Kevin Drum

Cheering Against America

| Fri Oct. 2, 2009 3:03 PM EDT

I don't really care much about the Olympics, and the fact that Obama's brief trip to Copenhagen got saturation coverage in the press this week struck me mostly as yet another testament to the modern media's fundamental unseriousness.  The triumph of gossip over substance continues its inexorable march.

That said, I hopped back over to The Corner a few minutes ago, and the Olympics are by far the biggest topic of conversation there this morning.  But The Corner is a gossipy place, so that's not such a big deal.  What is stunning, though, is just how openly thrilled they are that America lost its bid.  All because a president they don't like decided to make a direct pitch for his adopted hometown.  Ditto for the Weekly Standard, apparently.  It sure doesn't take much to turn these guys against their country, does it?

UPDATE: Much, much more here and here.  I honestly had no idea things had gotten this deranged.  Jesus.

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Out of Work

| Fri Oct. 2, 2009 1:32 PM EDT

There are lots of different measures of unemployment.  One of the best and most consistent is the civilian employment-population ratio, which shows the percentage of the workforce currently employed.  The series below, from the St. Louis Fed, shows this measure for the past 60 years and it highlights just how bad our current recession is.  Here's the drop in the ratio in past recessions, measured in percentage points from peak to trough:

• 1948 — 2.2%
• 1953 — 3.1%
• 1958 — 2.5%
• 1960 — 1.4%
• 1969 — 1.9%
• 1974 — 2.4%
• 1979 — 3.0%
• 1990 — 2.0%
• 2000 — 2.7%

The worst recession of the past half century, the 1980-82 double dip, produced a drop of only 3.0 percentage points.  I don't think anybody has ever used the modifier "only" to describe that recession before, but it fits now: the current recession has produced a drop of 4.6 percentage points so far.  That's double the postwar average.  The drop from the previous peak in 2000 is 5.9 percentage points.  So far.  The job scene is simply devastating right now.  More from Andrew Samwick here and Brad DeLong here.

R.I.P. Chicago Olympics

| Fri Oct. 2, 2009 12:26 PM EDT

In a stunning upset, Chicago was the very first city eliminated this morning from voting to host the 2016 Olympics.  Reaction from The Corner:

Ponnuru: Chicago is out of contention....But I'm sure that Obama will be a lot more persuasive with the Iranians.

Miller: Wow, what an embarrassment for Obama. If he can't work his personal magic with the Olympians, why does he expect it to work with the Iranians?

Lowry: We Can Take Some Comfort....in this distressing hour that the Iranians, Russians, Chinese et al. are push-overs compared to the International Olympic Committee. Right?

You know times are tough when the NR gang all have to use the same gag writer to produce their lame jokes.  Of course, the real loser in all this is Oprah, but I notice that none of these guys has the guts to take her on.  Probably wise thinking.

Your Morning Healthcare

| Fri Oct. 2, 2009 11:28 AM EDT

Here's your morning healthcare roundup.  First up is Bruce Bartlett, who, after a long technical explanation about how Medicare premiums work, summarizes a recent roll call on a bill that blew yet another hole in the deficit by preventing a scheduled premium increase even for very wealthy seniors:

The main people affected by this situation are those with high incomes for whom paying $6 to $16 a month extra can hardly be considered burdensome.... Interestingly, the only representative willing to speak against this unjustified give-away was House Majority Leader Steny Hoyer, D-Md.....Even many of the Congress' strongest budget hawks were AWOL in this case. Among those voting for it were right-wing heroes Ron Paul, R-Texas, and Michele Bachmann, R-Minn. Nor was I able to find anything about this legislation on the Web sites of various conservative think tanks.

No surprise here.  A few months ago conservatives decided that reining in spending was good for townhall speeches, but nothing to actually be taken seriously.  Much better to have a campaign issue against Democrats.

