Kevin Drum

Chart of the Day - 3.12.2009

| Thu Mar. 12, 2009 10:33 AM PDT
Should healthcare reform include a public option?  That is, even if most people continue to get their healthcare via private insurers, should they have the option of signing up with a public plan if they want to?

The argument in favor is fairly simple: it keeps private insurers honest.  If the free market really does produce efficiencies and lower costs, then private plans ought to be able to provide medical services for less than the bloated government bureaucracy that runs Medicare.  If it turns out they can't, then they'll go out of business.

The argument against, such as it is, is that a public option will....what?  Force doctors to accept lower payment by fiat, I guess.  Or compete unfairly in some way.  I'm not sure.  My own guess is that a public option would be a boon for private insurers.  They really don't want to treat the sickest, costliest patients, after all, and even if they're required to insure all comers they'll still do everything they can to avoid taking them on.  That's a whole lot easier if turning the hardest cases away merely means they sign up for Medicare rather than being left to die in the street.

Anyway, it turns out the American public agrees.  In a recent survey, 71% said they favored "access to affordable, quality health care for all Americans even if it means a major role for the federal government."  This held up even under a barrage of hostile questions.  Ezra Klein summarizes:

The poll was conducted by Lake Research Partners and it tests reactions to the public insurance option seven ways to Sunday. It asks whether the public insurance option "will have an unfair competitive advantage over private insurance because the government will set rules that favor the public plan" and suggests that "a new public health insurance plan will reimburse doctors and hospitals at much lower rates, causing many doctors and hospitals to shift higher costs onto people who buy private health insurance." It dangles that "a public health insurance plan will be another big, government bureaucracy that will increase costs to taxpayers" and warns that it might "force people into lower quality care including long waiting times and rationing of care."

It doesn't matter. In case after case after case, the public insurance option retains majority support.

The bad guys haven't started up their PR blitz yet, of course, so this could all change.  But it's an encouraging sign.

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Does Dinner Matter?

| Thu Mar. 12, 2009 9:58 AM PDT
Matt Yglesias is unhappy with Matt Bai's dismissive attitude toward political scientists.  Bai says sniffily, "My dinnertime conversation with three Iowans may not add up to a reliable portrait of the national consensus, but it’s often more illuminating than the dissertations of academics whose idea of seeing America is a trip to the local Bed, Bath & Beyond."  Matt responds:

The events of the day play out against a larger structural backdrop. And it’s just not possible to try to understand them a-theoretically. What journalists unschooled in political science tend to do is to substitute prejudice for understanding. So you notice that in Maryland and Virginia there are a lot of well-to-do Democrats and start writing stories which presuppose that poor people are generally Republicans and rich people are generally Democrats. An alternative approach would be to read Andrew Gelman’s book and you’d see that this is an idiosyncratic feature of a small portion of the country and that, overall, high income is a strong predictor of Republican voting.

To some extent, this is just the usual battle between the hacks and the wonks, between researchers and reporters, or (from my past life) between sales and marketing.  The obvious and boring answer to all this is that both are important: you need to talk to real people and you need to understand the larger trends and forces that shape their attitudes.  But willy nilly, most of us tilt toward one side or the other.

In the case of journalists, one reason they tilt toward the a-theoretical side is that they're in the business of generating human interest.  Not only is that what their readers want to read (including me, even though I'm firmly on wonk/researcher/marketing side of things), but it's the only way to produce daily stories that are meaningful.

Here's an example that I've struggled with a bit: Why did Barack Obama win last year's election?  My answer — and I genuinely think this is right — is that he won because two fundamentals were overwhelmingly in his favor: (a) a Republican had been in the White House for eight years and (b) the economy was failing.  Put those two factors together and Obama was a shoo-in to win by about 6-8 points in the popular vote.  And guess what?  He won the popular vote by a little more than 6 points.

But there's a corollary here that's hard to ignore.  If you believe this, then it means that Sarah Palin didn't matter.  Jeremiah Wright didn't matter.  McCain's meltdown over the economy didn't matter.  Obama's phenomenal fundraising and state organization didn't matter.  None of that stuff mattered.  McCain just had too big a hurdle to clear.  As long as Obama avoided some kind of epic gaffe, he was going to win.  All the ink spilled on strategy and tactics and debates and campaign finance and dinners with Iowans was just so much hooey.  None of it mattered.

But that's a tough nut to swallow, isn't it?  I'm pretty deeply into this stuff, and even I can't really swallow it.  What's more, it makes for really lousy journalism.  So instead we get the stories.  They may or may not represent reality, but at least they're interesting.

