Kevin Drum

Slaves to Farming

| Sun Jul. 12, 2009 9:30 PM EDT

Dave Schuler laments:

As best as I can tell I’m one of the very few in the American political blogosphere who comments on trade negotiations — you can check back through my archives for my many posts posts on the subject. It doesn’t seem to be a subject that captures the imagination, possibly because there’s not a great deal of partisan hay to be made from the subject. I’d still like to know the answer to a question I posed nearly a year ago to Candidate Obama: how would he revive the Doha trade talks?

I sort of feel his pain.  But I'm not sure that lack of partisan venom is the reason for this.  More likely it's because everyone has just given up.  To me, writing about the Doha round is sort of like griping about how big states should have better representation in the Senate or musing about how we ought to eliminate the Defense Department.  I mean, if that's what floats your boat, fine.  The blogosphere is deep.  But we all know this stuff is never going to happen, so it's sort of a waste of time, isn't it?

Trade talks aren't quite that bad.  But they're close.  The Doha round in particular lives or dies based on the willingness of rich nations to substantially reduce tariffs and subsidies on agricultural products, and seriously, what are the odds of that?  We can't even have a serious discussion about reducing subsidies on corn ethanol, possibly the stupidest use of taxpayer dollars in the past century, let alone reducing farm support payments to ConAgra and Archer Daniels Midland.  Meanwhile, the European attitude toward farming makes ours look positively levelheaded and beneficient.  Paris would probably go up in flames if EU farm payments were ever rationalized.

So: what are the odds of making progress on agricultural issues?  Especially these days, you'd need scientific notation to express it properly.  Might as well wish for a pony instead.

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Wagging the Dog

| Sat Jul. 11, 2009 11:23 PM EDT

Here's an interesting little tidbit from yesterday's inspector general report on the various domestic spying programs known collectively during the Bush/Cheney era as the President's Surveillance Program.  The way it worked was this: the CIA at first, and later the Office of the Director of National Intelligence, produced a threat assessment every 45 days that was known internally as the "scary memo."  That memo was the basis for periodic renewal of the PSP.  If the memo wasn't scary enough, then no PSP:

CIA Office of General Counsel (OGC) attorneys reviewed the draft threat assessment memoranda to determine whether they contained sufficient threat information and a compelling case for reauthorization of the PSP.  If either was lacking, an OGC attorney would request that the analysts provide additional threat information or make revisions to the draft memoranda.

....During interviews, ODNI personnel said they were aware the threat assessments were relied upon by DOJ and White House personnel as the basis for continuing the PSP, and understood that if a threat assessment identified a threat against the United States the PSP was likely to be renewed.

Italics mine.  Now, the report dutifully goes on to say that the ODNI inspector general found the threat assessment process "straightforward, reasonable, and consistent," and that counterterrorism analysts believed the al-Qaeda threat to the United States was "overwhelming."

And yet — if that's the case, why would the scary memo ever lack "sufficient threat information" and need to be beefed up at the request of a CIA attorney?  And why would the IG's report go out of its way to mention, without comment, that the drafters of the memo were well aware that it needed to be sufficiently scary to justify the PSP?

Beats me.  I just work here.  But without saying so directly, the IGs who wrote the report sure seem to be going out of their way to suggest that sometimes the surveillance program was driving the threat assessment rather than the other way around.  Does that ring any bells?

Paying for the Times

| Sat Jul. 11, 2009 1:50 PM EDT

The New York Times is considering charging half a sawbuck per month for online access, and Michael Crowley approves:

Given that some people spend $5 per day on coffee, paying that much per month for online access the best newspaper in the world strikes me as an absolute no-brainer. I myself would pay twice as much. I hope the idea catches on, and I hope this marks a shift from the days of newspapers panicking to the start of successful new business models.

