Kevin Drum

On Independence Day, Pentagon Shows Off Some Real Fireworks

| Sat Jul. 4, 2015 12:20 PM EDT

From W.J. Hennigan on the front page of this morning's LA Times:

As diplomats rush to reach an agreement to curb Iran's nuclear program, the U.S. military is stockpiling conventional bombs so powerful that strategists say they could cripple Tehran's most heavily fortified nuclear complexes, including one deep underground....U.S. officials say the huge bombs, which have never been used in combat, are a crucial element in the White House deterrent strategy and contingency planning should diplomacy go awry and Iran seek to develop a nuclear bomb.

....U.S. officials have publicized the new bomb partly to rattle the Iranians. Some Pentagon officials warned not to underestimate U.S. military capabilities even if the bunker-busters can't eliminate Iran's nuclear program. Gen. Martin Dempsey, chairman of the Joint Chiefs of Staff, suggested at the same Pentagon news conference Thursday that airstrikes might be ordered multiple times if Iran tries to build a bomb.

The usual questions present themselves. (1) This is obviously a piece that was spoon-fed to the press. Why now? (2) Who is it targeted at? Iran, or our allies? Or Israel? (3) Is it credible? Does anyone truly believe that Obama will bomb Iran if talks fail? (4) Credible or not, does this kind of saber rattling do more harm than good? Discuss.

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China Halts IPOs in Peculiar Attempt to Prop Up Stock Market

| Sat Jul. 4, 2015 12:05 PM EDT

The latest from China, where the stock market continues to plummet:

China has decided to suspend new stock sales and establish a market-stabilization fund aimed at fighting off the worst equities selloff in years, as concerns grow among China’s leadership that the stock-market malaise could be spreading to the other parts of the world’s second-largest economy.

...Previous steps including an interest-rate cut by the central bank have failed to impress investors, many of whom have been forced to unwind their leveraged bets as stocks continue to drop.

Chief among the decisions made is to halt new initial public offerings in a bid to preserve liquidity in an increasingly volatile market, the people said. Officials also discussed the setup of a market-stabilization fund.

Another odd move that I don't entirely understand. Do IPOs reduce market liquidity in any significant way? Put another way: Am I missing something here, or is this just another panicky move by the Chinese authorities that's unlikely to make things better?

Friday Cat Blogging - 3 July 2015

| Fri Jul. 3, 2015 1:36 PM EDT

Today you get a very special episode of Friday Catblogging. It's a movie! I made it with my shiny new Surface 3, and although it's not the greatest catblogging movie ever made, it does prove the old adage: any camera you have is better than any camera you don't. So sit back and enjoy Hopper using her passive-aggressive defensive skills to keep Hilbert at bay. Our show takes place atop the fireplace mantel, everyone's favorite new place these days.

Have a great 4th, everyone. See you next week.

Greek Media Really, Really Wants Yes Vote On Euro-Bailout

| Fri Jul. 3, 2015 11:58 AM EDT

Henry Chu of the LA Times reports on how the Greek media is presenting Sunday's upcoming vote on the bailout:

Strong emotions are in abundant supply. But impartial reporting is not.

Along with Skai TV, nearly all the mainstream press and television stations in Greece have skewed their coverage or are openly in favor of the "yes" campaign, throwing in doubt just how fair Sunday's election will be. The snap referendum has already come under criticism for being called with too little notice by the left-wing Greek government — which is urging a "no" vote — to allow for proper campaigning and educating of voters.

....In a widely circulated examination of how the six biggest TV networks treated the rival referendum rallies Monday and Tuesday, freelance journalist Markos Petropoulos found that the pro-government "no" demonstration got about 81/2 minutes of coverage, whereas the "yes" protest received more than five times that much.

In another newscast, one network devoted 18 minutes to warnings and statements from European leaders about the breakdown of bailout negotiations with Athens and the surprise referendum announcement that had precipitated it. The Greek government's position got two minutes.