Reading on, here's a Bloomberg story about some real socialized medicine:

After serving in Vietnam and spending three decades in the U.S. Navy, [Rick] Tanner retired in 1991 with a bad knee and high blood pressure. He enrolled in the Veterans Health Administration and now benefits from comprehensive treatment with few co-payments and an electronic records system more advanced than almost anywhere at private hospitals.

“The care is superb,” said Tanner, 66, a San Diego resident who visits the veterans medical center in La Jolla, California, and a clinic in nearby Mission Valley. The record- keeping, he said, is “state of the art.”

....The system is a larger enterprise than that envisioned for the so-called public option being considered by Congress, where the government would run a nonprofit insurer as an alternative to the private industry, not provide care. That hasn’t stopped opponents such as House Republican leader John Boehner from warning that President Barack Obama favors “government-run health care,” a criticism that bothers many veterans.

“I really get annoyed every time I hear these talking heads talking about ‘the government can’t run anything,’” said John Rowan, 64, president of the Vietnam Veterans of America, who visits a New York clinic for complications from contact with the chemical Agent Orange. “Most veterans would give it a fairly good rating.”

Like they say, read the whole thing.  And finally, here's Kirk Nielsen on the cost of a single night at the hospital after feeling some chest pains:

The doc soon arrived, said my heart was fine and handed me an instruction sheet with two recommendations: ibuprofen or Tylenol, and antacids. Who knew? Gastroesophageal phenomena can cause dull, throbbing pains above your heart and make your left hand feel cold and tingly. Better safe than sorry.

And who knew that all of this costs only $4,712?

As it turned out, Nielsen was fine.  But considering the cost (his share was about $1,000), I wonder if he'll have second thoughts about heading to the emergency room the next time something like this happens?  Should he?

How Stimulating is the Stimulus?

| Fri Oct. 2, 2009 3:07 AM EDT

A fiscal "multiplier" is a measure of how effective government spending is.  If it's greater than 1, it means that a dollar of federal spending produces more than a dollar of increased economic activity.  So to evaluate how effective a stimulus package is, we need to know what multiplier to use.

Today we get estimates from two sources.  First up is Robert Barro, who has done a detailed study of the effect of increased defense spending:

World War II tends to dominate....the defense-spending multiplier that applies at the average unemployment rate of 5.6% is in a range of 0.6-0.7....It increases by around 0.1 for each two percentage points by which the unemployment rate exceeds its long-run median of 5.6%. Thus the estimated multiplier reaches 1.0 when the unemployment rate gets to about 12%.

To evaluate typical fiscal-stimulus packages, however, nondefense government spending multipliers are more important. Estimating these multipliers convincingly from U.S. time series is problematical, however....The effects of tax rates on GDP growth can be analyzed from a time series we've constructed....a one-percentage-point cut in the average marginal tax rate raises the following year's GDP growth rate by around 0.6% per year.

So: at the current rate of unemployment the multiplier for defense spending is about 0.85.  For nondefense spending, Barro guessed a few months ago that it's approximately zero, but this time around he just says that he doesn't know.  And tax cuts tend to be fairly effective.

Next up is a team of CEPR economists who have done a cross-national comparison of fiscal multipliers in 45 different countries:

For the US....The impact multiplier is 0.64 and the long-run cumulative multiplier is 1.19....pre-1980 multipliers are considerably larger than the post-1980 multipliers. The post-1980 multipliers are just 0.32 on impact and 0.4 in the long-run.

....In practice, a sizable component of President Obama's package consists of government investment, as opposed to government consumption....The multipliers are 2.31 on impact and 1.83 in the long run.

So: for the post-1980 period, the multiplier is some average of 0.4 and 1.83, depending on how much of the stimulus bill is consumption and how much is investment.  Roughly speaking, then, it's probably around 1.1 or so if they're evenly balanced.

I'll be fascinated to read learned commentary on this.  Barro's work strikes me as pretty shaky, since it's dominated so heavily by an extreme event many years ago (World War II).  On the positive side, he does take into account the fact that the multiplier ought to be higher as the economy gets worse and unemployment goes up.

