Kevin Drum

Does Privacy Have a Future?

| Thu May 27, 2010 1:37 PM EDT

The London Times recently announced that they would be putting their entire paper behind a paywall. Their view is pretty simple: giving away their news for free cuts into subscription revenue but produces almost nothing back in the way of ad revenue because advertisers aren't willing to pay much for the "useless tourists" who drop by new sites occasionally but aren't serious about either the news itself or the advertising. Paying customers, conversely, tend to be demographically more desirable and they spend more quality time looking at both the news and the accompanying ads. So charging for access should be a net benefit. Felix Salmon comments:

The logic here has existed in print publications for years: newspapers with a cover price tend to have higher ad rates than free sheets, because their readership is more affluent and is also more likely to actually read the paper (and see its ads).

....But the fact is that online there are much more useful and granular ways for an advertiser to work out who they're targeting, beyond just saying “we want people who are willing to pay to read this publication”....The fact is that if I sign in to a free site using my Twitter login, I'm actually more valuable to advertisers than if I paid to enter that site. That's because the list of people I follow on Twitter says a huge amount about me, and a smart media-buying organization can target ads at me which are much more narrowly focused than if all they knew about me was that I was paying to read the Times.

We're not quite there yet. But it seems to me that online publications are making a big mistake if they make subscribers go through a dedicated registration and login process, because the demographic information they can get from that will be less useful and less accurate than if they outsource the reader-identification procedure to Twitter or LinkedIn or Facebook. And people will definitely enjoy an automatically personalized reading experience, where they can see what their Facebook friends are reading and what the people they follow on Twitter are reading.

I have an abiding fear that Felix is right. There's an analogy here to the world of supermarkets. In the past, supermarkets charged everyone the same price and made a small profit margin doing it. Then came loyalty cards. And they were popular! So once one supermarket started offering them, everyone else did as well. Eventually they were ubiquitous.

Today, overall supermarket prices are still the same as they've always been, they're just tiered differently: those with cards pay less and those without cards pay more. So on average, consumers haven't benefited. What's more, competition is generally fierce in the supermarket biz, which means that overall profit margins are also the same as they've always been. So supermarkets haven't benefited.

So who has benefited? Well, as near as I can tell, the answer is: marketing firms. Loyalty cards generate mountains of purchasing data that allow third parties to target advertising more effectively. This is great news for marketing companies and their clients. Whether it's great news for the rest of us is a little harder to determine.

But this might be the news model of the future. Basically, you'll be able to get access to the Times two ways: either by paying for a subscription or by registering with your Facebook/Twitter/LinkedIn ID and agreeing to give the Times access to your online life. This is roughly the same trade that we've made in the supermarket biz: pay more and maintain your privacy, or pay less in return for giving it up.

The big difference, of course, is that supermarkets had a perfectly viable business model before loyalty programs started up. Newspapers don't. This might actually be the only way they can save themselves. But it might also be a sign of much broader things to come. In the future, the poor and middle class will essentially have no privacy in their day-to-day life. They will have sold it away, because in practical terms the poor and the middle class simply can't afford to give up a 5-10% discount on everything they buy. Only the better off, who can, will have the option of maintaining their privacy.

Maybe this is OK. I don't like it, but plenty of people seem fine with the idea. But there's a reason that all this information is so valuable, and it's not because marketing firms and consumer goods companies are genuinely interested in your welfare. This is a brave new world we're stumbling into.

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The Curious Case of Joe Sestak

| Thu May 27, 2010 12:14 PM EDT

Back in February, Joe Sestak told reporters that the White House had once offered him a federal job as an inducement not to run against Arlen Specter in the Democratic primary race for Pennsylvania's senate seat. Since then Sestak has refused to talk further about the matter and so has the White House. Republicans have tried to make hay out of this, but Stan Brand, a Washington lawyer who specializes in ethics matters, tells David Corn today that it's virtually certain that nothing illegal took place:

Though he dismisses Issa's pursuit of Sestakgate, Brand says that White House actions are keeping the scandal alive: "Gibbs dissembling doesn't help them. Don't be defensive about it. Just say this is what goes on. They're looking guilty over something that isn't illegal." He adds: "That's not the first time that this has happened."

This is surely one of the weirder pseudo-scandals of the year. It's not weird that Republicans would try to get some mileage out of it. That's politics. What's weird is two things: (1) How could Sestak possibly have been stupid enough to mention this in the first place? and (2) Why don't he and the White House just tell us about it?

As to #1, I have no idea. But #2 is murkier. Republicans are trying to pretend that the job offer was made "in return" for Sestak not running against Specter, but that's ridiculous. A job offer is just a job offer. If Sestak accepted, he automatically wouldn't be running for office. It's like saying that I offered a cashier some money in return for not having me arrested when I walk out the door with a Blu-Ray player under my arm. It's implicit in the whole thing.

So the White House either offered Sestak a job or they didn't. If they didn't, they would have said so. So presumably they did. If they and Sestak just fessed up to this, wouldn't the story go away almost instantly? If the White House announced, say, that Sestak had indeed been under consideration for a position in the Navy Department last summer, but Sestak turned them down, then that's the end of it. It's not even good campaign fodder. All Sestak has to do is confess that in the heat of the campaign he got a little carried away and characterized it badly.

