Kevin Drum

What Happens When Summer is Over?

| Tue Aug. 31, 2010 12:18 AM EDT

Gallup got a lot of attention today for a news release reporting that the Republican lead over Democrats in the generic congressional poll had blown out from three points last week to ten points this week. It's only one poll, but it was a pretty dramatic result.

So I went over to to see what their latest poll aggregation showed. It's on the right, with the period from June through August highlighted in pink for both 2009 and 2010. It's not instantly obvious to the eye, but it turns out that pretty much the same thing happened both last year and this. During the three months of summer in 2009, Republicans went from -2 to +1, a change of three points. This year they went from +1 to +5, a change of four points.

So what does the recent change mean? I don't know, but if I had to guess I'd say it shows that conservative hysteria during a slow news season is a pretty effective attention getter, at least in the short term. Last year it was death panels and frenzied town hall meetings. This year it's the Ground Zero mosque and a Glenn Beck rally on the Mall.

So will they lose some of this lead as summer winds down and there's a little more real news to report, as they did last year? Beats me. But I wouldn't be surprised. This is shaping up to be a bad year for Democrats, but once August is over, everyone goes back to work, and the real campaigning begins, things might tighten back up a bit.

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How Immigration Boosts Your Pay

| Mon Aug. 30, 2010 8:45 PM EDT

Felix Salmon points to a new research note from the San Francisco Fed about the effects of immigration on U.S. employment and productivity. The bottom line results are interesting: the author says that immigration has no effect on employment ("the economy absorbs immigrants by expanding job opportunities rather than by displacing workers born in the United States"); it has a strong upward effect on average income ("total immigration to the United States from 1990 to 2007 was associated with [...] an increase of about $5,100 in the yearly income of the average U.S. worker"); and immigration improves an economy's total factor productivity dramatically.

Like I said: pretty interesting. But what I thought was even more interesting was the explanation that followed. Why does immigration increase average income? How does it increase productivity and efficiency? Here's the scoop:

The analysis begins with the well-documented phenomenon that U.S.-born workers and immigrants tend to take different occupations....Because those born in the United States have relatively better English language skills, they tend to specialize in communication tasks. Immigrants tend to specialize in other tasks, such as manual labor. Just as in the standard concept of comparative advantage, this results in specialization and improved production efficiency.

If these patterns are driving the differences across states, then in states where immigration has been heavy, U.S.-born workers with less education should have shifted toward more communication-intensive jobs. Figure 3 shows exactly this....In states with a heavy concentration of less-educated immigrants, U.S.-born workers have migrated toward more communication-intensive occupations. Those jobs pay higher wages than manual jobs, so such a mechanism has stimulated the productivity of workers born in the United States and generated new employment opportunities.

What's really striking about this is that the very mechanism that provides the productivity boost — the fact that immigrants don't speak English well and therefore push native workers out of manual labor and into higher-paying jobs — is precisely the thing that most provokes the immigrant skeptics. They all want immigrants to assimilate faster and speak English better, but if they did then they'd just start competing for the higher paying jobs that natives now monopolize.

The usual caveats apply here. This is only one study. (Well, two actually, but still.) And in order to generate useful results the authors have to control for a whole menagerie of variables that can muck things up. There's always a chance that some important variable got missed or that another one got controlled for incorrectly. So don't take this as the last word. It does, however, join a growing literature that suggests immigration has no negative effect on wages and might actually have a positive effect. Interesting stuff.

Papers, Please

| Mon Aug. 30, 2010 3:56 PM EDT

Megan McArdle writes about the loan paperwork she had to fill out before buying a home recently:

The underwriting standards have been very tight, in terms of the paperwork I have had to produce — in order to use money that we received as wedding gifts as part of our downpayment, for example, I needed to produce a copy of our license, an invitation, and the announcement from the Times.

Say what? Just the fact that you have money in a bank account isn't good enough? And what would have happened if the Times had declined to print an announcement?

End the FDIC!

| Mon Aug. 30, 2010 3:40 PM EDT

Mike Konczal dips into 15 years worth of financial regulation advice from the Cato Institute and is impressed with their consistency:

With one exception [], there are no new ideas on financial market regulation as a result of the financial crisis. None....You would have no idea that we’ve just experienced the most major financial crisis since the Great Depression by reading their high-level policy suggestions. How cool is that?

