Kevin Drum

A Penal Colony With a Nice Coastline

| Wed Jul. 22, 2009 11:20 AM EDT

As of yesterday, fees to attend a Cal State university have gone up by a third in the past year:

As several hundred students shouted "Vote no!" outside the chamber door, California State University trustees Tuesday approved a student fee hike of 20% and agreed to furlough most faculty and staff, including college presidents, for two days each month.

....Cal State also plans to cut its 450,000 enrollment by 40,000 students over the next two years, and $183 million more in budget cuts will be borne by individual campuses.

The 23-campus university system, the nation's largest, has almost tripled its basic fees over the last eight years, approving increases in every year but one. But Tuesday's was by far the steepest, and followed a 10% hike approved just in May.

When I went to school at Cal State Long Beach in 1978, I paid about $100 per semester, plus another $50 or so for books.  Call it $300 a year.  Basically, even the poorest could afford it without going into debt.  Now it's more like $5,000 per year.

I know there are some pretty good arguments for having higher public university fees.  After all, why should the taxpayers subsidize kids who are just going to use their degrees to earn a lot more money over the course of their lives anyway?  And yet.....I don't buy it.  Applied to Harvard, maybe.  But I really like the idea of having a public university system that isn't world class (that's what UC is for), but does provide a basic, good quality, no-frills education to anyone who wants it, and is designed to attract as many people as possible to give it a try — without having to worry that they're racking up a huge debt if it turns out they can't make it.  There's not only a meritocratic ideal in this that appeals to me greatly, but it says something about the priorities of the citizenry that's inspiring as well.

Maybe I'm living in the past.  Maybe community colleges provide that function these days.  A lot of people think so.  But I don't.  And if I had the choice of keeping Cal State universities accessible to everyone vs. shoveling another 10,000 petty crooks into prison, I know which I'd choose.  Over the past 30 years my fellow California residents have decided they'd rather become a penal colony with a nice coastline than a land of opportunity.  It's not a change for the better.

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Taming the Blue Dogs

| Wed Jul. 22, 2009 1:55 AM EDT

Karen Tumulty reports that President Obama is starting to twist arms on Capitol Hill a little more:

One close Obama ally predicted to me: "He's going to become increasingly specific — and increasingly persistent — about the things he does and doesn't want" in the health care bill. This afternoon found the President knee-deep in negotations with the conservative Democrats known as "Blue Dogs," who have been slowing down Energy and Commerce Committee Chairman Henry Waxman's efforts to get a bill through his panel. And as a result, the President and the conservative Democrats are making common cause on one cost-containment measure that both would like to see added to the House bill.

In a conference call with a group of reporters after the session, Obama Budget Director Peter Orszag said that the White House and the Blue Dogs agree that the "biggest missing piece" of the House bill is a proposal — similar to one championed in the Senate by Democrat Jay Rockefeller — to take the job of setting Medicare reimbursement rates out of the hands of Congress, and turn it over to an independent agency that presumably would have more expertise — and more insulation from political pressure. (You can read our earlier discussion of it — and Orszag's argument for it — here.) The idea has also won words of praise from the Mayo Clinic on the very blog where it criticized the House bill yesterday. And Obama's engagement may be bringing the Blue Dogs aboard.

Right now rate setting is little more than a naked annual porkfest, and there's really no good reason Congress should be involved in it except at the hundred-thousand foot level anyway.  I don't know if giving it to an independent agency will actually contain costs very much, but if this is what it takes to bring the Blue Dogs on board it's fine with me.

Waist Management

| Tue Jul. 21, 2009 11:17 PM EDT

So what's happening over at Slate these days?  Let's take a look:

For years, critics of the body mass index have griped that it fails to distinguish between lean and fatty mass. (Muscular people are often misclassifed as overweight or obese.) The measure is mum, too, about the distribution of body fat, which makes a big difference when it comes to health risks. And the BMI cutoffs for "underweight," "normal," "overweight," and "obese" have an undeserved air of mathematical authority. So how did we end up with such a lousy statistic?

Oh man, not this again.  Yes, it's true: there are a few of us with such Adonis-like physiques that our BMI is high even though we're not overweight. But not many, and you know who you are anyway.  For most of us, let's face facts: if you have a high BMI it's because you've been eating a few too many Snickers bars.

What's more, it's no mystery why BMI has become so widely used: it might not be perfect, but it's a pretty good rough-and-ready measure of obesity and it's really, really easy to measure.  Mine is about 28.  And anyway, all these articles moaning about how bad BMI is never give us anything better to use.