I'm a little torn here.  I don't have any problem with paying for the Times.  I already pay for the Wall Street Journal online, for example, and I figure that's just part of the job.  But if the Times does go this route, I hope they provide some mechanism for providing short-term public links to individual articles.  I generally try not to link to pieces that readers can't click through to read themselves, partly as bloggy courtesy and partly because it's one of the things that keeps bloggers honest.  If the Times blocked off online access completely to nonsubscribers, I'd link to them way less and would therefore find them way less useful.

As for the broader question of whether this will work, it's hard to say.  On the one thand, we're rapidly entering an era in which the Times is almost literally the only top notch general purpose newspaper in the country, now that the LA Times and Washington Post seem to be in death spirals.  That means less competition, which in turn means that if you really care about serious news, you don't have much choice except to pony up.

On the other hand — well, the Post and the LAT aren't that bad, and McClatchy and AP and the Guardian and the BBC and NPR and all the cable nets are still around.  The Times has them beat on a number of scores, but you still have to be a real news junkie before you're going to be unsatisfied with the flood of news from other outlets.  And I'm just not sure how many serious news junkies there are out there who don't already subscribe to the print edition.

But on the third hand, online advertising seems to have collapsed so completely that it's hard to see the downside of charging for access.  Even if it only brought in a few million dollars a year, that's probably more than they make from online ads these days.  So what's the harm in trying?

Let the Feds Fund Medicaid?

| Sat Jul. 11, 2009 1:19 PM EDT

If we need more stimulus, what form should it take?  Matt Yglesias comments:

In an ideal world at this point what I’d like to see is more aid to state and local governments. Probably this should just be done in a very crude way — some flat per capita disbursement that could be implemented very rapidly at the federal level and kick specific decisions to someone else. Some of the money would be wasted or used in bad ways, but it wouldn’t be congress or the executive branch doing the wasting, so it’d be someone else’s problem. That kind of thing would work quickly, would be highly stimulative, and would allow structural shifts in the private sector to proceed apace.

Well, one quick way to do this might be to stop dinking around with alterations to the Medicaid funding formula (as the first stimulus bill did) and simply turn Medicaid into a purely federal program funded entirely with federal dollars.  This would instantly save states something on the order of $100 billion or so.  Here in California, we'd save a little over $10 billion, which would be $10 billion less in demand-destroying budget cuts we'd have to make.  Eventually this might lead to Medicaid becoming more standardized throughout the country, rather than being a hodgepodge of 50 different plans, but that's probably OK.  I'm not sure Medicaid has really been a great poster child for states as laboratories of democracy anyway.  Maybe it's time to turn the entire program over to the feds so it's not constantly a procyclical drain on the economy and be done with it.

The Clown Show Forges On

| Fri Jul. 10, 2009 7:43 PM EDT

It's hard for a Republican to compete with Mark Sanford and Sarah Palin in the weirdness sweepstakes these days, but Sen. John Ensign is working hard to grab the spotlight back.

Yesterday, I thought that Ensign was doing pretty well on the comic relief front when his pal Sen. Tom Coburn, who has apparently been counseling him about how to handle his messy private life, informed reporters that he would refuse to testify about what he told Ensign.  "I was counseling him as a physician and as an ordained deacon," he said.  "That is privileged communication that I will never reveal to anybody." Coburn, of course, is an Ob/Gyn.

But then it got better — and less comic.  As we all know, Ensign was having an affair with Cindy Hampton, the wife of one of his former aides, and yesterday we learned that Ensign got his parents to pay $96,000 in hush money to the Hamptons.  Why $96,000?  According to Ensign's lawyer, his mother and father gave $12,000 apiece to Cindy Hampton, her husband, Doug, and two of their children in the form of a single check.  Hilzoy piles on:

$96,000 is a lot of money. Interestingly, it is precisely the amount you can give as a gift without having to report it to the IRS, multiplied by eight: one gift of $12,000 from each parent to Ensign's lover, her husband, and two of their children. I wonder what the IRS will make of that? I certainly hope that neither of the parents has made use of their children's money, or done anything else to suggest that this was all one big gift split up to avoid paying gift tax, or (more likely) having to report the gift. It's bad enough asking your parents to cough up $96,000 to cover up your indiscretions; asking them to violate the tax code and risk prison is a whole lot worse.