The CEPR results are interesting, and the cross country dataset seems like a novel and worthwhile approach.  On the other hand, they produce only a single number that doesn't depend on economic conditions.  But that doesn't seem right.  In good economic times, it makes sense that the multiplier is low, since increased government spending probably just crowds out private spending.  During a deep recession, when monetary policy is already at its lower bound and lots of people are out of work, government spending ought to be more effective.  A single number doesn't capture that.

All told, then, I'm not sure how much either of these studies tells us about the size of the multiplier right now.  Zero really doesn't seem very likely, though.  Since Obama's stimulus package was a combination of investment, consumption, and tax cuts, and the unemployment rate is currently 9.7%, I'd guess that these studies taken together suggest an overall long-run multiplier somewhere in the range of 1.0-1.3.  But that's just an amateur swag.  Let's hear from the economists.

Public Opinion on Abortion

| Thu Oct. 1, 2009 6:59 PM EDT

Is support for legal abortion declining?  A new Pew poll says yes, but ABC's polling director doubts it:

The problem: These two Pew results don’t match other polls that asked the same question this year. Support for legal abortion was 55-43 percent when we polled on it in June, 52-44 percent in an AP/GfK poll also in June and 52-41 percent in a Quinnipiac poll (among registered voters) in April.

....In a question we asked in June, for example, 60 percent said they’d want Sonia Sotomayor to vote to uphold Roe v. Wade if it came before the Supreme Court — very similar to the average (63 percent) when we asked this question four times (re Samuel Alito and John Roberts) in 2005. In somewhat different questions in CNN and CBS/NYT polls in May and June, 68 and 64 percent, respectively, did not want to see the high court overturn (or, in CNN’s phrasing, “completely overturn”) Roe — matching the high in occasional askings by CNN since 1989.

Abortion polling is notoriously sensitive to precise question wording and placement, but the Pew results really do appear to be outliers.  Worth keeping an eye on, though.

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No-Win in Afghanistan

| Thu Oct. 1, 2009 3:29 PM EDT

Marc Lynch is unimpressed with conservative sniping that Barack Obama is "dithering" over Afghanistan:

The overwhelming odds are that if the escalation option is chosen, in a year or two we will be confronting the exact same questions. More troops will once again be needed, a new strategy will once again be demanded, we’ll still be reading about how the Taliban is out-communicating us and about how the corruption of the Karzai government poses a serious challenge. And then the exact same debate will recur... the Kagans will demand more troops, dark mutterings about tensions between the administration and the generals will roil the waters, the Washington Post editorial page will publish debates where everyone is on the same side, the smart think-tankers will agonize over the tough choices but ultimately come down on the side of escalation.  Might as well have this debate now, and get it right.

That's admirably cynical.  Welcome to the dark side, Marc!

But he's got good reason: the aims of the all-in counterinsurgency supporters are flatly unrealistic.  "If the goal is the creation of a functioning, effective, legitimate Afghan state," he says, "then I would say the prospects are close to zero. Not with 40,000 troops, not with 400,000 troops, not in twelve months and not in twelve years."

Probably true.  And it's why I'm glad I'm not president right now.  If Obama doesn't approve all the new troops the Pentagon wants, then he's caving in to the terrorists.  If he does approve them, he's hitching himself to a policy that's almost certain to drag us ever further into a quagmire without ever producing results.  If that's not a no-win situation, I don't know what is.

Obama and the South

| Thu Oct. 1, 2009 2:38 PM EDT

Are Democrats going to lose the House in 2010?  Just to make things clear up front, I think it's dumb to even be asking this question so early in the election cycle.  The answer depends on healthcare, it depends on the economy, it depends on Afghanistan and Iraq.  Come back in April, when we have a better read on those things, and we can talk.