The only change is that in 2009 they aren’t calling for abolishing FDIC insurance....They do that every year except their latest version. I wonder why they’ve backed off that all of a sudden? Did the financial crisis show a lack of panic in the commercial banking system, and they suddenly support FDIC insurance? Or are they biting their tongues and sitting it out for a half decade or so before calling for it to be dismantled again?

I'm guessing the latter. Still, I'm disappointed that they've turned out to be so craven on this vital issue of libertarian principle.

Who You Calling Racist?

| Mon Aug. 30, 2010 1:19 PM EDT

Is the Tea Party movement fundamentally bigoted? Ditto for modern Republicanism, which increasingly takes its cues from the tea partiers. Bob Somerby has been unhappy with sweeping liberal charges of racism against the entire movement for some time, and today, responding to a Digby post about Glenn Beck's rally this weekend, he says so again:

Obviously, it wasn’t an all-white audience, but it felt good to say so (or something). Most people weren’t in lawn chairs, but that conveys an image....That said, we were most struck by Digby’s focus on skin color, a mocking focus which then extended into her readers’ comments. (Along with mocking comments about the age and clothing of the people who attended Beck’s event, including some first-hand observations.)....The people at the event were pink skinned; they are also “dumb as dirt,” we were told in an earlier post. Sorry, but this is the type of language adopted by haters worldwide, language which will be aimed at hundreds of thousands or millions of folk at a time.

Calling broad swathes of the electorate dumb and bigoted is probably not a great vote-getting strategy. But is it true? Here is Christopher Hitchens for the defense:

One crucial element of the American subconscious is about to become salient and explicit and highly volatile. It is the realization that white America is within thinkable distance of a moment when it will no longer be the majority.

....This summer [] has been the perfect register of the new anxiety, beginning with the fracas over Arizona's immigration law, gaining in intensity with the proposal by some Republicans to amend the 14th Amendment so as to de-naturalize "anchor babies," cresting with the continuing row over the so-called "Ground Zero" mosque, and culminating, at least symbolically, with a quasi-educated Mormon broadcaster calling for a Christian religious revival from the steps of the Lincoln Memorial.

What is the right way to talk about this? I think Bob has a point: calling people stupid racists just isn't very bright. For the most part it probably isn't true, and even to the extent it is, it's bad electoral politics to harp on it. Calling an individual person racist for some particular action is fine if it's justified. Ditto for specific groups with overtly racist agendas. But entire movements? Probably not.

On the other hand, can we talk? You'd have to literally be blind not to notice that the Fox/Rush/Drudge axis has been pushing racial hot buttons with abandon all summer. There's all the stuff Hitchens mentions, and you can add to that the Shirley Sherrod affair, the continuing salience of the birther conspiracy theories, the New Black Panthers, and Beck's obsession with Barack Obama's supposed sympathy with "liberation theology." Are we supposed to simply pretend that it's just a coincidence that virtually every week brings another new faux controversy that just happens to appeal to the widespread, inchoate fear of a non-white country that Hitchens writes about?

For what it's worth, I think this is a genuinely hard question. I don't feel like putting my head in the sand and pretending that the leaders of the conservative movement don't know exactly what they're doing. On the other hand, like Bob, I'm not really on board with dismissing half the country as bozos and racists either.

So how do you thread this needle? How do you talk honestly about all the racially charged paranoia oozing out from conservative leaders without also implicating half the country as willing racists? I'm not sure.

A Liberal Version of Social Security Private Accounts

| Mon Aug. 30, 2010 12:21 PM EDT

Andrew Biggs, a conservative who served on George W. Bush's Social Security commission, has gotten some attention for writing a piece in National Review today explaining that privatization is no cure-all for Social Security's problems:

Personal accounts are a valid choice, and one I’ve supported in the past and continue to support. But accounts aren’t exclusive to tax increases or benefit cuts; they don’t, as I’ll explain, reduce the need for these other choices. One problem for the Bush administration’s reform drive in 2005 was that many congressional Republicans had bought into the idea that accounts reduce or eliminate the need for tax increases or benefit cuts. Finding out they don’t may have taken some wind out of their sails. Because of this, combined with some pretty shameless demagoguery from the left, Bush’s reform ideas didn’t even come up for a vote.