Fixing the Economy

| Thu Mar. 12, 2009 9:15 AM PDT
Megan McArdle is unhappy with how Obama is running the country:

Having defended Obama's candidacy largely on his economic team, I'm having serious buyer's remorse.  Geithner, who is rapidly starting to look like the weakest link, is rattling around by himself in Treasury.  Meanwhile, the administration is clearly prioritized a stimulus package that will not work without fixing the banks over, um, fixing the banking system. Unlike most fiscal conservatives, I'm not mad at him for trying to increase the size of the government; that's, after all, what he got elected promising to do.  But he also promised to be non-partisan and accountable, and the size and composition stimulus package looks like just one more attempt to ram through his ideological agenda without much scrutiny, with the heaviest focus on programs that will be especially hard to cut.

I picked this at random because it's representative of a groundswell of similar complaints.  And I suppose I should be happy with this groundswell since I think it's pretty important that we fix the banks and fix the banking systems.  Still, what exactly do people expect?

Did Obama prioritize the stimulus first?  Of course he did.  It's something that could be passed fairly quickly, and the faster it was passed the faster the money could work its way into the economy.  Fixing the banks is just the opposite.  Even the most optimistic observers don't think the banking system can be repaired any time soon.

There are two aspects to this.  First, what should we do about weak individual banks?  Second, how should the financial regulatory system be reformed?  Neither of them is something that's amenable to a quick fix.

On the first, Geithner announced a plan a few weeks ago, and Wall Street immediately began whining about how vague it was.  At the time, I sort of agreed, but since then I've begun to wonder just what people expected.  That Geithner would walk up to the podium and announce he was seizing Citigroup?  Some magical plan to turn toxic waste into gold?  A trillion dollars to shower on the bankers of America?

But look: there's just no quick solution here.  At least, not one that's practical.  He can't take over banks without some pretty good justification, and the stress tests he announced are the minimum necessary for that justification.  His plan to value toxic waste probably won't work, but that's because probably nothing would work.  And while lots of free money for bankers would be popular with bankers, it ain't gonna happen.

So, yeah, in public he appears to be dithering.  And the rock jawed titans of Wall Street are doing the same thing they always do when things aren't quite going their way: they weep and moan and panic.  It's quite a spectacle.  But honestly, this is something that's going to take months to address at a minimum.  That's just the way it is.  Going into a panic because we're well into his seventh week and Obama hasn't cured the economy is silly.

As for regulatory reform, well, I'd like to hear more about it too.  But that's something that will be the work of years.  And it won't have much immediate effect on the current financial crisis anyway.

So, yeah, Geithner could stand to be a little more reassuring in public, and it would be nice if he could fill empty Treasury positions a little faster, and I'm holding out hope that his stress tests will lead to some dramatic action by mid-Spring.  But all legends to the contrary, FDR didn't fix the world in a hundred days, and the fact that the internet has made everybody even more impatient than usual doesn't mean Obama can fix it that fast either.  I think it's time to chill a bit.

Just a Little Off the Top

| Wed Mar. 11, 2009 3:45 PM PDT
Yesterday Citigroup announced that it had been profitable in January and February and the stock market rejoiced.  Citigroup shares jumped 50%.  But how about their bonds, probably a better measure of what the market really thinks of Citi's chances of surviving?  Answer: not so good.

U.S. bank debt has lost 7.8 percent and yields have jumped to record levels compared with benchmark rates in the past month....The concern among debt holders is reflected in Citigroup’s $789 million outstanding in 7.25 percent subordinated notes due in October 2010, which fell 7 cents today to 70 cents on the dollar and have lost 23.7 cents in the past three weeks.

Italics mine.  70 cents on the dollar, eh?  Basically, this means that Vikram Pandit's cheery memos notwithstanding, the market already figures that either (a) Citi will eventually be forced into some kind of debt-for-equity swap that will slash the value of their claims, or (b) the government will nationalize Citigroup and then decide not to pay off bondholders at par.  This is bad for current bondholders, but Felix Salmon thinks low bond prices will eventually attract the bottom feeders:

Increasingly they're going to start representing significant potential gains for people who are buying at today's levels and hoping to be paid off at par — paid off, that is, essentially by taxpayers. Since those people can be broadly characterized as hedge-fund managers, one can foresee a lot of Congressional pushback if a large number of hedgies start pulling in tens of millions of dollars just by playing the moral hazard trade. Or, to put it another way, it's a lot easier to impose a haircut when a haircut is priced in than when it isn't.

Right.  If hedge funds start buying up Citi's bonds at 70 cents on the dollar, hoping that eventually the bank will be nationalized and its obligations guaranteed by the U.S. government, they've probably got another thing coming.  It's one thing to pay off bondholders who invested years ago in good faith, but quite another to pay off speculators hoping to cash in on a taxpayer bailout.

