From Ars Technica:

Aaron Swartz [] was arrested Tuesday on charges of wire fraud, computer fraud, “unlawfully obtaining information from,” and “recklessly damaging” a “protected computer.” He is accused of downloading 4.8 million documents from the academic archive JSTOR, in violation of its terms of use, and of evading MIT’s efforts to stop him from doing so.

Swartz is a founder of the advocacy organization Demand Progress. In a statement, Demand Progress executive director David Segal blasted the arrest. “It’s like trying to put someone in jail for allegedly checking too many books out of the library,” he said. Demand Progress also quoted James Jacobs, the Government Documents Librarian at Stanford University, who said that the arrest “undermines academic inquiry and democratic principles.”

This affair has raised a lot of hackles among the infovore set, but I'm a little stumped about why I should be outraged. As James Joyner says, maybe this should have been a civil matter, not a criminal one (though Swartz did break into an MIT network closet to do all this), but beyond that does anyone really think JSTOR should just sit idly by as their entire archive is downloaded? Would the librarians at Stanford sit idly by if someone backed up a semi and started shoveling hundreds of thousands of books into it? Sure, there's no evidence that you're planning to steal the books. Maybe you intend to return them all in two weeks. But come on. Are we really all expected to be that stupid?

Likewise, Swartz may say that he had no intention of putting his 4.8 million documents online, but come on. It's a pretty safe assumption, no? Swartz's suggestion that he just wanted to perform a research project is a wee bit improbable.

As near as I can tell, Swartz is basically engaging in civil disobedience, publicly breaking a law that he considers unjust in order to generate publicity. Fine. But one of the tenets of civil disobedience is that you accept that you're breaking the law and accept the consequences. Now he is.

UPDATE: This story is actually several months old. Sorry for not noticing that.

The Week So Far

What have we learned over the past couple of days? A short list:

This is going to be a fun year, isn't it?

From David Brooks:

If you’ll forgive some outside advice, President Obama might consider running for re-election as Luthor.

Jeez, first he's a Kenyan socialist who hates America, and now Brooks wants him to run as Lex Luthor? This is the worst —

Oh wait. Not Luthor. Luther. As in Martin Luther, the 16th-century firebrand who assailed the corruption of the Catholic church and brought us the Protestant reformation. Except in this case, the federal government plays the role of Pope Leo X:

Life is unfair. Republican venality unintentionally reinforces the conservative argument that government is corrupt. Democratic venality undermines the Democratic argument that Washington can be trusted to do good. Liberalism has not expanded because it has not had a Martin Luther, a leader committed to stripping away the corruptions, complexities and indulgences that have grown up over the years.

....Make the tax code simple. Make job training simple. Make Medicare simple. Every week choose a rent-seeker to hold up for ridicule and renunciation. Change the Congressional rules. Simplify the legal thickets that undermine responsibility. If Democrats can’t restore Americans’ trust in government, it really doesn’t matter what problems they identify and what plans they propose. No one will believe in the instrument they rely on for solutions.

It's true that people don't trust government these days. But is it really because they think it's been captured by special interests? Maybe. But I'd like to see some actual evidence for this. Brooks has a bad habit of speaking ex cathedra about what's eating the American public and then moving grandly forward without even a passing acknowledgment that he's just guessing about this stuff. It's pretty annoying.

My own suspicion — and that's all it is since I don't intend to scour the academic literature to back this up — is that Brooks has a bit of the answer here, but only a bit. For starters, that "unintentionally" in the first sentence is pretty hilarious. There's nothing unintentional about this, and I'm quite sure he knows it. Beyond that, there's the fact that lots of people think too much government money is spent on the undeserving poor. There's the fact that government has pretty plainly not done much for the middle class over the past few decades, which is largely due to corporate dominance of the public discourse. This is a form of rent seeking, of course, but not the kind Brooks is talking about, I suspect. Plus, there are the trillions we've blown on a couple of disastrous wars, the near institutionalization of pretense and deception in Washington DC, and the financial crash of 2008.

But put all that aside for a moment. I happen to agree with Brooks that liberals would be well advised to place a lot of emphasis on making sure government runs efficiently. But there are two gigantic problems in the way. The first is that Republicans have very successfully undermined a lot of the traditional sources of Democratic funding (labor unions, trial lawyers) and Democratic working-class support (social conservatives, white Southerners). This means that Democrats have had little choice but to turn to corporate sources of funding if they want to remain in existence. That hasn't (yet) made them quite the cheerleaders of corporatism that Republicans are, but they aren't that far off.