Shameless demagoguery? Hold on a second. The left was indeed opposed to Bush's plan, but a lot of the opposition was based on the fact that it was sold as a costless panacea, exactly the problem that Biggs himself identifies. My own position was (and is) that Social Security should simply be left alone for the time being, but that there are also some legitimate reasons to bite the bullet and shore up its financial position now — and if we do, "there's nothing wrong with private accounts in theory as long as they're properly accounted for, tightly regulated, and honestly funded."

Don't believe it? Click the link and my proposal for Social Security reform with private accounts is right there. Would liberals accept this if it were presented honestly? I don't know, because no one has ever tried it that way. But they might. The problem is that "honestly" almost unavoidably includes some tax increases, and that kind of honesty just isn't acceptable to current Republican dogma. So we're stuck. There's the dishonest approach, which Democrats won't accept because it's dishonest, and there's the honest approach, which Republicans won't accept because it's honest. It's hard to see the middle ground here.

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Meg's Millions

| Mon Aug. 30, 2010 11:27 AM EDT

Ed Kilgore writes that eBay zillionaire Meg Whitman, currently running for governor of California, can present herself to voters as a moderate without suffering the wrath of the state's famously rabid Republican right wing:

Whitman has an advantage over most Republicans in choosing her general election strategy in this year of conservative vengeance against moderation: her virtually limitless money, which will bankroll not only her own campaign, but the get-out-the-vote efforts crucial to the entire GOP ticket. This has put something of a damper on right-wing demands on the former eBay exec at the Republican confab.

....Uniquely in the Republican politics of 2010, Meg Whitman has the freedom to swing towards the center if she wishes, so long as she keeps her checkbook open and meets the easy test of being more orthodox than Arnold Schwarzenegger. Conservatives may grouse and pine for a mighty warrior to smite the anchor babies and the tree-huggers and the abortionists of the Golden State, but they are signed on to eMeg’s wild money-fueled ride, wherever her cold-blooded pollsters take them.

That's true. But Meg has another advantage too: the virtual invisibility so far of her Democratic opponent. Here's longtime state watcher George Skelton:

There was a blond sitting at a Lake Tahoe waterfront bar recently who had Jerry Brown's problem nailed. "Millions of Democrats are waiting for a reason to vote for Jerry Brown and he isn't giving them one," she said, interrupting the tortured analyses spewing from me and some other political junkies.

The woman didn't want to be identified by name. But, OK, she's my wife. And she's usually right about these things, largely because she has a normal life outside politics and punditry.

I'd amend her assessment to include not only Democrats but also independents and moderate Republicans. They're all waiting for the Democratic candidate to get a move on and finally tell them why he'd be a better governor than Republican political novice Meg Whitman.

This is the damnedest campaign I've seen in a long time. Granted, Labor Day isn't until next week, and Brown simply doesn't have the kind of money that Whitman does. But so far I've barely heard a peep out of him, and the peeps I have heard have been nothing more than the most soporific kinds of generalities. It's almost as if he's decided he's too tired to bother campaigning at all, and that's really not the image a 72-year-old career politician wants to send out. I sure hope there's some kind of deep strategy here that I'm not privy to. Whitman is a deeply cynical campaigner, but she has enough money to keep most of the public from seeing that. If Brown doesn't start beating her up soon, it's going to be too late.

Financial Journalism

| Mon Aug. 30, 2010 11:05 AM EDT

Ryan Avent on the role of financial journalists:

There is a growing sense of despair among some economic writers that policymakers will not do much more to bolster the flagging global recovery. And critics who note the limits of policy intervention have a bit of a point—not all of the shortfall in demand and employment can be fixed by government intervention. But much of it can be and should be. And if it isn't, that's not because we lack the ability to conceive of helpful policies. It's because policymakers are unwilling to do what they should be doing.

It's not the job of the economics journalist to take that as a given and declare that America will have to muddle through. It's their job to correctly identify the problem, and name the names of those causing it.