Still, it's tricky.  After all, how do you tell the speculators apart from the other creditors?  You can't.  So either everyone gets a haircut or no one does.  And if everyone does, nobody quite knows what will happen.  Bottom line: buying Citi bonds at current prices might be a good deal, but only if you have nerves of steel.  Their future is murky indeed.

Ross Douthat

| Wed Mar. 11, 2009 2:46 PM PDT

Marc Ambinder reports that the New York Times has hired his Atlantic colleague Ross Douthat as an op-ed columnist.  This is basically to take Bill Kristol's place as their #2 conservative columnist (alongside David Brooks) and it seems like a pretty good choice to me for a couple of reasons.  First, Ross has a fluid, intelligent writing style that's well suited to the 800-word op-ed format.  Second, he fits the post-Bush zeitgeist: he is, at core, a conservative Barack Obama.

What I mean is this: like Obama, he's always careful to acknowledge the arguments of his adversaries and to take them seriously.  Like Obama, he does this overtly and deliberately.  And like Obama, this is mostly for rhetorical effect: both of them use this technique to mask the fact that they rarely change their minds.  They might listen respectfully, but after they're done they go on doing whatever they intended to do in the first place.

This isn't a criticism (I don't change my mind very often either, after all).  In fact, it makes him a more than normally worthy dissenter to the Age of Obama.  His column should make for interesting reading.

Yet More Ways to Annoy You

| Wed Mar. 11, 2009 2:06 PM PDT
Some joyous news for web surfers today:

The Online Publishers Assn. on Tuesday released several new in-your-face advertising formats designed to be both more obtrusive and interactive.

Twenty-seven top Internet publishers — including the New York Times, CNN, CBS Interactive, ESPN and the Wall Street Journal — say they'll try the supersize ads in an attempt to get the attention of Web surfers who have learned to ignore banners.

....The three new types of ads are the "fixed panel," which looks like part of the page but scrolls up and down as a user does; the "XXL box," in which users can turn pages within the ad; and the "pushdown," which opens to display a larger ad.

In its press release, the OPA optimistically suggests that these stupendous new ads will "help stimulate a renaissance of creative advertising on the Internet."  Maybe so, but I suspect a renaissance of people throwing things at their computer screens is more likely.

But hell, I guess I can't blame them.  I mean, I work for a magazine that relies on web ads for part of its revenue, but I don't care.  I still do everything in my power to block the ads I can and ignore the ones I can't.  I used to unblock ads at motherjones.com, just so I'd know what was going on on my own site, but when our ad server started delivering GE ads that played a soundtrack every time they loaded, I couldn't take it anymore and finally blocked even that.

So I'm part of the problem.  But here's the real question this provokes: does general purpose advertising even work?  It's pretty clear that targeted ads do well: Google ads that are keyed to search queries, for example, or ads in specialty magazines with an audience that's genuinely eager to see what likeminded merchants have to offer.  But how about non-targeted stuff?

In the web world, we have strong evidence that it works poorly: the clickthrough rate on web banner ads is famously anemic.  So what makes us think that nontargeted TV or newspaper ads work?  There are ways to measure this stuff — the old reader response cards in magazines, post-purchase product surveys ("Where did you hear about Cranberry Pepsi Lite?"), and so forth — but they don't work all that well.  For the most part, marketeers do their best to target and then just pray that the rest of their advertising budget is doing some good too.

But in the web we finally have a medium where we can actually quantify the impact of nontargeted ads, and it turns out to be pretty low.  Everyone takes this to be a sign that the web is unusually hostile territory for general purpose advertising, but what if that's the wrong lesson?  Maybe the web is actually typical, and these ads don't really work very well anywhere else either.  Maybe.

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Chart of the Day - 3.11.2009

| Wed Mar. 11, 2009 11:20 AM PDT
According to Gallup, Congress's approval rating went up 12 points last month and another 8 points this month.  At this rate, they might even hit 50% sometime this spring!  Apparently the American public likes the idea of better healthcare for kids, fighting discrimination against women, and stimulus spending to slow the course of the financial meltdown.

It's also worth noting that although most of the increase is due to Democrats being happier with Congress than in the past (no surprise), approval among independents has doubled.  Republicans are still unhappy, of course, but no more so than in the past.  Apparently all that talk radio bloviating about incipient socialism hasn't had much effect even on conservatives.