What the hell am I missing here? I just see no downside to this.

Healthcare Costs Going Up, Up, Up

| Thu May 27, 2010 11:50 AM EDT

The Los Angeles Times reports today on enormous rate hikes for small businesses in the health insurance market:

Five major insurers in California's small-business market are raising rates 12% to 23% for firms with fewer than 50 employees, according to a survey by The Times.

...."We don't have that money," said Ann Terranova, a San Francisco financial planner who is dropping Blue Shield for herself and two employees after learning that their annual premium would jump to more than $19,000 a year from $11,000. 

....California insurers defend their rate hikes as sound and fair, saying they struggle to balance affordable rates with the need to remain competitive and turn a modest profit. Blue Shield, for example, said hospital charges rose nearly 20% last year, while physician costs and pharmaceutical fees increased almost as much. Anthem Blue Cross also cited the cost of medical care in explaining its average rate hikes of 13% this year.

If conservatives want to avoid the specter of federally funded single-payer healthcare in the United States, this is what they need to come to terms with. Canada provides high quality healthcare for everyone — including small businesses and the elderly — for a cost per person of about $4,000 per year. Ditto for France and the Netherlands. Britain and Japan do it for about $3,000. Ann Terranova is being asked to pay more than $6,000 per person — and that's for three working-age employees.

One way or another we have to deal with this. This year's healthcare reform bill takes some small strides toward reining in costs, but they're not nearly enough. We need to do far more, and if the private market won't do it then eventually public opinion will force us to adopt a European-style system. If conservatives really understood this, they'd take the problem more seriously. But they don't seem to.

Gulf Spill Apparently Stopped

| Thu May 27, 2010 11:07 AM EDT

It's nice to occasionally wake up to some good news:

Engineers have stopped the flow of oil and gas into the Gulf of Mexico from a gushing BP well, the federal government's top oil-spill commander, U.S. Coast Guard Adm. Thad Allen, said Thursday morning.

The "top kill" effort, launched Wednesday afternoon by industry and government engineers, had pumped enough drilling fluid to block oil and gas spewing from the well, Allen said. The pressure from the well was very low, he said, but persisting.

The well hasn't been cemented yet, and this whole thing could yet fail. But keep your fingers crossed.

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Why Did North Korea Do It? cont'd

| Wed May 26, 2010 7:11 PM EDT

Fred Kaplan, after noting that North Korea has engaged in a number of naval skirmishes with South Korea over the past decade, takes a crack at explaining why they upped the ante and torpedoed a South Korean vessel two months ago:

Some speculate that Kim Jong-il may have planned the March 2010 attack as a show of strength, both to the Seoul government and to his own military commanders. South Korean president Lee Myung-bak had already — for good reasons — abandoned his predecessors' "sunshine policy" of outreach toward the North. Kim is also believed to be caught up in succession concerns — he is thought to be ailing and wants his youngest son, Jong Un, to be installed as his successor (just as he succeeded his own father, Kim Il-Sung) — and he may have felt a need to toughen up his image after the humiliation of last November.

....Who knows how this latest gamble will play out. Some speculate that Kim made the move, hoping that it would frighten the South Korean people into voting out Seoul's current anti-détente government in next month's elections. However, some observers think that Kim has been spoiled by the excess indulgence of the previous two administrations — not realizing that the last few years of northern belligerence have strained the patience of many southerners.

Maybe. As Kaplan says, though, "You may notice the phrases believed to be, thought to be, and may have in the previous sentence." Nobody really has anything more than a guess at this point.

Sarah Palin's Neighbor

| Wed May 26, 2010 5:56 PM EDT

In case you missed it because you actually have a life, author Joe McGinniss, who's writing a book about Sarah Palin, has rented the house next door to her. Palin immediately posted a Facebook greeting that included this line: "Wonder what kind of material he’ll gather while overlooking Piper’s bedroom, my little garden, and the family’s swimming hole?" The none-too-subtle insinuation that McGinniss is some kind of pedophile is vintage Palin, and undeniably disgusting.

Still, I have to wonder: am I the only lefty around who finds McGinniss's action a little disturbing? McGinniss obviously isn't breaking any laws, public figures have very little expectation (legal or otherwise) of privacy, and digging deep for book material is what any good journalist should do. Still. It seems a little over the top. Am I being too squeamish, allowing my personal conviction that even politicians deserve a certain zone of privacy to override my better judgment? In the age of Oprah, am I just a dinosaur? Or is McGinniss in fact crossing a line here? Comments?

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Healthcare Reform Won't Hurt State Budgets

| Wed May 26, 2010 3:44 PM EDT

This should be old news, but since a lot of people still don't get this it's nice to see it getting front page treatment from the Washington Post:

The federal government will bear virtually the entire cost of expanding Medicaid under the new health-care law, according to a comprehensive new study by the Kaiser Family Foundation that directly rebuts the loud protests of governors warning about its impact on their strapped state budgets....Governors of many of those states have predicted fiscal calamity for their budgets, and some have cited the Medicaid expansion in the suits they have filed against the new law, saying it violates their states' rights.

