Kevin Drum

Missing the Story

| Mon Nov. 16, 2009 1:08 PM EST

Can a city use its power of eminent domain in order to seize property and then turn it over to a private developer?  In Kelo vs. New London the Supreme Court ruled that it could, but by the time the case was finally decided in 2005 the private development project in question had already started to run out of steam.  Last week, in an ironic coda to the story, Pfizer, which the city of New London had hoped would build a headquarters building on the land, pulled out of New London completely.

Over at CJR, Ryan Chittum says this is a great story that the press completely whiffed on:

The Hartford Courant, fifty miles up the road, wrote a 900-word story the next day on Pfizer’s moves and barely mentioned the whole Supreme Court controversy that roiled the city and country for months. Neither did the Associated Press in a brief. The Wall Street Journal ran with 600-plus words on C3 and didn’t mention Kelo.

....Finally, today, the fourth day of the story, we have major papers covering the Kelo angle. The Daily News hits it, while The New York Times admirably puts its story —and it’s a good effort—on page one.

What took so long and why have other papers been missing on this? Are our institutional memories that short? Are we staffed that thin? Are we that disconnected from our readers?

Believe me, they remember Kelo.

I wonder about that.  Sure, lots of political junkies remember Kelo, but I'll bet that something like 99% of the country couldn't distinguish it from a brand of corn syrup.  Nor do they care about the town of New London, or about Pfizer, or even about the eminent domain issue in question.  The facts of the case make it an interesting topic for a feature story — hubris, irony, hard times, etc. — but in a straight news piece of a few hundred words I'm not really surprised the Supreme Court case didn't get much of a mention.  After all, Suzette Kelo is no Michael Jackson.

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CMS Report Revisited

| Mon Nov. 16, 2009 12:17 PM EST

My post last night about the CMS report on healthcare reform may not have been a model of clarity.  For more, see Ezra Klein here and Jon Gruber here.  Combined with my post and this Wonk Room post, you should get a pretty good idea of what's up.

Trade and China

| Mon Nov. 16, 2009 2:35 AM EST

The yawning U.S. trade deficit, which was one of the factors that helped fuel the recent credit bubble, declined sharply in the aftermath of last year's economic meltdown.  But it never came anywhere close to zero, let alone positive, and it was mostly an illusion anyway, the result of a temporary collapse in demand for durable goods.  Paul Krugman:

But with the financial crisis abating, this process is going into reverse. Last week’s U.S. trade report showed a sharp increase in the trade deficit between August and September. And there will be many more reports along those lines.

So picture this: month after month of headlines juxtaposing soaring U.S. trade deficits and Chinese trade surpluses with the suffering of unemployed American workers. If I were the Chinese government, I’d be really worried about that prospect.

Unfortunately, the Chinese don’t seem to get it: rather than face up to the need to change their currency policy, they’ve taken to lecturing the United States, telling us to raise interest rates and curb fiscal deficits — that is, to make our unemployment problem even worse.

And I’m not sure the Obama administration gets it, either. The administration’s statements on Chinese currency policy seem pro forma, lacking any sense of urgency.

I don't know if Obama gets it, but the Chinese sure don't seem to:

Liu Mingkang, chairman of the China Banking Regulatory Commission, said that a weak U.S. dollar and low U.S. interest rates had led to "massive speculation" that was inflating asset bubbles around the world. It has created "unavoidable risks for the recovery of the global economy, especially emerging economies," Mr. Liu said. The situation is "seriously impacting global asset prices and encouraging speculation in stock and property markets."

....Early Monday, a spokesman for China's Ministry of Commerce added further criticism of the Obama administration, targeting recent measures by Washington against Chinese exports. "We've always known the U.S. and the West as free market economies. But now we're seeing a protectionist side," the spokesman, Yao Jian, told a monthly press briefing. Mr. Yao also rejected criticism of China's currency policy, saying the yuan's exchange rate has little to do with trade imbalances with the U.S. and that China should keep the exchange rate stable.