Except — wait!  Hallelujah!  This one does:

Our continuing reliance on BMI is especially grating given there's a very reasonable alternative. It turns out that the circumference around a person's waist provides a much more accurate reading of his or her abdominal fat and risk for disease than BMI. And wrapping a tape measure around your gut is no more expensive than hopping on a scale and standing in front of a ruler.

OK, so what's the formula?  WC squared divided by neck size?  Or what?  Is Slate seriously going to make us click those links and wade through a couple of epidemiological studies instead of just telling us?  Jeebus.  But fine.  I'll go look.  From the second link, here it is:

Men and women who have waist circumferences greater than 40 inches (102 cm) and 35 inches (88 cm), respectively, are considered to be at increased risk for cardiometabolic disease....Waist circumference measurements should be made around a patient's bare midriff, after the patient exhales while standing without shoes, both feet touching, and arms hanging freely. The measuring tape should be made of a material that is not easily stretched, such as fiberglass.

That's it?  No formula?  Just one number?  That's pretty nice — though I don't really like this one much.  My BMI tells me I'm a little heavier than I should be, but not that much heavier.  Hooray!  My WC, on the other hand, clocks in at 42 inches, clearly higher than it should be.  Boo!

But as it turns out, this is a point in favor of WC since I've always felt that BMI is too kind to me.  My gut is considerably more jello-like than it should be, and my WC measurement makes that clearer than my BMI does.

Still, don't take this too seriously.  The study in the first link above shows that WC is a better measure of various kinds of fatty tissue than BMI, but not that much better.  And the second study says that although WC provides "incremental value" in predicting diabetes, CHD, and mortality rate above and beyond that provided by BMI, it's not clear if it provides enough incremental value to be worth it: "Based on NHANES III data, 99.9% of men and 98.4% of women would have received the same treatment recommendations proposed by the NHLBI Expert Panel by evaluating BMI and other cardiovascular risk factors, without an assessment of WC."

So go ahead and measure your waist.  It's fast and easy, and if you don't cheat it's a fairly decent predictor of body fat.  But for 98% of us, if you know your BMI already you're probably not going to learn anything you don't already know.

(Now, whether you should care is another question entirely.  I'll leave that for another day.  But regardless of your weight, don't forget to exercise!  Everyone agrees that a sedentary lifestyle is bad for you.)

Who's Afraid of Futures Contracts?

| Tue Jul. 21, 2009 7:16 PM EDT

It's become popular lately to attack the Waxman-Markey cap-and-trade bill as yet another giveaway to Wall Street.  In his recent tongue-lashing of Goldman Sachs, for example, Matt Taibbi warned that trading in carbon credits would be the next subprime debacle:

Instead of credit derivatives or oil futures or mortgage-backed CDOs, the new game in town, the next bubble, is in carbon credits — a booming trillion dollar market that barely even exists yet, but will if the Democratic Party that it gave $4,452,585 to in the last election manages to push into existence a groundbreaking new commodities bubble, disguised as an "environmental plan," called cap-and-trade.  The new carbon credit market is a virtual repeat of the commodities-market casino that's been kind to Goldman.

As you know, I'm pretty skeptical of this.  The market for carbon credits may be big, but it's nowhere near big enough to cause the kinds of systemic problems that abuse of subprime mortgages did; the derivatives in question are simple ones like options and futures, not CDOs and swaps; and Waxman-Markey has some pretty good language regulating them in any case.  Today Paul Krugman takes up the argument:

Any time you have a market, there’s some opportunity for speculation....So, should fear of speculation lead us to ban trading in wheat? Nobody would say that....Now substitute “emission permits” for wheat. It’s exactly the same story. Why should you address it any differently?

....The prime example of an energy market gone bad is the western electricity market in 2000-2001; and let me say that I have some moral authority here, since I called it when it was happening. That was the real thing — but what made it possible was a combination of at least two factors. First, the demand for electricity was highly unresponsive to prices; second, the relevant markets were fairly small (northern and southern California were isolated both from the outside world and from each other by transmission bottlenecks).

In the case of emission permits, demand will probably be quite responsive to prices — and the market will, as Joe Romm says, be huge.

Read the whole thing. Joe Romm has more here. I'm all in favor of Waxman-Markey containing strong language to restrict fraud and speculation, but there's no reason tie ourselves in knots thinking that this is another subprime debacle waiting to happen just because it involves commodity trading.  The facts on the ground really don't back it up.

F-22 Fail

| Tue Jul. 21, 2009 2:57 PM EDT

The Senate has voted 58-40 to cut off funding for the F-22.  There's still more to come on this, both in the Senate and in conference, but it's promising news.  The case against the F-22 was pretty rock solid, and if the funding cutoff had failed it would have meant that, basically, it's impossible to cut anything in the Pentagon budget.  Score one for common sense.

