I see that President Obama is kowtowing to America's enemies yet again:

North Korea agreed to suspend nuclear weapons tests and uranium enrichment and to allow international inspectors to verify and monitor activities at its main reactor, the State Department and the North’s official news agency announced on Wednesday, as part of a deal that included an American pledge to ship food aid to the isolated, impoverished nation.

Although the Obama administration called the steps “important, if limited,” they signaled a potential breakthrough in the impasse over North Korea’s nuclear weapons program following the death late last year of the country’s leader, Kim Jong-il....North Korea’s agreement to allow inspectors from the International Atomic Energy Agency to return to the country appeared to be a significant concession. After years of negotiations, North Korea expelled inspectors and went on to test nuclear devices in 2006 and 2009.

No word yet on exactly how Obama worded his apology to the North Koreans, but I'm sure Mitt Romney will be on Fox News soon to tell us.

I see, via Andrew Sullivan, that Will Wilkinson and Reihan Salam are arguing about whether it would be a good idea to increase tax incentives for having children. Will opposes it because he doesn't think the government has any business intruding here in the first place, and Reihan favors it because he favors pro-natal policy in general. "On the whole," says Reihan, "I’d rather we subsidize child-rearing than the purchase of large homes in capacity-constrained regions or high-tax jurisdictions at the expense of low-tax jurisdictions."

Put that way, I guess maybe I'd agree. But before this argument goes much further, it might be worth asking whether changes to the tax code have any real impact on childbearing in the first place. Our philosophical predispositions don't matter much if the empirical evidence tells us not to care.

And it seems like that's what it tells us. An influential paper a couple of decades ago suggested that tax policy really did have an effect on fertility rates, but two decades and some big changes in tax policy have gone by since then. A couple of years ago a trio of researchers at NBER recrunched the numbers and found that the original paper relied on a couple of critical assumptions that most likely aren't true. And even if they are true, "there is some evidence that child tax benefits affect the timing of births, but find no evidence of any lasting fertility effects."

Chart below. Do you see any effect from the skyrocketing level of child tax subsidies over the past couple of decades on the general fertility rate? I sure don't. If you want to reward people for having children just because you think it's the right thing to do, that's fine. But if you're actually trying to affect the number of kids we have, the evidence suggests it simply doesn't make any difference.

Going into today's primaries, I figured Romney had to win Michigan by five points to demonstrate that his campaign still had its old mojo. In the event, he won by three. So....I guess things are still up in the air. Romney is in sort of a quantum superposition between winning and losing, still waiting for the Republican base to look at him just a little bit harder and collapse him into one or the other.

Or something. In any case, I'll bet no one else uses that particular imagery to describe tonight's results. And Romney is still the luckiest man in the world. (Well, the second luckiest after Barack Obama, anyway.) It's as though he's a modern-day Dr. Faustus. No matter how stilted and awkward and jawdroppingly detached from normal human experiences he remains, somehow every one of his opponents ends up self-destructing under his steely gaze. Bachmann had Gardasil, Perry had "Oops," Cain had Ginger White, Gingrich had Gingrich, and now Santorum is reeling from Snobgate. Ron Paul has come through unscathed, but that's only because he's apparently cut a side deal with Romney and his infernal patron.

So Romney is still the presumptive nominee, the winner by default because everyone else is unthinkable. And after limping through the spring and finally staggering into the convention like a punch-drunk Rocky Balboa, guess what? Not only will he have to face Apollo Creed in the main event, but it looks like the Greek Streak, Olympia Snowe herself, might be pecking away at his kneecaps the entire time. Unfortunately for Romney, being the second luckiest guy in the world in a presidential race is sort of like being the second best team in the Super Bowl. He better check the fine print on his contract.

Jon Chait thinks Republicans are following an inevitably disastrous long-term electoral strategy because they've given up on their future and just want to win two more years in office — years they can use to move America so far to the right it will take Democrats a generation to move it back. I think that sounds entirely unlikely because (a) there's little reason to believe that Republicans buy the idea of their impending demographic doom in the first place, and (b) Republicans know that Democrats could just use the filibuster to prevent them from moving the needle all that far anyway. So the strategy wouldn't even work. Matt Steinglass displays excellent judgment by agreeing with me:

But I disagree with Mr Drum on one point. If the Republicans retake the Senate next year and have the opportunity to pass major legislation, I think it very likely they'll get rid of the filibuster, or pare it back in some complicated way that pertains to the issues they consider important. There's nothing in the constitution about needing to have 60 votes in the Senate. Democrats would have been better able to accomplish their agenda in 2009 and 2010 if they'd scrapped the filibuster, but they're too fragmented and hesitant to make those kinds of aggressive rule changes. Republicans have tighter party discipline, and the tea-party wing hates complex Washington rules that prevent the people's will from being done. I don't really see what's going to stop the GOP from making the changes they need to pass their agenda with a simple majority, if that's what they need to do.

