real-life version of ex-TNR editor Chuck Lane (as opposed to the Shattered Glass version most of us are more familiar with) seems to have a habit of feuding with liberals. Last month he accused his fellow Washington Post writer Ezra Klein of promoting a "venomous smear" of Joe Lieberman, and a minor blogwar ensued. Now Lane's getting on liberals' nerves by hyping a study (also pimped by Fox News) that says the minimum wage kills jobs. The study is by longtime minimum wage opponent, and, as ThinkProgress notes, "almost all of the economic research on the subject shows that the minimum wage has little to no effect on employment," but Lane doesn't mention that. (He also doesn't mention Paul Krugman's detailed explanation of why reducing minimum wages could be counterproductive during a recession.) Here's the point, from DougJ at Balloon Juice:

The point here is not that Lane is an asshole for suggesting we lower minimum wage. Nor is to cast aspersion on the work of David Neumark, the economist whose work he cites.

The point here is that Neumark is an economist, who (rightly or wrongly) has made a career of criticizing minimum wage laws (his conclusions, based on my skim, are not simplistic). It’s simply nuts to hold up his work as the consensus of the entire field, especially since critics of Lane’s original article held up a large body of work by various authors who hold different positions on the issue.

I'm going to go to a somewhat unlikely source to try to resolve this dispute: The Economist. Even the libertarians from the other side of the pond acknowledged (paywall), in 2006, that the Democrats' plan to raise the minimum wage would probably not have significant negative effects on employment. They referred to Lane's source, Neumark, as "perhaps the leading sceptic about the minimum wage." But they also offered a suggestion I think a lot of people will be able to get behind:

[A] better tool exists for helping the working poor: the earned-income tax credit (EITC). This tax subsidy, a "negative income tax" that tops up the earnings of the low-paid, was introduced in the 1970s and has been expanded four times since.

Lane should do more to acknowlege that Neumark's research does not represent the consensus of economists. But there's room to work towards a resolution here: like The Economist, Lane supports increasing the EITC. That's great, because while economists do disagree (despite Lane's protestations) about the economic impact of increasing the minimum wage, they largely agree that increasing and broadening the EITC is a better option. Can't we all just get along?

Kevin is traveling today.

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Conservatives vs. Executing Gay People

| Thu Jan. 7, 2010 12:41 PM EST

Yesterday, Andrew Sullivan linked to this blog post by John Mark Reynolds, who blogs for First Things, the conservative ("theoconservative," according to some) Catholic magazine founded by the late Richard John Neuhaus. Sullivan praised Reynolds' "brilliant evisceration" of Uganda's proposed "execute gay people" law "from both a Christian and secular perspective." Here's how Reynolds launches his attack: 

Uganda may pass a law that could lead to the death penalty for homosexual behavior.

The proposed law is odious.

Due to the legacy of colonialism, Western people should be sensitive about interfering in sub-Saharan African politics and modest in making moral pronouncements regarding Africa, but this law deserves universal condemnation. Uganda experienced many evils under colonialism, including the loss of basic liberties.

Experiencing evil does not give a free pass to do evil and this bill is wicked.

It is not a close call.

No good can come of this bill and great harm will be done if it is passed.

The rest is here. I want to draw your attention to the comments section of Reynolds' post, which is pretty unique. It's not full of idiots or trolls, per se. The commenters make long, often well-reasoned arguments and show basic respect for each other. But the subjects they're arguing about are well outside mainstream political discourse. For example:

I have a friend who defends slavery on the grounds that the Bible does. No amount of quoting texts like Titus have helped. I have tried to show him the changing standards of morality that God holds us to while remaining faithful to the idea. I have hit a brick wall with him, but fell any time spent trying to talk someone out of ever saying in public that Christianity is okay with slavery is time well spent. Have you expounded on these ideas elsewhere in a fuller form that I might hopefully change his mind. Oh one other thing, what is the best introductory work on the Orthodox church, though I am Reformed, and not likely to change. I do feel there is a gap in my knowledge when I don’t know anything about a 1/3 of Christendom.

Reynolds responds—not to say that slavery is obviously wrong but instead to point to his work on the Bible's approach to slavery in a new Christian apologetic.

It's all well and good, I suppose, to offer lengthy attacks on the Ugandan law. But at this point in human history, given the experience of the twentieth century, some things should really be part of a broad moral consensus. The immorality of slavery or of executing minorities shouldn't really require long arguments.