How to Market Healthcare Reform

| Tue Jul. 21, 2009 2:11 PM EDT

As the healthcare debate plays out, we're all getting to see in real time the fundamental political contradictions that make it so hard to get anything done.  The big lesson learned from the Clinton debacle of 1994 is that people who currently have insurance from their employer don't want it touched.  Ditto for senior citizens covered by Medicare.  So Democrats are making sure they aren't touched: in fact, they're repeating like a mantra that if you like the insurance you have now, you can keep it.  No one's going to take it away.  No one's going to so much as look at it crosseyed.

Fine.  But two-thirds of the country already has health insurance through their employer and another big chunk are on Medicare.  If these aren't going to be touched, then why should they care about healthcare reform?  In particular why should they be willing to pay higher taxes for something that won't help them out in any way?

No reason, really.  So instead Dems are promising to increase "access" and cut costs.  The former is basically welfare and gets only anemic support.  The latter is not only unproven, but doesn't do much to excite most people anyway.  Sure, they'd like it if their copays went down, but mainly they just want healthcare and they don't care how much it costs.  Mickey Kaus comments:

1) As is so often the case, overpolling seems to blame....I suspect [Obama aides] saw what they wanted — and they wanted to focus on costs. It's possible to take polls that show something very different2) Is "access" the right word to test-as opposed to "security"? "Access" makes it sound as if you are focusing on the problem of the uninsured — i.e. charity, to many middle class Americans — as opposed to security for everyone. If they polled "access," that may have stacked the deck from the start; 3) "Maybe" they "overcorrected from the Clinton model"? Maybe?

I sympathize with the Obama folks.  How do you promise to leave most people alone and also convince them to support major change?  It's a tough nut.  And putting aside whether the Obama team overcorrected or not, it's still true that "security" didn't get the job done for Clinton.  So what's the answer?  In a nutshell, fearmongering.  Like so:

Rather than overall cost....the selling point of national healthcare is freedom from the endlessly gnawing problems of our current jury rigged system. For example: HMOs that make it hard to see a specialist. High and rising copayments. Fear of losing coverage if you lose your job. Long waits for non-urgent care. New (and usually worse) healthcare coverage every time your HR department is told to find a cheaper plan.

And more: Small businesses that have a hard time attracting good employees because they can't afford to offer health coverage. Big business that are on the verge of bankruptcy because of skyrocketing health costs. Lack of choice in physicians because you're limited to whichever medical groups have signed contracts with your company's insurance carrier. Losing your longtime family doctor because your company switches insurance carriers and you can only see doctors on your new carrier's approved list.

And yet more: Fear that preexisting conditions won't be covered if you take a new job. The risk of financial ruin if someone in your family has a truly catastrophic illness. Crowded emergency rooms that have essentially become clinics of last resort for the poor. Being forced to go on strike year after year because your employer relentlessly tries to gut your healthcare benefits every time your union contract gets renegotiated. 43 million people who lack health coverage of any kind.

Reducing healthcare costs ought to be a goal of any national healthcare plan, and a truly national plan is probably the only way we'll ever accomplish that. But that's not the way to sell it. Freedom from fear, freedom from pain, and freedom of choice are the ways to sell it.

Fine.  I'm cheating.  That was me a couple of years ago.  But I still think it's the right sales pitch.  And even if it's not as highminded as Obama might like, it has the virtue of being true.  For most people, healthcare reform isn't so much about insuring their health now as it is about insuring their health tomorrow.  If they understood just how precarious that is, they'd be a lot more enthusiastic about healthcare reform today.

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Chart of the Day

| Tue Jul. 21, 2009 12:20 PM EDT

This comes from Foreign Policy magazine, which ranks the world's countries every year to figure out which ones are stable and which ones aren't.  According to FP, a grand total of 37 countries are minimally stable this year.  The entire rest of the world is either borderline or in outright chaos:

The financial crisis was a near-death experience for insurgency-plagued Pakistan, which remains on IMF life support. Cameroon has been rocked by economic contagion, which sparked riots, violence, and instability. Other countries dependent on the import and export of commodities — from Nigeria to Equatorial Guinea to Bangladesh — had a similarly rough go of it last year, suffering what economist Homi Kharas calls a “whiplash effect” as prices spiked sharply and then plummeted. All indications are that 2009 will bring little to no reprieve.

Instead, the global recession is sparking fears that multiple states could slip all at once into the ranks of the failing. Now more than ever, failed-state triage could become a grim necessity for world leaders from the United Nations and World Bank to U.S. President Barack Obama’s White House. All of which puts a fine point on an old and uncomfortable dilemma: Whom do you help when so many need it?