But Charlie Cook is talking now, and he thinks Democrats are in big trouble.  Brendan Nyhan, hauling out some fancy poli sci analysis, isn't so sure Cook is right, and Cook responds:

Have you been in the South lately? The level of anti-Obama, anti-Democratic and anti-Congress venom is extraordinary, and with 59 Democrat-held seats in the region, 22 in or potentially in competitive districts, this is a very serious situation for Democrats. I have had several Democratic members from the region say the atmosphere is as bad or worse than it was in 1994.

This is no surprise.  For the last forty years the South has been represented in the Oval Office one way or another.  They've been represented when a Republican was president, because Republicans represent their values.  (Or, at the very least, they talk a good game.)  And they've been represented when a Democrat was in office, because the last three Democratic presidents have all been Southerners.

But Barack Obama?  He's a northern Democrat.  What's worse, he's not from Hope or Plains or Johnson City and he doesn't pretend to be.  He's a biracial, urban, Harvard-educated northern Democrat.  If there's anyone in the world more likely to scare the hell out of traditionally-minded Southerners, I'm not sure who it is.  For the first time in decades, the South is completely out in the cold.  Completely powerless.

So their conspiracy-laden backlash against Obama is no surprise, and it might well lead to a further loss of seats for Dems in the South.  But will they lose all 22 of the competitive districts?  I doubt it.  And will they lose another 20-30 more outside the South?  I doubt that too.  If you live in Washington it's all too easy to get caught up in whatever whirlwind happens to be whirling at the moment, but this one won't last forever.  If Democrats manage to avoid terminal stupidity over the next few months1, they'll take some hits in the midterms but come out still retaining a sizable majority.  If Charlie or anyone else has some money they want put down on this, just let me know.

1Yes, yes, I know.

Our Debt to Ronald Reagan

| Thu Oct. 1, 2009 1:28 PM EDT

Paul Krugman looks at this chart of the personal savings rate in the United States and concludes that Reaganomics is the most likely reason that it fell off a cliff.  Matt Yglesias admits the timing is right: "But is there a causal link? I think it’s suggestive, but I don’t know what it would be."

Krugman suggests that part of the cause was Reagan's blithe acceptance of federal deficits.  After all, if the government didn't need to balance its books, why should anyone else?  Thus was born an era of binge spending.

Fine.  But I'd point to two other things that Krugman mentions: financial deregulation and stagnant median wages.  Those seem like much more likely villains to me.  Starting in the late 70s, middle class wages flattened out, which meant there was only one way for most people to support the increasing prosperity they had long been accustomed to: borrowing.  At the same time, financial deregulation unleashed an industry that marketed itself ever more aggressively on all fronts: credit cards, debit cards, payday loans, day trading, funky home mortgage loans, and more.  It was a match made in hell: a culture that suddenly glorified debt; an easy money policy from the Fed that made it available; a predatory financial industry that promoted it; and middle-class workers who dived in to the deep end without ever quite knowing why they were doing it.

So, yeah, Reagan did it.  Sort of.  But he had plenty of help.

Ben Bernanke and You

| Thu Oct. 1, 2009 12:52 PM EDT

The AP reports that Ben Bernanke didn't talk much about consumer protection in today's testimony before Congress:

Rep. Melvin Watt, D-N.C., was stunned by what he thought was Bernanke's short shrift to the consumer protection issue. "Five sentences on consumer protection when everything else gets substantially more space," Watt said. "It is just not a good message to send."

During the hearing, Bernanke conceded that the Fed didn't do the job it should have in protecting consumers, but said improvements are being made. He suggested the central bank could take further steps to strengthen such oversight.

"We are competent and have the skills ... I think we can do that," he said.

You could take this two ways.  First, maybe Watts is right: this is evidence that Bernanke just fundamentally doesn't care about consumer protection.  Second, it might mean that Bernanke has decided not to continue opposing the creation of an independent consumer protection agency.  He's still making some pro forma remarks about the Fed's capabilities, but he's not really fighting to keep hold of its consumer protection portfolio any longer.

Either way, though, the next step is still the same: strip the Fed of its consumer responsibilities and put them in a CFPA that will actually make them a top priority.  Bernanke's testimony puts us a step closer to that.