I decided not to make a long post longer by addressing this yesterday, but long story short, I don't think Republicans will do this. If they really did believe they were demographically doomed, and had only two years to save America from an apocalyptic Euro-secular future of moral decay and economic disintegration, then maybe they'd think about it. But I don't think they believe this. They believe that politics will continue pretty much the way it always has, and they're going to need the filibuster in the future.

Besides, this doesn't even make sense on its own terms. If Republicans really do believe that their party is demographically doomed and 2012 is their last stand, this means they also believe that Democrats will take back control of the government in 2016. And if the filibuster has already been mowed down, the jig is up. We'll have single-payer healthcare, abortion clinics on every corner, and gay marriage at gunpoint by 2017.

Either way, then, the filibuster is safe. If politics continues as normal, Republicans will need the filibuster. If Democrats are going to sweep to power in 2016, Republicans will need the filibuster. It's not going anywhere.

From Mitt Romney, in a rare appearance before actual reporters who got to ask him questions:

It's very easy to excite the base with incendiary comments. We've seen throughout the campaign if you're willing to say really outrageous things that are accusative, attacking of President Obama, that you're going to jump up in the polls. I'm not willing to light my hair on fire to try and get support. I am who I am.

Say what? I mean, Romney is basically right here, but he's talking about himself. His strategy from the first day has been to deflect questions about his conservative bona fides by quickly pivoting to the wildest, most over-the-top applause-line condemnations of President Obama imaginable. And it's a smart strategy: until recently it's allowed him to show the Republican base that he's one of them ("I hate Obama as much as you do!") without tacking so far right that he ruins his chances in the general election.

Of course, Romney has since seen that strategy fizzle. His whole apology tour schtick, his claims that Obama wants to turn America into China, his claims that America is on the edge of a socialist precipice — well, that was pretty good stuff in its day, but Rick Santorum has upped the ante. Obama has declared war on religion! Obama wants you to go to college in order to indoctrinate you! He supports prenatal testing because he wants to rid America of the disabled! Suddenly, if you want to prove that you really hate Obama, the stakes have gone up. Romney has been outplayed at his own game, and he's not happy about it.

UPDATE: Greg Sargent tells me to get my demagoguery straight: "Romney says Obama wants to turn America into Europe, not China." I guess that's right. Maybe I was thinking of something Newt Gingrich said? Or perhaps Romney's claim in the Sioux City debate: "This is a president who fundamentally believes that the next century is the post-American century. Perhaps it will be the Chinese century. He is wrong." Or maybe his WSJ op-ed claim: "President Obama came into office as a near supplicant to Beijing." I dunno. It really is hard to keep track.

By the way, Greg has a pretty good rundown of Romney's Big Lie strategy here. It's a couple months old, so there's a lot of more recent stuff missing, but it still gives you a pretty good sense of Romney's rhetorical method.

The Washington Post reports on another budding source of outrage:

On Tuesday, a new Defense Department review of the mortuary operations at Dover [Air Force Base] revealed that “several portions of remains” recovered from the Sept. 11 attacks at the Pentagon and at Shanksville [] ended up in a landfill. The review, led by retired Army Gen. John P. Abizaid, did not quantify how many human remains from Sept. 11 were disposed of in this manner. It said the remains “could not be tested or identified,” apparently because they were too small or charred to allow for DNA analysis.

Those remains were cremated first, but then handed over to a “biomedical waste disposal contractor”....for incineration. Dover mortuary officials assumed at the time that “after final incineration, nothing remained,” Abizaid’s report stated. In fact, there was still residual material left over from the incineration, which the contractor then took to a landfill.

The mortuary changed its policy in 2008 and since then has buried unclaimed or unidentified cremated remains at sea.

Can we please please please just collectively decide not to care about this? If I'm reading this right, we're talking about perhaps half a dozen "portions" so small they couldn't be analyzed. In other words, maybe an unidentifiable few grams or so? Which were cremated and then incinerated. And then taken to a landfill instead of being tossed over the side of a ship.

Let's all get a grip. This just isn't a big deal. All we have to do is decide not to pop a gasket and get on with our lives. We can do that. We can.