Delaying Guantanamo

| Tue Jul. 21, 2009 11:48 AM EDT

The latest on Guantanamo:

Obama administration officials said Monday they would not meet self-imposed deadlines for deciding what to do with scores of detainees too dangerous to release from the prison in Guantanamo Bay, Cuba.

....The officials said they had made substantial progress in reviewing the cases of the approximately 240 prisoners at the facility, and had decided that dozens of detainees were eligible for transfer to other countries or were suitable for trial.

But the officials acknowledged that two reports that were supposed to be delivered to the president by Wednesday — one on how to overhaul the nation's detention policy and another on interrogation policy — would not be ready...."We want to get this right and not have another multiple years of uncertainty," one senior administration official said in a background briefing with reporters at the White House.

Well, that's probably right.  It is a complex problem, and they do want to get it right.  But it's not really as complex as all that, and there's a far more likely explanation for the delay: after the bipartisan meltdown when this first surfaced in May, Obama realized that it's a political issue so explosive that it could easily derail his entire domestic agenda if he lets it detonate in public again. Passing healthcare reform and climate change bills will be hard enough as it is, and he's probably made a cold-blooded calculation that it's better to slow-roll Guantanamo than it is to endanger either of his centerpiece domestic initiatives.  It's not pretty, but it's politics.

Does Independence Matter?

| Tue Jul. 21, 2009 11:08 AM EDT

Why do independent central banks (ICBs) generally produce low inflation?  Alex Tabarrok says it's because bankers tend to get appointed to run ICBs and bankers have a bias toward low inflation.  Megan McArdle says no, it's because nobody holds Congress accountable for the performance of ICBs, which gives them the freedom to appoint people who will do things they don't have the guts to do themselves.  Matt Yglesias isn't sure that the Fed is really an ICB in the first place: it was pretty clearly politicized in the 70s and produced high inflation, and it was quite likely politicized in the oughts and helped produce an economic meltdown.

These all sound like reasonable points to me, and I don't think they're mutually exclusive.  Maybe they're all right.  But I'm curious about something else: what does the academic literature say about the performance of ICBs in advanced economies in the first place?  There must be a considerable amount of research on this point.  If we take some measure of "independence" and compare that to various measures of medium-term economic performance (inflation, wage growth, GDP growth, unemployment, etc.), what do we find?  Does independence really matter very much?  Is there some specific aspect of independence that matters more than others?  Can some friendly econoblogger summarize the literature for us?

Checking In On the Rich

| Tue Jul. 21, 2009 1:51 AM EDT

The communists at the Wall Street Journal present us with the latest executive pay data today:

Executives and other highly compensated employees now receive more than one-third of all pay in the U.S.....In the five years ending in 2007, earnings for American workers rose 24%, half the 48% gain for the top-paid. The result: The top-paid represent 33% of the total, up from 28% in 2002.

....The data suggest that the payroll tax ceiling hasn't kept up with the growth in executive pay. As executive pay has increased, the percentage of wages subject to payroll taxes has shrunk, to 83% from 90% in 1982. Compensation that isn't subject to the portion of payroll tax that funds old-age benefits now represents foregone revenue of $115 billion a year.

You probably thought that the big problem with skyrocketing executive pay was the fact that it left nothing for the rest of us.  And you're right: that 24% increase for "American workers" includes the 48% increase for the top earners.  In other words, the executives got a 48% increase, the rest of us got approximately nothing, and it all averaged out to 24%.

But that's not all!  It also means that the average joes with stagnant wages couldn't keep up, so they went deeper and deeper in debt.  And who loaned them the money to do that?  Well, the rich can't really spend that ocean of extra dough they're getting — the technical reason is that they have a lower marginal propensity to consume than average joes; the nontechnical interpretation is that you can only buy just so many yachts — so they ended up loaning most of it back to the middle class.  We all know how that turned out — but the rich got bailed out by the taxpayers so they ended up OK.  The rest of us, not so much.

And now the Journal is pointing out yet another problem with running our economy solely for the benefit of the wealthy: you only owe payroll taxes on income up to $106,000.  This number rises every year, but it doesn't rise nearly as fast as the earnings of the rich.  Which means that more and more income every year is above the cutoff and doesn't get taxed.  And that in turn means that Social Security is in considerably worse shape than it would be if increases in national income weren't being hoovered up almost exclusively by the executive class.

So there you have it.  If we don't pass healthcare reform it will be because the rich don't want to help pay for it.  Average wages are stagnant because that leaves a bigger pool of money for the rich to slosh around in.  We're letting the planet fry because policies to stop it would inconvenience the rich.  Regulatory reform of the financial system increasingly appears to be a dead letter because Congress is owned by the rich and they don't want it.  Against all that, I suppose that crippling Social Security hardly even shows up in the ledger.  But we might as well tot it up anyway.