The bias toward the "yes" side reflects the fact that many of Greece's biggest news outlets are owned by corporate titans and other "oligarchs" whose business interests would be directly threatened by a "no" victory and the potential abandonment of the euro in favor of the drachma, [Nikolas] Leontopoulos said.

I suppose it's no surprise that Greece's corporate class is deeply unthrilled by Prime Minister Alexis Tsipras's leftist government, and would be happy to see him humiliated and tossed out of office. I assume that they also prefer the devil they know—grinding European-imposed austerity for years—to the devil they don't—exiting the euro amid chaos and eventually rebuilding their economy with a devalued drachma. After all, they'll stay rich either way, and sticking with their fellow European moguls probably seems the better bet by far.

Less than 48 hours to go now.

Bobby Jindal Really, Really, Really Hates Gay Marriage

| Fri Jul. 3, 2015 11:05 AM EDT

From The Advocate:

After three courts told him he had to, Louisiana governor Bobby Jindal will finally allow his administration to issue marriage licenses to same-sex couples today.

....Jindal's administration argued it's possible the Supreme Court's ruling didn't apply to the Fifth Circuit Court of Appeals, where Louisiana had been defending its statewide ban....On Wednesday, the circuit court actually went through the motion of confirming the Supreme Court has jurisdiction over it.

....But Jindal's administration jumped on that as reason to delay even further. The Fifth Circuit technically sent the case back to the lower, district court where its earlier ruling in favor of the state had to be corrected. The New Orleans Times-Picayune reported that Jindal's spokesman said no same-sex couple would be recognized until the district court formally reversed itself. And so it did that today."

I've seen several people wondering why Jindal wasted time with this, since he knew perfectly well what the outcome would be. The answer is obvious: He's trying to position himself as the most tea-partyish, most anti-Obama, most combative conservative in the Republican field. So this is basically brand marketing. Republican voters now know that no one will stand up for traditional values as strongly as Bobby Jindal. Message sent and received.

China Adopts an Unusual Approach to Fighting a Stock Market Crash

| Thu Jul. 2, 2015 2:38 PM EDT

Hum de hum hum. Greece is in trouble. Puerto Rico too. And don't forget China:

Chinese shares plunged Thursday, even as Beijing grasps for solutions to stem the selling, including relaxing rules on the use of borrowed funds to invest in stocks....The Shanghai Composite closed down 3.5% while the smaller Shenzhen market was down 5.6%. The ChiNext board, composed of small-cap stocks, sank 4%. Even after losing nearly a quarter of its value from a mid-June high, China’s main stock market has almost doubled in value over the past year.

....In a rare move late Wednesday, Chinese regulators set in motion draft proposals to ease restrictions on margin lending earlier than scheduled....Regulators’ sudden shift in attitude about margin trading comes after vocal warnings about its risks in recent months. In April, regulators took various steps to rein in the practice, which had allowed investors to borrow several times their investment money.

Inscrutable, those Chinese. Their stock market is crashing so they're promoting an increase in margin trading. That's sort of like lighting a tree on fire when it gets dark outside and all your flashlights are dead. It'll work. For a while. But it's really not considered best practice.

Then again, maybe there's something I don't understand here. All I know is that panicky measures to halt a panic don't usually work. And the Chinese stock market still has a long way to fall. I sure hope they figure something out.

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My $500 Pill Revealed

| Thu Jul. 2, 2015 1:03 PM EDT

Have you ever wondered what a $500 pill looks like? Well, here's your answer: it looks like pretty much any other pill.

Anyway, I'm supposed to take this for 21 days, then a week off, then another 21 days, etc. This will last a few months before we know if it's working. If it does work, then I'll be taking it forever (I think). So that's $126,000 per year to keep Kevin alive. Of course, I pay only a fraction of that thanks to having excellent health insurance, and I'm sure that even Kaiser pays nowhere near that list price. Maybe half that, or a third. Still, pretty expensive!

Luckily I'm not on Obamacare. From what I hear, my case would have gone straight to a death panel, which almost certainly would have decided that my societal worth didn't measure up to the cost of the treatment. And who could argue? I mean, blogging? Seriously?