A study that suggests the rich are bigger pricks than the poor got a lot of attention yesterday, and I agree with Tyler Cowen that we should all take it with a bigger grain of salt than we have. I wasn't wildly impressed with the quality of the results, though some are interesting and suggestive. But what's up with this?

Let’s view these results in light of the literature as a whole (I haven’t seen any journalistic source do this). Very often in studies the highest trust, lowest corruption societies in the world are the relatively wealthy Nordic countries, not poor countries. There is plenty of evidence that it is low and falling incomes — not wealth — which helped to explain voter support for fascism. Consumers are eager to buy products from companies such as Apple, and they regard the wealth of the shareholders, and the high profit margins, as a sign they will get a high quality product, not a reason to fear a rip-off.

Wait a second. We all love Apple products because Apple charges wildly high prices for them? Where did that come from? Wal-Mart and McDonald's are pretty big companies too, and obviously nobody buys from them because of their high margins and wealthy shareholders. We buy from all three companies because they sell highly standardized products/services and have a reputation for being customer-centric.

That said, I agree with Tyler's advice to read this study carefully. High-status people can afford to take more risks (like breaking traffic laws); they engage in negotiations more routinely and therefore come to consider them mostly amoral exercises; and they're accustomed to not being questioned — either because they're surrounded by people who work for them or because they're surrounded by people who want to sell them stuff. All of this is likely to make them more imperious, more demanding, and more likely to believe they won't get caught if they cheat (and more likely to get off if they are caught). What's more, the rich are certainly far more likely to get their way than the poor. All of this is common sense, and it makes us more likely to believe a study that confirms our intuitions about the rich. But the study relied an awful lot on simulations (i.e., games) and on asking people to "imagine" they were upper class. Neither of those necessarily maps well to what real people would do in real situations. Be careful with this one.

Christine Negroni writes in the New York Times today about all the innovative ways that airlines plan to make money in the future since it's now obvious to them that they can't make money merely by flying people around. Matt Yglesias thinks the ideas all sound kind of dumb except this one:

Continental Airlines, which merged with United Airlines last year, is also taking business ideas from the world of finance. A year ago, it began selling options on ticket prices. The program, FareLock, lets would-be travelers freeze a ticket price for as many as seven days by paying a small fee which the airline keeps regardless of whether the customer ultimately makes the purchase. United will adopt the program next month, when its reservations system is merged with Continental’s.

“It’s a value to people like a stock option is a value,” said Jeff Smisek, the president and chief executive of United Continental Holdings. It lets you buy stock at a fixed price. Well, this is an option on a seat.”

So this is a....nonrefundable deposit? With a fancy new name to make it sound more like high finance? Give me a break. I agree that it's not necessarily a bad idea, but do we really have to adopt such an idiotic euphemism for a retail practice that was commonplace before I was born?

UPDATE: On a related subject, in comments Model62 says:

Just a nit, here, but the checked baggage fees the NY Times writer notes in the story's intro are not primarily a way to generate more cash flow. They are a tax avoidance scheme; airline FAA fees are calculated based on fares, not the various attached "fees." The more services the airline can strip out of the fare price and re-add as a fee, the less it pays to the government.

In a way the airlines have been acting like finance types for some time now; quants figuring out the most efficient ways to route traffic around the tax code.

Interesting! I didn't know that. Still, can't it be both: a cash flow generator and a tax avoidance scheme?

Credit default swaps are in the news again:

An unidentified market participant has asked a committee of the International Swaps and Derivatives Association to rule on whether the passage of legislation approving collective-action clauses for Greek debt should trigger payouts on credit-default swaps tied to Greek sovereign bonds.

At stake are payouts from sellers of a net $3.2 billion of CDS on Greece currently outstanding, and the stigma associated with lending credence to an instrument policy makers have long reviled.

I hope the ISDA takes the case, and I hope they rule in favor of the CDS holders. I'm not a big fan of CDS, and I suspect the world would be a better place if CDS were banned outright, but for now they're legitimate contracts bought and sold in a legitimate way. So if Greece has defaulted, the contracts should pay out — and Greece has defaulted. The European claim that the haircut on Greek bonds is "voluntary" is the worst kind of sophistry, and allowing it to stand because of bullying from the EU would be a travesty. The ISDA shouldn't be a party to this fiction, and shouldn't encourage other governments to expect a continuing supply of get-out-of-jail-free cards in the future. That's moral hazard for you.

Default is part of the latest European deal. Part of the price of that deal is the cost of CDS payouts. Everybody should stop pretending otherwise.

