Kevin Drum

Schools and Poverty

| Wed Oct. 13, 2010 1:40 PM EDT

Matt Yglesias muses on the eternal question among education wonks: should we focus our attention specifically on education reform itself, or is that unlikely to make much difference unless we also address the broader issues of concentrated poverty that are largely behind so many of our educational problems? He kinda sorta defends the latter view:

The rising cost of health care, the shrinking public tolerance for tax hikes on the middle class, and the hyper-empowerment of the rich in the political system are combining to create a situation where it will be impossible to finance K-12 education in the United States. Institutions committed to “education reform” as their mission sort of can’t focus on this nexus by definition and the people who fund such outfits are generally not interested in funding talk about the desirability of higher taxes. Similarly, most American cities are in a position where if they improve their school system and hold housing policies constant, the medium-term impact will be to create a new equilibrium where poor people can’t afford to live in the city, not a new equilibrium where poor people attend the new good schools.

I'm going to get the ed people mad at me again — and I guess I'll add the poverty people too this time — but I continue to think that the biggest problem here is simply that no one has any really compelling answers. Movies like Waiting for Superman (which I haven't seen), along with an endless stream of credulous punditry, keep suggesting that the answers are out there if only we'll fund them and take them seriously. But they aren't. Charter schools are great, but they're no panacea. (Not yet, anyway. Maybe someday after we figure out which ones work.) High-stakes testing might be a necessary evil, but it hasn't proven to have any long-term value yet either. Etc. You can go down the list of every ed reform ever touted, and they either can't scale up, turn out to have ambiguous results when proper studies are done, or simply wash out over time.1

And as Matt suggests, the tolerance of the middle class for raising its own taxes to improve education is pretty low. One reason, I suspect, is that people have largely lost faith that their taxes are being used for anything useful. If they pay more, they won't get better schools, they'll just get higher teacher salaries as the teachers unions hoover up all the dough. That's especially galling for a middle class that no longer believes teachers are underpaid. Here in California, the average teacher makes about $55,000, and that's for a job with good benefits, great job security, a nice pension, and a workyear of 180 days. Like it or not, your average waitress or truck driver just doesn't think that's so terrible.

So is the answer to address concentrated poverty? Sure. Except that, if anything, attempts to address poverty have a worse track record than attempts to improve education. Hell, attempts to address poverty have such a bad track record that even credulous pundits rarely bother writing about it anymore. Nobody really seems to have any compelling answers, and for about 90% of the country it's just too easy to ignore the problem entirely. They won't phrase it quite this way, of course, but basically they're willing to let the cities rot.

I would really, really like someone to tell me I'm wrong. So far, though, no one has. At least, not to my satisfaction. But I'm willing to be schooled if anyone thinks I'm missing the big picture here.

1As near as I can tell, the only real exception is intense and persistent early intervention. It's still no panacea, but done right it really does seem to make a difference.

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The Next Crisis

| Wed Oct. 13, 2010 12:54 PM EDT

This has been on the back burner for a while as we dealt with a financial meltdown and a brutal recession, but Steven Pearlstein reminds us today of what our biggest and most enduring economic problem really is:

The fundamental economic challenge facing the United States is to get what we consume more in line with what we produce after years of living beyond our means. Obviously there are two ways to correct this imbalance — increase production or reduce consumption — and given the magnitude of the adjustment, it's likely we're going to have to do both.

....From a policy standpoint, this appears to put us in a terrible bind: either reduce unemployment by returning to our free-spending ways, or finish the job of reducing consumption by pushing unemployment up even further. For the moment, we've decided to choose neither. There is, of course, a way out of this bind: produce more without consuming more. For all practical purposes, that means grabbing a bigger share of global markets, either by exporting more goods and services, or replacing some of the stuff we import by producing it at home.

This, of course, was behind Barack Obama's (largely empty) promise to double U.S. exports over the next five years. For that to happen, though, the dollar has to fall. Probably a lot. That makes U.S. exports to the rest of the world cheaper and everyone else's exports to us more expensive. Martin Wolf comments:

To put it crudely, the US wants to inflate the rest of the world, while the latter is trying to deflate the US. The US must win, since it has infinite ammunition: there is no limit to the dollars the Federal Reserve can create. What needs to be discussed is the terms of the world’s surrender: the needed changes in nominal exchange rates and domestic policies around the world.

....China objects to the huge US fiscal deficits and unconventional monetary policies. China is also determined to keep inflation down at home and limit the appreciation of its currency. The implication of this policy is clear: adjustments in real exchange rates should occur via falling US domestic prices. China wants to impose a deflationary adjustment on the US, just as Germany is doing to Greece. This is not going to happen. Nor would it be in China’s interest if it did. As a creditor, it would enjoy an increase in the real value of its claims on the US. But US deflation would threaten a world slump.