I suspect this is why it's been hard for Sullivan to find examples of the National Review or the Weekly Standard or the American Conservative or Commentary denouncing the Ugandan law. The writers at those magazines may disagree with Sullivan on a lot of things, but I suspect they think it's pretty obvious to most Americans that executing gay people is wrong. The problem for conservatives is that it's inconvenient for them to defend any sort of gay rights—even the right not to be executed—because doing so brings up awkward questions about why conservatives want to deny other rights to gay people.

When you have to make long arguments to convince your audience to accept the basic moral consensus—slavery is wrong, executing gay people is abhorrent—it makes you (and your audience) look radical. After all, how many of us have friends who argue that slavery is okay? How many of us hang around with folks who think it would be great if gay people were executed for their "crimes"? It's fine that John Mark Reynolds spent hundreds of words attacking the murder of minorities and a chapter explaining why slavery is wrong. But he shouldn't have to do it. A quick note of opposition ("executing gay people is obviously wrong") should suffice. If that's not more than enough to convince you, you had better be ready to explain your position. When it comes to easy moral questions like enslaving people or slaughtering homosexuals, the burden of proof falls overwhelmingly on those who would buck the modern consensus.

Kevin is traveling today.

Why Dodd Retired

| Wed Jan. 6, 2010 8:11 PM EST

As I mentioned this morning, I was working on a piece about Chris Dodd's reelection campaign for the print magazine. That's obviously moot now, but I've recast it as an explanation of what went wrong:

The writing was on the wall for Chris Dodd in December, when even Peter Schiff, the longshot candidate in the fiercely contested Republican primary, was leading the five-term incumbent in the polls. "We have a unique opportunity," Schiff assured supporters in December, during an appearance I attended in Watertown. Dodd "is so unpopular that just about anybody can beat him."

Apparently Dodd and his political advisers ultimately arrived at a similar conclusion. The senator announced Wednesday that he would not seek reelection.

The rest of the piece is here.

Kevin is traveling today and tomorrow.

Paper of the Day

| Wed Jan. 6, 2010 6:15 PM EST

Economist James Galbraith, an occasional Mother Jones contributor, has an interesting new article [PDF] in Thought & Action, the journal of the National Education Association. It's about economists who saw the financial crisis coming, and why you never hear about them:

[T]he lines of discourse that take up these questions have been marginalized, shunted to the sidelines within academic economics. Articles that discuss these problems are relegated to secondary journals, even to newsletters and blog posts. The scholars who betray their skepticism by taking an interest in them are discouraged from academic life—or if they remain, they are sent out into the vast diaspora of lesser state universities and liberal arts colleges. There, they can be safely ignored.

While Galbraith will no doubt be slammed by the trolls for not heaping praise on the Austrians, his whole essay is well worth a read. After all, it's not every day you see "the Marxian view" of economics taken seriously.

Sen. Richard Blumenthal (D-Conn.)

| Wed Jan. 6, 2010 2:06 PM EST

This morning, in the wake of the news that Sen. Chris Dodd (D-Conn.) will retire and that Connecticut AG Richard Blumenthal will run for his seat, I wrote:

[I]f the first polls of the race with Blumenthal show even a hint of hope for the Republican challengers, that might be even worse news for Democrats. Linda McMahon (of wrestling fame), former Republican Rep. Rob Simmons, and former Ron Paul adviser Peter Schiff were battling to face Dodd in the general. If the most popular politician in a super-blue state like Connecticut is in any sort of trouble against those three, well, national Dems are probably cooked.

Public Policy Polling, which was in the field on Monday and Tuesday, has some good news for Dems. Dodd's retirement makes this look like a safe seat:

Attorney General Richard Blumenthal leads all three of the Republicans in the race by at least 30 points in polling we conducted Monday and Tuesday night before Dodd's announcement.

Blumenthal is unusually popular, especially in hyper partisan times when voters like few politicians. 59% have a favorable opinion of him to just 19% who see him negatively. It's no surprise that he's liked by 71% of Democrats and 60% of independents, but even Republicans view him favorably by a 37/35 margin. It doesn't take a lot of hands to count the number of Democratic politicians with positive numbers among GOP voters these days.

Blumenthal leads Rob Simmons 59-28, Linda McMahon 60-28, and Peter Schiff 63-23. It would take an epic collapse for him not to be Connecticut's next Senator.

With this race moving rapidly off the national radar, Connecticut politicos will probably focus more on the fight for the open governor's mansion, and Republicans will spend more money (and energy) trying to win at least one of the Connecticut House races. (Republicans held three of the state's five House seats as recently as 2006.)

Kevin is traveling today and tomorrow.