At some point our trade deficit has to turn around.  The Chinese obviously don't want to be the ones to take the hit for this by strengthening their currency and damaging their export-based economy, but they really don't have much choice about it.  The global economy is going to be rebalanced one way or another, and it can either happen gradually or it can happen suddenly. The latter would be no fun for anyone, China included.  Better to take Door #1 instead.

Payback Time

| Mon Nov. 16, 2009 1:55 AM EST

According to "a source familiar with the matter," General Motors is planning to pay off its government loan earlier than expected:

The nation's largest automaker plans to pay $1 billion per quarter until the $6.7 billion loan is repaid, according to a source familiar with the matter.

...."This is a result of the company performing modestly above expectations," said the source, who spoke on the condition of anonymity to discuss the situation. "Obviously, the company has a long way to go and a lot of important things to execute on."

....The $6.7 billion debt is not due to be repaid until July 2015, but the company has exceeded projections, partly by going through bankruptcy more rapidly than it thought it would, and partly by cutting costs.

Am I the only one who thinks this is dumb?  Is GM really that convinced that it's out of the woods and won't be running short of cash anytime in the next few years?  Why?  Has the business cycle suddenly been repealed without anyone telling me?  Are customers suddenly swooning over GM cars?  What's going on?

Fonts and You

| Sun Nov. 15, 2009 6:53 PM EST

A few years ago I was reviewing an installation app with some engineers.  We were going from screen to screen, with me occasionally commenting on something, and on one screen I told them everything looked fine except for the font in one of the sentences.  It needed to match the others.

They looked at me strangely.  They're all the same.  No they aren't.  Just look.  Sure they are.  No they aren't.  Etc.  They said they'd check and we moved on.

An hour later one of them came up to me and said, "You were right! I can't believe you noticed that."  But I couldn't believe no one else noticed it.  They might as well have been in different colors to me.  I don't remember the fonts in question, but they were about as similar as, say, Times and Palatino — not wildly different to someone who doesn't care about such things, but still, pretty different.

But even I have a hard time with this from Alice Rawsthorn:

Dirt. Noise. Crowds. Delays. Scary smells. Even scarier fluids swirling on the floor. There are lots of reasons to loathe the New York City subway, but one very good reason to love it — Helvetica, the typeface that’s used on its signage.

Seeing the clean, crisp shapes of those letters and numbers at station entrances, on the platforms and inside the trains is always a treat, at least it is until I spot the “Do not lean ...” sign on the train doors. Ugh! There’s something not quite right about the “e” and the “a” in the word “lean.” Somehow they seem too small and too cramped. Once I’ve noticed them, the memory of the clean, crisp letters fades, and all I remember are the “off” ones.

A couple of comments here.  First, Helvetica is a fine font, but hardly something to swoon over.  I mean, come on.  Second, the "e" and the "a" in the subway sign look fine to me.  Am I just not observant enough?  Are there some bad signs and some good ones?  Did the offending sign have some crude repairs on it?  Or what?  I'm a little stumped here.

On the other hand, Rawsthorn also includes some interesting stuff about the misuse of typography on Mad Men, which prides itself on period authenticity.  Who knew that all the office signage was done in Gill Sans?

Saving Money via the Public Option

| Sun Nov. 15, 2009 6:06 PM EST

As long as we're on the subject, here's another statement from the CMS report that I blogged about below:

We estimate that the public plan would have costs that were 5 percent below the average level for private plans but that the public plan premiums would be rought 4 percent higher than private as a result of antiselection by enrollees.

If this is true, it means that the public option would save the government some money but is unlikely to put pressure on private health insurers to lower their premiums.  We'd all keep paying the same prices we are today.  Bummer.

Overall, however, this is still a net positive for healthcare legislation.  Consumers might not save any money directly, but since we've apparently decided that a 10-year cost of $900 billion has been handed down on stone tablets and can't be changed, that means that saving the government some money via the public option would allow more to be spent on other things.  Like, say, higher subsidies for low-income families.

That's sort of a roundabout way of getting to higher subsidies, and as a big fat tax-and-spend liberal I'd opt for simply combining both the House and Senate tax increases and using the money directly.  But any port in a storm.  If $900 billion is untouchable, then the public option is a good way to free up a little extra dough.