POSTSCRIPT: I forgot to mention something in my previous health update: I feel great. Not 100 percent, mind you, but pretty good. My stomach is in fine fettle (in fact, I'm overeating these days), I'm sleeping well, and my energy level has recovered almost to normal. The long-term prognosis for the multiple myeloma is obviously still uncertain, and that's an unhappy thing, but in the meantime at least I feel good for the first time in eight months!

Greece vs. Germany: Behind a Veil of Morality vs. Technocracy, the Germans are Winning the War of the Narrative

| Thu Jul. 2, 2015 11:31 AM EDT

Just a quick note on Greece. Although I've periodically written at considerable length on the Greek crisis, in shorter posts I often sound as if I blame the whole thing on Germany. That's shorthand, though, and fairly sloppy shorthand.

Here's the thing: Greece bears plenty of blame in this whole debacle. They borrowed way too much when their economy was booming; they refused to modernize their infamously porous tax collection, especially toward the rich; they lied through their teeth about their finances for years; and governments of both right and left have doggedly supported an insanely bloated public sector that would make even a Russian blush.

On the German (i.e., Northern European) side of things, the story of blame is a little more....technocratic. Banks made bets on interest rate convergences between north and south when the euro was introduced. This paid off, and for years they happily shoveled money into Greece at great profit. Greece's economy overheated, but the ECB kept monetary policy loose because that benefited Germany twice over: first by providing Germans with a good place to invest their money and second by providing Greeks with enough money to import German goods. Eventually, this hot money flow produced inflation, but monetary policy stayed loose anyway because the German economy was kind of sluggish at the time and needed the boost. Inevitably, this produced a capital account surplus in Greece and therefore a current account deficit. When the Great Recession hit, everything went to hell. Due to the hot money flows, Greek banks had become dependent on wholesale funding, and when that suddenly dried up a banking crisis got added to the rest of the mix. It's been downhill ever since.

Now: read those two paragraphs carefully. It's plain there's fault on both sides. But the fault of the Greek side is easy to understand and easy to put in moralistic terms. They lived high, they lied about their finances, and they coddled their government workers. It's easy to paint the Greeks as irresponsible wastrels who are just getting what they deserve.

The German side is quite different. Be honest: did you even understand it? It's all very technocratic, almost hydraulic in nature. Investors made bets on some derivatives; centralized monetary policy was not ideal for Greece; hot money flows inevitably produced current account deficits; and when the Great Recession cratered the economy it all turned into a full-blown banking and debt crisis. This is all very recondite. Sure, maybe it was Germany's fault, but in an abstract, bureaucratic way. It's a lot harder to see bad personal behavior here.

I'm not alone in thinking that once you dig into things, German behavior has been quite a bit worse than Greek behavior. But it's hard to make this case in a way that makes much sense emotionally. What most people see is a highly intricate and technocratic system on one side and a bunch of reckless, happy-go-lucky Greeks on the other side. So who are you going to blame?

We humans are attracted to human stories, so the answer is the Greeks, of course. They hired the money, didn't they? The fact that they were stuck in a monetary web designed by Germans that was almost guaranteed to produce disaster—well, maybe that's true and maybe it's not, but it all sounds like a bunch of blah blah blah. What did you say an ECB refi rate was again?

So: reckless people vs. a complex financial system that a few eggheads say was rigged. Which story do you think is going to win?

Chart of the Day: Net New Jobs in June (Sucks, Sucks, Sucks)

| Thu Jul. 2, 2015 10:12 AM EDT

The American economy added 223,000 new jobs last month, 90,000 of which were needed to keep up with population growth. This means that net job growth clocked in at 133,000 jobs and the unemployment rate fell to 5.3 percent.

Unfortunately, this isn't the mediocre news it looks like. It was all bad news. Essentially the entire decrease in the unemployment rate was due to 432,000 people leaving the labor force, reversing an increase of 397,000 last month. Because of this, the labor force participation ratio declined by 0.3 percentage points to 62.6 percent, the lowest number in recent history.