Second, how exactly is all this simplification going to happen? Brooks is like a yo-yo on this, occasionally acknowledging that Republicans have become such insane obstructionists that nothing is possible, but then turning right around and wondering why Democrats don't get more done. Make the tax code simple? That's really not something that can be done without Republican help and Republican compromise. We all know how likely that is. Ditto for Medicare, job training, legal thickets (whatever that means) and everything else on his list. It's just impossible for one party to do this stuff even if it wants to. Hell, Democrats can't even get the Republican leadership to acknowledge that long-term deficit reduction requires both spending cuts and tax increases. That's about as butt-simple and indisputable as it's possible to get, but there's no one home on the other end of the line to hear it.

On the other hand, I'll confess that I sort of like Brooks' "rent seeker of the week" idea. I'm not sure how much it would accomplish, but it would be fun to try. My guess is that Brooks would like it right up until the week that Obama chose someone or something that Brooks happens to like. Then it would be a demagogic attack unworthy of a president. This stuff is harder than it looks.

Responding to Newt Gingrich's nuclear attack on Mitt Romney's career at Bain Capital, Ramesh Ponnuru says:

Romney may in some sense be the “moderate” candidate in the race, but his business background and the likelihood that Obama will go after it means that his nomination would oddly raise the ideological stakes of the race: make it a referendum on free markets.

There's some truth to this, of course. Any Republican candidate will talk about free markets and try to make it a central point of the fall campaign, but Romney has really lived it. That makes him a more concrete messenger, someone who can credibly say that he not only believes in free markets, but has lots of experience in making them work.

But I doubt that this really works in conservatives' favor. You all remember the old saw that Americans are ideologically conservative but operationally liberal? It means that lots of Americans say they're conservative and like to believe they're conservative, but when it comes to specific government programs they turn out to be pretty liberal. They like Medicare and Social Security and federal highways and disaster relief and unemployment insurance and all that. Try to cut these things and you learn very quickly just how operationally liberal most Americans are.

Romney has the same problem. In a sense, a guy like Newt Gingrich has the best of all worlds: he can stand on a soapbox and deliver stemwinders about free markets all day long, garnering endless applause along the way. But that's precisely because he's able to keep things sort of fuzzy. He can talk about the glories of competition and keeping the government out of your hair  — and then just walk off the stage. Mission accomplished.

But Romney? No such luck. When he talks about free markets, Ponnuru is right: the stakes are higher. He can't get away with platitudes. His experience at Bain Capital will inevitably be Exhibit 1 in just what he means when he talks about free markets, and let's face it: short of being the CEO of Goldman Sachs, this is quite possibly the worst possible face you can imagine for a conservative message about the glories of free enterprise and wealth creation. Romney, whether he likes it or not, won't be able to talk about those glories without also facing up to the human destruction that often follows in its wake. Newt Gingrich is proving that right now, and there's little doubt that Team Obama will do the same.

When Americans hear about free enterprise from conservative politicians, it's usually accompanied by images of sunrises over wheat fields, hardworking farmers, and small-town construction workers heading home after a day of honest labor. It is very definitely not accompanied by images of well-coiffed guys in suits and green eyeshades, making millions by sitting in boardrooms and approving mass layoffs by adding a quick line to a spreadsheet before they head out to lunch. But guess what? That's what you get with Romney whether you like it or not. Americans may be ideological free marketers, but operationally they're just folks who believe in a day's pay for a day's work. If you rub their noses in the the true face of modern capitalism, they aren't going to like what they see.

From KSTW in Seattle:

Microsoft Patents ‘Avoid Ghetto’ Feature For GPS Devices

A GPS device is used to find shortcuts and avoid traffic, but Microsoft’s patent states that a route can be plotted for pedestrians to avoid an “unsafe neighborhood or being in an open area that is subject to harsh temperatures.”

You may decide for yourself whether to be outraged by the idea of Microsoft developing a ghetto-avoidance feature. Either way, though, you definitely should be outraged that they can get a patent for it. What's next? A patent for an app that allows you to find city hall? Or avoid city hall?

I know this patent hasn't been tested in court and may well be worthless. I don't care. It should have been tossed out of the patent office with extreme prejudice, and Microsoft should have been warned not to waste their time with this kind of thing ever again. Ditto for every other company that engages in this nonsense. It really needs to stop.

Matt Yglesias points out correctly today that during the aughts there were a lot of economists who thought that America's trade deficit was unsustainable and would shortly lead to a major financial crisis of some kind. So the questions they were asking revolved around things like how long it would take for the value of the dollar to correct, whether we'd be better off with a quick crash and recovery or a long, slow slog back to balance, and so forth. Either way, though, a crisis like this would have fundamentally required American consumption to decrease until we got our affairs back in order.