Ten years ago John Judis and Ruy Teixeira wrote The Emerging Democratic Majority, which argued that a variety of demographic trends spelled doom for the Republican Party. Unfortunately for Judis and Teixeira, Republicans ignored their demographic doom and won a convincing victory in 2004. But hey, that was due to 9/11 and Iraq and the war on terror, and who could have predicted that? Then Democrats chalked up big wins in 2006 and 2008 (whew!), but in 2010 Republicans came roaring back. But hey, that was because of an epic recession, and who could have predicted that? Any day now, those demographics are going to kick in and Republicans will be doomed once and for all. Honest.

I am, obviously, being a smart-ass about this. In fact, as Jon Chait writes today in "2012 or Never," the demographic trends that Judis and Teixeira wrote about really are continuing apace. Smart Republicans are well aware of this, and they're especially well aware that one of the biggest demographic trends working against them is the growth of the Latino population. So a few years ago, as a way of peeling off some Latino votes from the Democrats, they took a stab at passing a moderate immigration bill. Unfortunately, their base went into a full-bore revolt and began demanding a harsher anti-immigrant policy instead of a more moderate one. As Jon says, this was about like publicly announcing an electoral suicide pact on national TV.

And it gets worse. At the same time that Republicans are deliberately adopting policies that spell long-term disaster, they've also adopted an uncompromising all-or-nothing political strategy that appeals to their existing base but has cost them dearly in the form of short-term Democratic victories. A more moderate party could have stopped or watered down health care reform, but instead they got Obamacare. A more moderate party could have struck a historic spending deal with Obama, but instead they got nothing. And like lemmings going over a cliff, virtually all of them voted for Paul Ryan's budget roadmap, which was extremely unpopular with most voters. What's going on?

The way to make sense of that foolhardiness is that the party has decided to bet everything on its one "last chance."…Grim though the long-term demography may be, it became apparent to Republicans almost immediately after Obama took office that political fate had handed them an impossibly lucky opportunity. Democrats had come to power almost concurrently with the deepest economic crisis in 80 years, and Republicans quickly seized the tactical advantage, in an effort to leverage the crisis to rewrite their own political fortunes.

…During the last midterm elections, the strategy succeeded brilliantly…In the long run, though, the GOP has done nothing at all to rehabilitate its deep unpopularity with the public as a whole, and has only further poisoned its standing with Hispanics. But by forswearing compromise, it opened the door to a single shot. The Republicans have gained the House and stand poised to win control of the Senate. If they can claw out a presidential win and hold on to Congress, they will have a glorious two-year window to restore the America they knew and loved, to lock in transformational change, or at least to wrench the status quo so far rightward that it will take Democrats a generation to wrench it back. The cost of any foregone legislative compromises on health care or the deficit would be trivial compared to the enormous gains available to a party in control of all three federal branches.

Jon doesn't actually offer any evidence that this is what's motivating Republicans, and likewise, I can't really marshal much evidence that he's wrong. But I have a hard time buying this. If I'm reading him correctly, he's saying that Republicans know they're doomed, and they're deliberately adopting a catastrophic long-term strategy in the hopes that one last hurrah will be enough to keep America conservative even if they do lose every election for the next 20 years.

But this simply doesn't pass the human-nature test. I can't peer into the souls of Republicans, but I don't get any sense that they believe themselves to be doomed. People just don't think that way. Rather, I get the sense that they're true believers who think that, deep in its heart, America agrees with them.

This also doesn't pass the common sense test. Even if Republicans do win control of all three branches, they aren't going to win 60 seats in the Senate. They aren't even going to come close. So if they try to roll back the New Deal, or whatever their plan is, Democrats will filibuster it. Republicans have already shown them how, after all. The GOP will certainly be able to move the dial a bit if they win in November, but there's no way anyone in the party thinks they can "lock in transformational change" over a two-year period with 52 votes in the Senate.

Basically, I just don't think there's a huge mystery to be solved here. When Democrats lost to Reagan, they nominated first Walter Mondale and then Michael Dukakis before finally tacking to the center and putting Bill Clinton in the White House. That was a 12-year stretch. Britain's Labour Party spent a decade moving left before they finally tacked back to the center after losing to Margaret Thatcher. It took them 18 years to finally regain power. Republicans have only been in the wilderness for either four or six years, depending on how you count. If it takes until 2016 for them to come to their senses, that would be a pretty normal progression.

Republicans don't think they have one last chance before the fat lady sings them off the stage. They're just reacting emotionally to a big defeat by convincing themselves that they were rejected because they hadn't been true enough to their principles. That happens all the time. They'll come around eventually.