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What the CMS Report Says

| Sun Nov. 15, 2009 5:43 PM EST

A front-page article in the Washington Post today tells us that a nonpartisan analysis from the Centers for Medicare and Medicaid Services concludes that the House healthcare bill would "sharply reduce benefits for some senior citizens and could jeopardize access to care for millions of others."  It's worth noting that this rather melodramatic statement is based primarily on a single paragraph in the 31-page report.  Here it is:

H.R. 3962 would introduce permanent annual productivity adjustments to price updates for institutional providers (such as acute care hospitals, skilled nursing facilities, and home health agencies), using a 10-year moving average of economy-wide productivity gains.  While such payment update reductions would provide a strong incentive for institutional providers to maximize efficiency, it is doubtful that many could improve their own productivity to the degree achieved by the economy at large....Thus, providers for whom Medicare constitutes a substantive portion of their business could find it difficult to remain profitable and might end their participation in the program (possibly jeopardizing access to care for beneficiaries).  While this policy could be monitored over time to avoid such an outcome, so doing would likely result in significantly smaller actual savings than shown here for these provisions.

What CMS is saying is that the healthcare sector tends to be labor intensive, and thus won't be able to improve its efficiency as rapidly as the broader economy.  Which might be true.

Still, it's worth noting that this is basically a counsel of despair.  It suggests that controlling the growth of healthcare spending is hopeless, and any attempt to try it won't work.  We're just going to have to pay doctors and hospitals as much as they want

I don't buy that.  It's plain that eventually we're going to have to control healthcare spending one way or another, and the sooner we give it a serious try the better.  Even if the productivity regs in the House bill don't work, at least we'll learn something along the way.  Maybe the Senate's plan to tax high-cost health plans will work.  Maybe comparative effectiveness research.  Maybe delivery reforms.  Maybe figuring out why we pay 5x as much for an MRI as Japan does.  Maybe something else.  Who knows?  Eventually we might even get to the point where we can talk about serious cost-cutting measures without Republicans going into manufactured conniptions over death panels.  After all, it's either that or national bankruptcy.

In a brief list of "caveats" at the end of the report, the CMS also worries that adding millions of new people to the healthcare system might cause problems if the supply of healthcare services doesn't rise at the same time.  But other countries manage to cover their entire populations with overall utilization rates that are often higher than in the U.S.  I'll bet we can do it too.  There will be hiccups along the way, but we'll adjust to them.

And one more thing: despite the Post's claim that the report says Medicare benefits would be "sharply" reduced and access jeopardized for "millions of others," the report says no such thing.  In fact the report is quite careful to say that the market effects it talks about are speculative and impossible to quantify.  The effects on overall coverage, however, aren't: lots and lots of people who otherwise wouldn't have any coverage at all will get it.  The chart above tells the story.  More here from the Wonk Room

Focusing the Fed

| Sun Nov. 15, 2009 2:41 PM EST

David Ignatius is worried about Chris Dodd's proposal to reduce the Fed's regulatory authority over the banking system.  Fine.  It's an arguable proposition.  After all, the British have a separate agency to regulate banks and it didn't seem to do them any good last year.  So maybe it won't help us either.

But he also seems to have bought into the idea that Dodd wants to politicize the Fed's core mission of conducting monetary policy:

The political challenge to the central bank's authority comes at an especially delicate moment — as the economy begins to rebound and the Fed considers future tightening of monetary policy. It will need public support to combat inflation. But as the New York Times noted in a front-page article last week, the Fed is "under more intense attack than at any time in decades," from both left and right.

Wall Street so far appears unfazed by the criticism of the Fed, perhaps because investors assume that the protests are just political posturing. But this could change. "If Congress even appears to be politicizing the Fed's monetary policy function, rest assured that two market developments are inevitable — a collapsing dollar and higher long-term interest rates," warns David Smick, a Washington financial consultant.