In the event, though, that's not the crisis we had. Our trade deficit may have played a role in what ended up happening, but basically it was just a huge housing/debt bubble that exploded, leaving balance sheets in tatters:

Precisely because lots of smart people foresaw the occurrence of that crisis, and because that crisis really seemed very likely, and since a crisis certainly did happen a diverse array of smart people have just sort of trundled along acting as if the crisis we're facing is that crisis.... Indeed, I would say that an awful lot of the Obama agenda has been about efforts to address the crisis we should have had. That's why [they think] long-term fiscal austerity is important and why there was no "holy crap the economy's falling apart, let's forget about comprehensive reform of the health, energy, and education sectors" moment back in 2009.

....I'm inclined to think that we will, at some future point, face the crisis we should have had and it will need to be addressed in complicated ways. But the crisis we're having is, for all its horror and scale, is a pretty banal monetary crunch—the natural rate of interest is below zero, nomimal rates can't go below zero, and the Fed won't act to push real rates lower. Fixing that wouldn't fix "all our problems" any more than ending the Great Depression solved all the problems of the America of its time (Jim Crow, anyone?) but it would solve the problem and it doesn't require us to fix the other stuff first.

That's an interesting theory, though I'm not sure I buy it, possibly because I'm more cynical than Matt. To some extent, I agree that early on there was some honest confusion as we tried to sort out what had happened, and even now there's probably some honest belief that a long-term trade deficit crisis is still in our future and we ought to do what we can to keep it from happening. To a much larger extent, though, I think that responses to the Great Recession were preordained by ideology and political convenience. Some beliefs about our current crisis are defensible, but there are others so far off the mark (we need to worry about hyperinflation, bond markets are terrified of U.S. deficit levels, it was all the fault of the CRA, etc.) that it's simply not plausible that these are honest mistakes. They're politically driven from the get-go, and these arguments, or similar ones, were inevitable no matter what form the crisis had actually taken. That's not because of genuine confusion about what happened, it's because there are plenty of actors all along the chain, from economists to bankers to pundits to politicians, who are invested in certain answers and dedicated to inventing problems that require those answers.

One of these days we may yet get the crisis we thought we were going to get back in the early aughts. If we do, I guarantee that all those economists and bankers and pundits and politicians who are preaching austerity and deregulation and low taxes today will still be preaching them. That might even be the right answer the next time around, but if it is, it will merely be a coincidence.

Why did all those CDOs issued by Wall Street investment banks between 2005 and 2007 do so poorly? Because the underlying mortgage bonds that went into them were crap. No surprise there. It was the height of the housing bubble, after all, and mortgage bonds backed by lots of crappy mortgages are bound to perform pretty badly.

But did they do especially badly? That is, did banks deliberately put their worst, most toxic bonds into their CDOs, knowing they'd fail but not caring because at least it got them off their books? According to a newly released study, apparently so:

Using a unique database published by the investment firm Pershing Square Capital Management, Faltin-Traeger and Mayer identified the underlying bonds in some 528 ABS CDOs issued between 2005 and 2007, and compared their performance to similar bonds that weren't included in CDOs.

They found that the bonds in the CDOs performed a lot worse. Even if one holds observable characteristics such as initial ratings and yields constant, the bonds in the CDOs suffered ratings downgrades that were 50 percent to 90 percent more severe. As of June 2010, for example, bonds with initial triple-A ratings had been downgraded by an average 11.84 notches, compared to 5.99 for those not in CDOs. The bonds in the CDOs were also more likely to have been rated by all three major credit-rating firms.

The research provides strong support for the idea that banks — with the help of pliant ratings agencies — put together the CDOs and sold them to investors in a premeditated effort to get rid of some of their most toxic assets, or to provide vehicles for clients who wanted to bet against the worst possible assets. As the authors put it: "It would have been very hard to randomly choose securities with such poor ex-post performance."

Nearly all mortgage bonds issued between 2005 and 2007 have done badly. But if this study holds up, it's plain that Wall Street banks deliberately set out to create cleverly-constructed CDOs out of the worst of the worst, not caring that their clients would lose their shirts in the process. That isn't what caused the financial crash of 2008, but it sure helped make it worse.

Over at Economix, Laura D'Andrea Tyson says it's pretty unlikely that competition between insurers will lower healthcare costs, as Paul Ryan and Ron Wyden hope. After all, private healthcare premiums — where competition should be keeping costs down — have grown at a faster rate over the past 40 years than Medicare costs per beneficiary. The actual numbers she cites, from the Center for Budget and Policy Priorities, seem a little iffy to me since they compare two different things (premiums vs. actual costs), but still, there's plenty of evidence to suggest that Medicare really is better at controlling costs than private insurers. But why?