Oh, and we had downward revisions of 60,000 jobs in April and May. And hourly wage growth of production and nonsupervisory workers was up by a measly 2 cents, a nominal increase of 0.1 percent. Adjusted for inflation, that's a decrease of about 0.3 percent.

I don't know how to dress this up. The net number of new jobs was OK, if not spectacular, but the rest of the report is just dismal. The number of people actually employed dropped by 56,000, labor force participation has tanked, and real wage growth was negative. If anyone else can put lipstick on this pig, they're welcome to try. It looks pretty gruesome to me. The only good news I can take out of it is that this is only a single month's data, which jumps around quite a bit. Maybe next month will be better.

There's More to Kumbaya Than Just Getting Liberals and Conservatives to Agree

| Wed Jul. 1, 2015 2:44 PM EDT

Tim Lee lists four pro-growth policy reforms that he thinks liberals and conservatives can agree on:

  1. Let developers in coastal cities build more
  2. Boost high-skilled immigration
  3. Reform copyright and patent laws
  4. Liberalize occupational licensing rules

In theory, I suppose these could be areas of bipartisan agreement. But without throwing too much sand in the gears just to make a nuisance of myself, we should take a look at why all four of these things are so firmly going nowhere even though liberals and conservatives allegedly hold common cause on them. Here we go:

  1. Coastal cities. The problem here is that this is a pretty low priority for both liberals and conservatives. They just don't care that much, and they certainly don't care enough to fight the nonpartisan power bloc that unfailingly—and rabidly—opposes this: current residents of coastal cities. This is mainly a local issue, not a state or federal issue, and the fastest way for any local pol in LA or San Francisco to get tossed out of office is to propose lots of new high-rise residential buildings that will (allegedly) bring tons of traffic and crime into the community, and probably drive down current property values. So the game just isn't worth the candle. Plus, conservatives have to watch out for the tea-party crazies who think high-rises are part of an Agenda 21 plot from the UN to make us all live like rabbits in government-controlled urban warrens. Or something.
  2. High-skill immigration. There are people who oppose this—primarily high-skill citizens who don't really want lots of new competition—but that's not the big problem. Mainly this is a political football. Sure, liberals and conservatives agree on this particular part of immigration reform. But liberals don't want to unilaterally agree to it. They want it to be one of the bargaining chips for broader immigration reform. After all, if they preemptively agree to all the stuff conservatives already support, they have no leverage for eventually negotiating a comprehensive bill that includes some stuff conservatives don't support. So for the time being, it's being held hostage and that shows no signs of changing soon.
  3. Copyright and patent. I dunno. For a policy that liberals and conservatives allegedly agree about, we sure haven't seen much action on it. Quite the contrary, in fact. Most Republicans and about a third of Democrats just approved fast-track status for the TPP treaty, which, among other things, enshrines American-style copyright and patent law on everyone who's part of the treaty. Once that's in place, we couldn't change our laws in any meaningful way even if we wanted to. And frankly, I've seen very little evidence that either Republicans or business-oriented Democrats really want to. They're too interested in currying favor with IP owners to bother with an issue that will win them virtually no votes from anyone on Election Day.
  4. Occupational licensing rules. This one, finally, is a bit of a mystery to me. I agree that it's not an inherently partisan issue, but in a way, that's the problem. It's also not a hot-button issue, which means neither party is really willing to fight back against it. On the other hand, taxidermists, animal trainers, bartenders, funeral attendants, and so forth are willing to fight for it since it restricts entry and raises wages in their profession.

There's a common theme to all four of these issues: there are special interests who care a lot about them, but no real benefit for working politicians to reach across the aisle and fight back. In theory, they might have similar attitudes on these four items, but why bother doing anything about it? No one is jamming their phone lines about this stuff and no one is voting for or against them based on their positions. If activists want action on this kind of googoo stuff, they have to figure out a way to make the public care. Once they do that, they'll have at least a fighting chance of getting politicians to care too. Until then, don't get your hopes up.