By "economic writers," I assume Ryan is talking mostly about columnists and pundits here. And he's right that it does, in fact, look as though political realities will prevent any serious additional government intervention to stimulate the economy. Those political realities include White House advisors who seem unsure what to do, a president who's unwilling to speak up forthrightly about the mess we're in, and a Republican Party that's either deep in the ditch of 19th century economic principles or else figures its best chance to regain power is to make sure the economy stays in the tank. Or both. It's hard to say without being able to read minds.

But while columnists certainly have a responsibility to explain political realities to their readers, they have an even stronger responsibility to explain the economic realities as they see them. If they legitimately think there's nothing more that can be done, fine. But if they don't, they shouldn't use politics as a cover for throwing up their hands. The federal government can't wave a magic wand and make everything OK, but there are still plenty of things left in its armory. We don't have to accept 8-10% unemployment for the next four years if we don't want to.

What Should Obama Do?

| Sun Aug. 29, 2010 11:25 PM EDT

Paul Krugman writes today that if Republicans win control of Congress in November, they're going to party like it's 1994:

So what will happen if, as expected, Republicans win control of the House? We already know part of the answer: Politico reports that they’re gearing up for a repeat performance of the 1990s, with a “wave of committee investigations” — several of them over supposed scandals that we already know are completely phony. We can expect the G.O.P. to play chicken over the federal budget, too; I’d put even odds on a 1995-type government shutdown sometime over the next couple of years.

....If I were President Obama, I’d be doing all I could to head off this prospect, offering some major new initiatives on the economic front in particular, if only to shake up the political dynamic. But my guess is that the president will continue to play it safe, all the way into catastrophe.

Consider this an open thread regarding Krugman's final paragraph. What could Obama do to help galvanize his base? Or shake up the political dynamic? Anything? Or is it all about the economy and Democrats are just doomed this year? What advice do you have for the White House?

Did Uncle Sam Cause the Housing Bubble?

| Sun Aug. 29, 2010 3:11 PM EDT

Matt Steinglass is arguing with his "Hayek-inflected" colleague W.W. about the origins and causes of the housing bubble. Roughly speaking, the two sides take the following positions:

(a) Federal government policies played a strong role in promoting the housing bubble.

(b) No, it was primarily the excesses of the private sector that powered the housing bubble.

Just to be clear: by position (a) I don't mean the kind of childish Fox News dimwittery that blames everything on the CRA and Fannie Mae. I mean the grown-up critique that more generally blames federal encouragement of homeownership, Fed monetary policy, federal tax policy, and various kinds of federal regulation of the financial industry. What's interesting here is that these two positions can collapse into each other pretty quickly. Let's rephrase them like this:

(a) Government regulations encouraged the private sector to lever up and make lots of bad loans in the housing sector.

(b) The financial industry used its enormous influence to lobby for deregulatory legislation, which allowed the private sector to lever up and make lots of bad loans in the housing sector.

Both of these statements are more or less accurate. And of course, deregulation is merely shorthand for a different set of regulations and policies, so our two positions can collapse even further if we like:

(a) Changes in government policy encouraged home buyers to borrow too much and encouraged the financial industry to lever up and make too many bad loans.

(b) Changes in government policy encouraged home buyers to borrow too much and encouraged the financial industry to lever up and make too many bad loans.

The difference here becomes more one of inflection than anything else. If the federal government created policies that allowed the financial sector to behave recklessly, whose fault was this? The government qua government? Or was it a specific and remediable failure of government caused by its capture by the financial industry? There's a sense in which it doesn't matter: government policy is government policy, and if federal regulations were too lax, that means the government was at fault.

But in another sense, it makes all the difference in the world. If we use government in its traditional civics class sense, where policy changes are driven by politicians of different parties responding to different swathes of public opinion, that leads us to one set of possible fixes. But if we use government in the sense of a political institution that primarily responds to lobbying by the rich and powerful — which is my preferred sense — that leads us to quite a different set of possible fixes. In both cases, it's quite accurate to say that "the government" played a big role in the problem, but they could hardly be more different in the kinds of solutions they suggest. The problem, then, is that when someone says this you have to listen more to the accent in which they talk than to the words themselves, and that can be pretty tricky. Caveat emptor.