On the other hand, if the $96,000 was all one big gift, then I don't have to feel so bad for the one Hampton child who mysteriously got no gift at all. (There are three. I believe the oldest is 19.) If the gifts were genuine, it might be hard to explain to that third child why his or her siblings just got $24,000 from Mommy's lover's parents while s/he got nothing at all, not to mention why Mommy's lover's parents suddenly started feeling so generous.

Obviously Sarah Palin is now going to have to do something even more bizarre than last week's lakeside press conference if she wants people to start paying attention to her again.  I wonder what she'll dream up?

Friday Cat Blogging - 10 July 2009

| Fri Jul. 10, 2009 3:19 PM EDT

I had a lot of pictures to choose from this week. I'm not sure why I chose these, but they were nice summery outdoor pictures, and I liked them. Maybe I'll use some of the others next week. In the meantime, enjoy the weekend, everyone.

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The New Economy?

| Fri Jul. 10, 2009 3:05 PM EDT

Robert Reich says that it's consumers, not investors, who will need to lead a recovery out of our current recession:

Problem is, consumers won't start spending until they have money in their pockets and feel reasonably secure. But they don't have the money, and it's hard to see where it will come from. They can't borrow. Their homes are worth a fraction of what they were before, so say goodbye to home equity loans and refinancings.

....My prediction, then? Not a V, not a U. But an X. This economy can't get back on track because the track we were on for years — featuring flat or declining median wages, mounting consumer debt, and widening insecurity, not to mention increasing carbon in the atmosphere — simply cannot be sustained.

The X marks a brand new track — a new economy. What will it look like? Nobody knows. All we know is the current economy can't "recover" because it can't go back to where it was before the crash. So instead of asking when the recovery will start, we should be asking when and how the new economy will begin. More on this to come.

For many years it's looked as if we were getting closer and closer to an economy in which there flatly wasn't enough unskilled work left to keep employment at normal levels.  Stagnant median wages were the canary in the coal mine, with permanently higher unemployment coming in the future.  But I dunno: maybe the future is now.

I'll write more about this later so that everyone can tell me where I'm wrong.  At least, I hope I'm wrong.  We'll see.

The Overdraft Scam

| Fri Jul. 10, 2009 2:25 PM EDT

Kathy Chu reports on the overdraft fee scam, which currently generates nearly $40 billion in income for banks — by far their most lucrative source of fees and penalties:

Some consultants offered banks ways to boost overdraft and credit card revenue. A 2001 "checklist" from Profit Technologies — a firm that has worked with 19 of the USA's 20 largest banks — has more than 600 strategies....One strategy listed to boost overdrafts: "Allow consumers to overdraw their ... accounts at the ATM up to the bank's internally set limit." To increase credit card fees, banks can "delay crediting of payments not received in bank provided envelop (sic) or for which payment coupon is not received for up to 5 days," and "remove bar coding from remittance envelopes," slowing the payment.

....Has banks' pursuit of profit gone too far? Ken Vollmer, 49, of Augusta, Ga., thinks so. He sued Wachovia this year, alleging it "purposely structured transactions to make money." A merchant mistakenly put a hold on his funds, then the bank cleared transactions from high to low, triggering hundreds in overdraft fees, he says. Spokeswoman Richele Messick says Wachovia processes transactions in an "appropriate" way and will "vigorously defend" itself in the case.

Banks clear larger payments first, says Talbott, because they tend to be more important. But Douglass Colbert, who advised banks on overdraft and card strategies at Profit Technologies, says fees are a key driver.

"Banks will say (high-to-low clearing) is for the consumer," he says. "Bottom line is, when it was pitched, we'd say ... a side effect is that it results in more fee income to you because it bounces more checks." Colbert says that after leaving Profit Technologies, he joined a credit-counseling firm and saw the damage fees did to consumers.