....The US is going to win this war, one way or the other: it will either inflate the rest of the world or force their nominal exchange rates up against the dollar. Unfortunately, the impact will also be higgledy piggledy, with the less protected economies (such as Brazil or South Africa) forced to adjust and others, protected by exchange controls (such as China), able to manage the adjustment better.

Before the financial collapse of 2008 this was the big topic of conversation among macroeconomists. Virtually none of them predicted the havoc that the housing bubble would wreak, but they did predict the havoc that an ever-expanding trade deficit would wreak. That's been largely in the background for a while as we dealt with the immediate crisis, but it hasn't gone away and after a brief bit of improvement in 2008-09 the trade deficit has been climbing all over again for the past year. The world has relied on U.S. consumers as the engine of global growth for the past two decades, and one way or another that was never going to keep up forever. The only question was whether it it would adjust gradually — producing modest but long-lived pain — or adjust suddenly, producing all the pain at once. That's still the question.

Life on the Street

| Wed Oct. 13, 2010 12:05 PM EDT

And now for some contradictory news about Wall Street earnings:

With the country's major banks due Wednesday to start reporting third-quarter earnings, a new pessimism is taking hold on Wall Street based on the growing belief that the economy will remain weak for some time, limiting the industry's ability to make money....Wall Street analysts who follow their own industry have recently slashed earnings estimates for a number of big players. Several firms have quietly fired staff, and many more layoffs are expected by early next year. There are even predictions of a severe drop in Wall Street's notoriously generous compensation.

"We're going to see a larger increase in unemployment in the financial services than anyone had expected," said Steven Eckhaus, a lawyer who advises banks on employment matters.

So are Wall Street traders breaking out the champagne buckets (yesterday's news) or preparing to sell their backup vacation homes (today's news)? Hard to say. But this report does suggest one reason that it's going to be hard to tell if financial reform is working. I've suggested before that overall industry profitability is a key metric to watch because a safer industry is inherently a less profitable industry. However, the opposite isn't mathematically equivalent: a less profitable industry might be a safer industry but it might not be. It might be less profitable just because the economy is sucking.

So: if industry profits stay high, that's definitely a bad sign. But if industry profits fall, it's an ambiguous sign. Wait and see.

Drowning in Ethanol

| Wed Oct. 13, 2010 1:53 AM EDT

Somebody just shoot me now:

The Environmental Protection Agency is expected to announce Wednesday that it has approved motor fuel with higher blends of ethanol for use in newer vehicles....The agency will grant a waiver to existing rules to allow the use of E15 — made with 15 percent ethanol and 85 percent gasoline — in cars made in model year 2007 or more recently.

....Big agriculture companies and ethanol distilleries have been pressing for an increase in the limit on ethanol in motor fuel because the nation's overall ethanol production is approaching 10 percent of motor fuel use, a point commonly known as the "blend wall" by people in the industry.

Just what we need. More land-use destroying, corn price increasing, environmentally idiotic ethanol. All taxpayer-subsidized, of course. I guess the Iowa caucuses must be coming up any year now.

How They Win

| Tue Oct. 12, 2010 5:27 PM EDT

Via Jon Chait, a new study shows that the good looking guys really do get all the hot chicks votes. Three researchers did a study to find out if attractive political candidates were more likely to win elections, and in order to eliminate a source of bias they asked Americans and Indians to rate the attractiveness of candidates for Mexican and Brazilian offices:

Despite cultural, ethnic, and racial differences, Americans and Indians agree about which candidates are superficially appealing (correlations ranging from .70 to .87).  Moreover, these superficial judgments appear to have a profound influence on Mexican and Brazilian voters, as the American and Indian judgments predict actual election returns with surprising accuracy. These effects, the results also suggest, may depend on the rules of the electoral game, with institutions exacerbating or mitigating the effects of appearance.

Since, unlike Chait, I'm a serious blogger, I won't illustrate this post with a picture of George W. Bush in his flyboy days. Instead you get a chart. And it's really pretty remarkable. The study included ratings of 47 pairs of candidates, and as you can see the more attractive candidates had a better chance of winning (black dashed line). But that's not all! In an effort to add some value to this study, I drew red lines at the one-third marks, and the results are truly astounding. In the middle, things are kind of a crapshoot. But when one candidate has a strong appearance advantage over the other, the results are almost foregone. All of the eight ugly candidates lost and six out of seven of the dreamboats won.

I don't know if similar results hold for women, but if it does maybe Republicans would be wise to nominate Sarah Palin after all.