Medicare has much lower administrative costs than private insurance (administrative costs account for about 14 percent of health care spending, or a whopping $360 billion a year).

And Medicare has considerable negotiating leverage with providers as a result of its huge enrollment. Private insurance plans are unable to negotiate payment rates with providers that are as low as Medicare’s rates, even though Medicare’s negotiating authority is tightly limited and often undermined by Congress.

This actually seems unlikely to me. Companies like Aetna and Blue Cross are plenty big enough to negotiate favorable prices from healthcare providers. And they do. I suspect the dynamic driving higher costs in the private sector actually lies mostly with private employers, who compete with each other to keep their workers satisfied. This means that they help drive costs up, not down, and healthcare insurers respond to this. What's more, employers can always make up for higher premiums with smaller wage increases, which gives them less incentive to pay a lot of attention to healthcare costs in the first place. As long as their total compensation costs stay within reason, they don't much care whether it's going out in wages or in benefits. (In fact, since healthcare benefits aren't subject to income tax, they actually have a small incentive1 to increase benefits at the expense of wages.)

So I guess I wouldn't give Medicare quite such huge props for controlling costs. There's probably less there than meets the eye. Still, even if the numbers aren't as impressive as Tyson suggests, there's not much question that private healthcare providers have never done better at controlling costs than Medicare, and have almost certainly done at least a little worse. This doesn't bode well for the notion that unleashing the forces of free market competition will do much good for Medicare.

1Austin Frakt emails to point out that the incentive isn't really all that small. The value of a dollar of healthcare benefits is actually substantially higher than a dollar of wages.

Jon Chait writes today about the tacit rules for primary attacks on front-runners: always attack from the flank, since that doesn't play into the strategy of the opposing party during the general election (Obama, for example, won't be attacking Mitt Romney as "not a true conservative"); and lighten up when it starts to look like the front-runner is a sure thing.

But Newt Gingrich is famous for his willingness to toss all the usual rules overboard and light the world on fire if that's what he thinks it takes for him to win, and now he looks set to do it again:

With the benefit of a $5 million infusion from right-wing casino mogul Sheldon Adelson, Gingrich is planning an assault in South Carolina that centers on Romney’s career at Bain Capital....The political effect of these ads is to turn Romney’s chief selling point into a liability – his private-sector experience becomes an indicator not that he will fix the economy but that he will help the already-rich. It’s a smash-you-over-the-head blunt message, with ominous music and storybook dialogue.

True enough. Here's a snippet from the "King of Bain" website:

Mitt Romney was not a capitalist during his reign at Bain. He was a predatory corporate raider. His firm didn't seek to create value. Instead, like a scavenger, Romney looked for businesses he could pick apart. Indeed, he represented the worst possible kind of predator, operating within the law but well outside the bounds of what most real capitalists consider ethical.

....He and his friends at Bain were bad guys. Any real capitalists should disavow Romney's ‘creative destruction’ model that made him wealthy at the expense of thousands of American jobs.

Yes, that's a site affiliated with Newt Gingrich arguing that there are boundaries to "real" capitalism. What's more, those boundaries are largely ones that liberals have been talking about for years. There's are also attacks on Romney's 11,000 square-foot house and his "corporations are people too" quote. Romney even took "foreign seed money from Latin America"!

This is brutal stuff, and as Chait points out, it plays directly into Obama's hands. If you didn't know better, in fact, you might think this video was created by the DNC.

In other words, Newt Gingrich is now doing exactly what everyone in the Republican Party was afraid he was going to do: destroy them utterly if they decline to nominate him. It's no surprise really, since this has been Newt's MO for decades, but it sure is a helluva spectacle.

Here is today's Rorschach test. Or a something test, anyway. Earlier this morning, Mitt Romney said:

I like being able to fire people.

Hah! Ain't that just like a plutocrat who's spent most of his career buying companies and then making millions by mounting brutal mass layoffs of their workers? Of course, this is wildly out of context. What Romney really said was that he likes being able to buy, say, health insurance from whoever he wants, so that he can switch companies if he gets bad service. It's really completely unobjectionable. So what about that out-of-context snippet? Do you think:

  1. It's fair game. After all, Romney himself, after airing a plainly deceptive quote about Barack Obama, was the guy who proposed the "what's sauce for the goose is now sauce for the gander" standard for quote doctoring. And pretty much everyone on the right backed him up.
  2. It's ridiculous. We lefties should have more integrity than to stoop to stuff like this.

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