Just to make this clear: Say you have $100 in your checking account and four checks arrive at your bank in the following amounts: $15, $20, $30, and $150.  If you clear them in that order, the first three are fine and only the last one incurs an overdraft.  If you clear them in the opposite order, all four incur overdraft fees.  Ka-ching!  That's why banks like to clear high to low.

In any case, if our Congress had any balls they'd fix this in a trice: simply regulate overdrafts as short-term loans, which is what they are.  The interest rates would be high, but nowhere near as high as the effective 1000%+ that banks charge now.  And it wouldn't matter what order checks cleared.

Banks still have to make money, of course, and if overdraft fees went down then the cost of other services would go up.  But that's fine.  There's no reason that overdraft fees from their least prosperous customers should subsidize other business lines.  It's better to charge everyone fairly and openly rather than trying to make outsize profits on the banking industry's poorest customers.

And the chances of this happening?  About zero.  Why?  Don't be silly.  It's because the finance industry still owns Congress.

Up North in Iraq

| Fri Jul. 10, 2009 1:28 PM EDT

Violence may be increasing in Baghdad, but it's up north in disputed Kurdistan that Iraq's bigger problems are likely to erupt.  Here's the LA Times:

The worst attack Thursday occurred in Tall Afar in Nineveh province in the north, where a double suicide bombing killed 34 people, prompting a senior Iraqi official to express concern that the country's security forces, now fully responsible for protecting the cities, had been penetrated by armed groups.

....Militants appear focused on the north, where Arabs and Kurds are locked in a dispute over a 300-mile stretch of land where Saddam Hussein's regime expelled Kurds and settled Arabs in their place. Iraq's semiautonomous Kurdish region wants to annex those areas, an idea Arabs oppose.

And the New York Times:

With little notice and almost no public debate, Iraq’s Kurdish leaders are pushing ahead with a new constitution for their semiautonomous region, a step that has alarmed Iraqi and American officials who fear that the move poses a new threat to the country’s unity.

....The proposed constitution enshrines Kurdish claims to territories and the oil and gas beneath them. But these claims are disputed by both the federal government in Baghdad and ethnic groups on the ground....Vice President Joseph R. Biden Jr., sent to Iraq on July 2 for three days, criticized it in diplomatic and indirect, though unmistakably strong, language as “not helpful” to the administration’s goal of reconciling Iraq’s Arabs and Kurds, in an interview with ABC News.

I don't have any special comment on this.  Just pointing it out.  Kurdistan has always been the wild card in Iraqi politics, but despite lots of warnings it's never quite erupted.  It always seemed to be a problem for tomorrow.  Now, though, it's possible that tomorrow has finally arrived.

Healthcare Weirdness

| Fri Jul. 10, 2009 12:36 PM EDT

Ezra Klein says he's "baffled" by Michael Kinsley's column on healthcare reform in the Post today.  He's being way too kind.  I read it last night and Kinsley's column isn't even coherent.

Do we need a root-and-branch reform of healthcare in America?  "The answer is probably yes," Kinsley affirms.  But then, without warning, he pulls a high-speed U-turn out of his hip pocket and declares that we shouldn't bother right now regardless.  Why?  Because healthcare reform gets its urgency "merely from [its] association with truly urgent measures like the stimulus package." Because it will cost $100 billion per year or so and it really ought to be free.  Because it will be politically difficult.

Huh?  Healthcare reform was viewed as urgent long before the banking crisis.  Its cost is no surprise at all.  And everyone knew it would be politically difficult from the get go.  None of this is news and none of it makes any sense.

And what makes even less sense is the "low hanging fruit" that Kinsley suggests we implement in place of broad change: malpractice reform, electronic recordkeeping, and comparative effectiveness research.  That's not low hanging fruit.  It's low hanging gnats.  They're all good ideas, but they'd have only a tiny impact on costs and essentially no impact at all on broadening coverage.  It's like telling GM to spend more time designing prettier hubcaps.  Very strange.