Quote of the Day: Congress and its Discontents

| Tue Oct. 12, 2010 3:34 PM EDT

In an interview with Ezra Klein, car czar Steve Rattner tells us what he thinks about America's lawmakers:

EK: Tell me about dealing with the Congress.

SR: When you actually deal with them to try and get something done? It's impossible. It is so divisive, so parochial and so petty. If you look at the auto rescue, the only time Congress really got involved was over the dealers. Here we are, laying off thousands of workers and restructuring these companies, and the only thing that animated Congress was the dealers. In terms of the body as a whole, they were just obstructionists.

I think that if we didn't have TARP, the whole economy could have imploded before Congress figured out what to do. They hated TARP because it gave the Treasury a $700 billion check, but it wouldn't have worked any other way. I think every president gets tagged negatively by the American public for things that really, they should be tagging Congress for. Everyone talks on the morning talk shows about the president's approval rating, it's 45 or 44 or 46, and Congress is 22. People should be focused on Congress. It's really important. It's not on top of the Hill by coincidence. It's not Article I of the Constitution by coincidence.

I recommend we replace them all with a randomly selected bunch of sixth graders. They might not get any more done, but at least they'd be better behaved.

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California's Medical Marijuana Maze

| Tue Oct. 12, 2010 1:21 PM EDT

Josh Harkinson tests out California's Byzantine medical marijuana bureaucracy:

Soon enough, I found Price-Less Evaluations, "the most trusted medical marijuana evaluation center in San Francisco"....The receptionist led me back into a hallway, where I saw a stooped, white-haired man in a rumpled pullover — the doctor. "Come on in," he mumbled. I stepped into an office and sat down at the edge of his desk. "So, can cannabis help you in some ways?" he asked, pen poised over a recommendation form. "I think so, yeah," I replied, trying to sound confident.

"So how does it help you?" he asked as the ink dried. "Well," I offered, "I have periodic pain from typing a lot, and in my lower back, and it could help me with that." He smiled. "Good. It's signed right there." The entire conversation had taken less than 90 seconds.

On my way out, I paid the $70 evaluation fee in cash and forked over another $20 for a wallet-sized "patient identification card" — carte blanche to buy pot from one of California's 1,000 medical marijuana dispensaries.

Apparently the time it took to google this up was the most arduous part of the whole experience.

UPDATE: Just in case anyone didn't get it, "Byzantine bureaucracy" was just a little joke.

Meaningless Polls, Part 897

| Tue Oct. 12, 2010 12:59 PM EDT

From the latest Bloomberg poll:

The Republican “Pledge to America” is viewed as a good idea by 48 percent of likely voters, compared with 39 percent who term it a bad idea.

Are they seriously trying to tell us that 87% of likely voters have heard of the Pledge to America? Please. Here's the actual question:

All this poll tells you is that if you vaguely ask people if they're in favor of cutting taxes and reducing some government spending, about half will vaguely say they are as long as nothing is cut that actually affects them. It's hard to think of a more meaningless poll question.

Liberal Branding Revisited

| Tue Oct. 12, 2010 12:31 PM EDT

Bob Somerby thinks that liberal branding isn't as hard as some of us think:

For ourselves, we think it’s very easy: The people, not the powerful! You have to explain where things go from there, of course.

Yep. You have to explain where things go from there. But that's the whole problem, isn't it?

Dumb and Dumber

| Tue Oct. 12, 2010 12:00 PM EDT

And now, from the annals of political cluelessness:

In a potential sign of Democratic unease with the White House midterm political strategy, some of President Obama's allies have begun to question his sustained attack on the U.S. Chamber of Commerce, which has long claimed bipartisanship but is being increasingly identified as a GOP ally.

....Democrats expressing reservations have worked on behalf of moderate candidates with business backing. They recalled past attacks on former President Clinton and Vice President Al Gore for receiving foreign money and warned that White House charges now could lead to GOP reprisals, particularly if Republicans gain control of the House.

"The White House may reap the whirlwind," said one top Democratic staffer. "What are we going to do next year if a Republican Congress is making baseless claims about President Obama? We'll want the media to hold them accountable to the facts and the evidence."

Maybe you think the president's attacks on the Chamber of Commerce are over the top. Fine. Maybe you think it's making life hard for some centrist Dems. Fine. But worrying about "reprisals"? Worrying that it will leave Dems helpless if Republicans start making "baseless claims about President Obama"? WTF? What planet do some of these guys come from? Are they still under the impression that Republicans might not make baseless claims about Obama if he plays nice? Or that the press is going to hold them accountable if they do?

Holy cats. Maybe they really do deserve to lose.