 So what exactly is Dodd proposing?  Let's break it down:

  • Interest rates are set by the Fed's Federal Open Market Committee, which has 12 members.
  • Five of the FOMC's twelve members come from the ranks of the presidents of the Federal Reserve regional banks.
  • These presidents are appointed by the boards of directors of the regional banks, subject to approval of the Fed Board of Governors.
  • Two-thirds of the regional board members are elected by member banks — i.e., ordinary private commercial banks
  • Dodd's bill would give the Fed Board of Governors the power to appoint the entire membership of the boards of the regional banks.

In what way does this politicize monetary policy?  What it does is reduce the power of commercial banks and increase the power of the Fed.  The only way to spin this as politicization is to point out that the Fed Board of Governors is approved by the Senate, which means that under Dodd's plan the regional board presidents would be appointed by people who are appointed by people who are in turn approved by the Senate.

This is pretty tenuous stuff.  If you want to argue that private commercial banks should retain the power to elect two-thirds of the boards that appoint five-twelfths of the FOMC, go ahead.  But they're losing that power to the Fed itself.  That only increases politicization of monetary policy if you think that the current Fed Board of Governors is too politicized in the first place.  But that's a tough argument to make: all modern central banks have boards that are appointed by political authorities.  That's democracy for you.  Their independence is guaranteed by staggered terms, guaranteed tenure, and statutory authority, just like the Fed.

Dodd's stated intention is to keep the Fed focused primarily on monetary policy and leave bank regulation to a separate super-agency.  As near as I can tell, that's exactly what he's done.  Commercial banks might not like losing some of their influence in the process, but it's the Fed that's gaining at their expense, not Congress.

Friday Super Cat Blogging - 13 November 2009

| Fri Nov. 13, 2009 4:36 PM EST

Today is cat overload day.  For starters, we have exclusive rare footage of Domino playing with a shoe.  I've cleverly titled it "Domino and the Shoe."  And not just any shoe, either.  This one is a nice smelly shoe freshly tossed off a human foot at the end of a long workday.  I don't know what it is about human foot smell that drives cats crazy, but smelly shoes are like catnip to them.  Weird.  In any case, be sure to watch the whole thing so you don't miss Domino's grand finale at the end.

But that's not all!  Two weeks ago, we asked you to vote for your favorite Mother Jones climate cat covers — and to add your own to the meow mix. The results were overwhelming — a cascade of cat covers. Four of the original contestants tied for first place, and I've chosen another eleven for our final cat-off.  A flickr gallery of all the entrants is below, and you can see — and vote for — the final 15 contenders here.

So click here and vote! May the best cat win.

The Way Forward in Afghanistan

| Fri Nov. 13, 2009 3:46 PM EST

Fred Kaplan tries to read the tea leaves in Afghanistan today.  Why is President Obama taking so long to decide on a strategy, and what is that strategy likely to be?

Counterinsurgency involves protecting the local population from insurgency groups, so that the national government is better able to provide basic services, thus winning popular support and undermining the insurgents' appeal. If the government is particularly corrupt or incompetent, it won't be able to build on the security wrought by a good counterinsurgency campaign, thus nullifying our success and sacrifice.

....Some advocates of the strategy have cautioned that counterinsurgency campaigns take years, even decades, to bear fruit....In the meantime, Obama told [Jake] Tapper that he and his advisers "are identifying not just a national government in Kabul but provincial government actors that have legitimacy in the right now."

This suggests that Obama is seeking ways to go around the central government — striking separate deals with provincial leaders or providing more or less intensive levels of support — if Karzai proves to be a feeble partner in our counterinsurgency campaign. Or it might suggest one way to exert leverage over Karzai — to make clear that we will empower regional players, and thus weaken his own standing, if he doesn't clean up his act, thus making his regime more legitimate in the eyes of his people and therefore better able to beat the Taliban in the competition for hearts and minds.

That's....plausible.  Obama likes the counterinsurgency approach, but without a credible government to back it up, it won't work.  Solution: find another government to work with. Make deals with tribal and provincial leaders instead of Hamid Karzai.  So he's asking his team to figure out if there's any chance of making that work.

It's an interesting thought.  Especially for a president trying to convince the country that his policy in Afghanistan is still reality based.