But the Kaiser study released Wednesday predicts that the increase in state spending will be relatively small when weighed against the broad expansion of health coverage for their residents and the huge influx of federal dollars to cover most of the cost.

Even the small increase in Medicaid costs may be canceled out by the savings states will enjoy from no longer having to subsidize the uncompensated care of uninsured people who will be on Medicaid, study co-author John Holahan said. "It's absurd," Holahan, an Urban Institute researcher, said of the states' doom and gloom predictions. "They come out ahead. It's just crazy."

Bottom line: the federal government is paying more than 95% of the cost of the Medicaid expansion that's included in the healthcare reform bill. In some states the federal share is even higher. Total state spending on Medicaid will go up only 1.4%, a grand total of about $4 billion per year to cover more than 11 million people. What's more, it might be even better than that: as Holahan says, states might find that in the end they come out in the black on overall healthcare costs since their spending on care for the uninsured will go down. Keep this in mind the next time your state's governor starts wailing about healthcare reform and how it's going to bankrupt your state. It won't. The full report is here.

Why Did North Korea Do It?

| Wed May 26, 2010 1:09 PM EDT

I haven't been posting about the North Korean situation, but I've been following it with considerable interest ever since the start. And the biggest question all along has been: Why? Even by North Korean standards, torpedoing a South Korean ship is nuts. What on earth were they thinking? In the Financial Times today, Christian Oliver runs down the theories:

  1. Revenge
  2. To smooth the succession
  3. An internal power struggle
  4. A reversion to hardline ideology
  5. Breakdown of command in North Korea
  6. To distract from economic woes at home
  7. Bitterness about G20 meeting in Seoul

I have to say that I find all of these unsatisfactory, and I haven't read anything better anywhere else. It's just weird as hell. Even granted that North Korea acts like a mental case much of the time, this doesn't make sense. There's simply nothing good that can conceivably come out of this incident from their point of view.

So: my guess is that it was an accident. Or perhaps some combination of #3 and #5, a rogue commander who fired the shot because of some kind of chaos in the chain of command. Then, once the deed was done, we got all the usual North Korean bluster and delusion that we've come to know and loathe over the past few decades.

And then there's another obvious question: just how long is China willing to put up with all this? Sharon LaFraniere had a pretty good rundown of the Chinese dilemma a few days ago in the New York Times, and their unwillingness to put serious pressure on North Korea mostly seems to come down to a combination of inertia and a fear of massive refugee flows across the border if North Korea collapses. This, again, is something I've never quite bought: refugee flows can be managed with international help, and in any case they wouldn't be any kind of existential threat to China. Propping up North Korea hardly seems to be in China's self-interest any longer, and if that's the case I'll bet they eventually overcome their inertia and decide that the refugee problem can be managed after all. The only question is just how long "eventually" is.

Wall Street's Temper Tantrum

| Wed May 26, 2010 12:29 PM EDT

John Heileman’s recent New York piece on financial reform tells us, among other things, that "it’s hard to find anyone on Wall Street who doesn’t speak of Obama as if he were an unholy hybrid of Bernie Sanders and Eldridge Cleaver." It's always fun to link to someone else's rant, so here's James Kwak's response:

Wall Street CEOs like to think they are the adults, the big men in the room, the ones who know how the world works. Well, you know what? They screwed up their own banks, the financial system, and the economy like a bunch of two-year-olds. Every single major bank would have failed in late 2008 without massive government intervention — because of wounds that were entirely self-inflicted. (Citigroup: holding onto hundreds of billions of dollars of its own toxic waste. Bank of America: paying $50 billion for an investment bank that would have failed within three days. Morgan Stanley and Goldman Sachs: levering up without a stable source of funding. Etc.) The financial crisis should have put to rest for a generation the idea that the big boys on Wall Street know what they’re doing and the politicians in Washington are a bunch of amateurs. Yet somehow the bankers came out of it with the same unshakable belief in their own perfection that they had in 2005. The only plausible explanation is some kind of powerful personality disorder.

It really is pretty mind boggling. I mean, obviously I get the fact that no one likes government interference in their business, no one likes being regulated, no one likes to make less money, and everybody has a million excuses for their own mistakes. But considering the epic FUBAR the bankers laid at our feet and the Obama administration's obvious efforts to protect them from the worst of the populist backlash by keeping the financial reform bill toned down — well considering that, and considering the fact that even bankers ought to occasionally take the long view and understand that better rules might be in their enlightened self interest, you'd think they could restrain themselves a bit. But no. I guess there's a reason that their nickname is Big Swinging Dicks.

Quote of the Day: Bipartisanship

| Wed May 26, 2010 12:09 PM EDT

From Sen. Lamar Alexander, commenting on the fact that no progress was made during a "good and frank" meeting yesterday between President Obama and congressional Republicans:

We simply have a large difference of opinion, which [will] not likely ... be settled until November.

Well, I'd say he's half right.