Stem Cell Polling

| Wed Mar. 11, 2009 10:51 AM PDT
Ramesh Ponnuru complains about yesterday's Rasmussen poll on stem cells:

The other day I commented on the poor quality of polling on stem-cell research. I'm afraid that the Rasmussen poll, cited in today's web briefing, is no exception. Here's the question they use: "President Obama has decided to lift the ban on federal funding of embryonic stem cell research. Do you agree or disagree with President Obama’s decision?"

Rasmussen also reports that 40 percent of those surveyed say they have followed the debate "very closely." No estimate is given for the percentage of those respondents who are lying.

I wonder what the problem with the question is supposed to be?  In the past, conservatives have complained when pundits and pollsters talked about "stem cells" rather than "embryonic stem cells," but the Rasmussen question is clear on that point.  Is the problem that "lift the ban" isn't specific enough, since the Bush ban wasn't absolute?  Beats me.  The Rasmussen question is very, very simple and neutral and avoids all the issues in Ponnuru's previous post on the subject, so I'm not sure what the problem is.

But there always seems to be something.  Conservatives seem to be endlessly convinced that the American public would be opposed to embryonic stem cell research if only it was made graphically clear to them that this means embryos are destroyed in the process.  But there's just not much evidence of that.  Most of us know that embryos get destroyed, and most of us don't think that's a big problem.

On the other hand, I sympathize with his closing paragraph.  40% is actually not too unreasonable a figure, but it's remarkable the number of polls that ask very recondite questions and get something like a 90% response rate.  "Do you think American banks are undercapitalized and should be nationalized" will get, say, 50% in favor and 40% opposed, despite the fact that it's a dead certainty that 80% of Americans have no idea what "undercapitalized" means and only a vague notion of what nationalization is.  But the results are taken seriously anyway.

Political Interference

| Wed Mar. 11, 2009 10:07 AM PDT
The New York Times reports that banks are getting tired of Uncle Sam constantly looking over their shoulders:

Financial institutions that are getting government bailout funds have been told to put off evictions and modify mortgages for distressed homeowners. They must let shareholders vote on executive pay packages. They must slash dividends, cancel employee training and morale-building exercises, and withdraw job offers to foreign citizens....The conditions are necessary to prevent Wall Street executives from paying lavish bonuses and buying corporate jets, some experts say, but others say the conditions go beyond protecting taxpayers and border on social engineering.

Some bankers say the conditions have become so onerous that they want to return the bailout money. The list includes small banks like the TCF Financial Corporation of Wayzata, Minn., and Iberia Bank of Lafayette, La., as well as giants like Goldman Sachs and Wells Fargo.

Obviously, everyone's first reaction is here is to break out their tiny violins so we can all play sad songs for the nation's bankers.  Songs like this: If you don't want taxpayer oversight, then don't take taxpayer money after you've run your bank into the ground.  Until then, suck it up.

That's pretty much my second reaction too.  Still, there's a germ of an issue here.  One of the arguments against bank nationalization is that unlike Sweden, where those nice sensible Scandinavians were willing to let their technocrats run things after their housing bust, Americans have no such discipline.  Nationalize a big American bank and Congress will promptly use it as a piggy bank for every half-baked scheme their staffs can cook up.  I mean, it's not as if Congress was exactly a positive influence on Fannie Mae and Freddie Mac, was it?

Which suggests these complaints deserve a hearing.  Some things just make sense: if you're accepting bailout money because your capital has become dangerously low, then it's hardly unreasonable to demand that you stop depleting capital even more by continuing to pay out full dividends.  That's directly related to the problem at hand and it's a reasonable regulatory response to a serious problem.

On the other end of the spectrum, though, you get populist grandstanding like the recent fuss over Northern Trust hosting a bunch of client parties at a golf tournament they were sponsoring in Los Angeles.  Aside from the fact that money for the events all came out of the bank's marketing budget — which no one in their right mind thinks should be shut down during a recession — they almost certainly would have wasted more money by calling off their parties than by holding them.  Those kinds of things are scheduled far in advance, and the contracts they signed probably didn't allow them to recover more than a pittance if they cancelled at the last minute.  So if they had cancelled, they would have ended up paying out 90% of their budget and getting nothing for it, instead of paying out 100% and getting something in return.

Now, you can argue that they should have cancelled anyway purely for the PR value.  And maybe so.  And it's obviously a judgment call about what kinds of rules should apply to bailed out banks that ought to be conserving cash.  Still, those of us who tentatively favor nationalization should also favor a process that keeps Congress at arm's length.  The whole point of nationalization is to restore both solvency and confidence, and let's face it: sober management isn't really Congress's stock in trade.  I'm not quite sure where the balance lies, but it's worth an open discussion.

Vitter's Meltdown

| Wed Mar. 11, 2009 9:06 AM PDT
Roll Call reports that Sen. David Vitter (R–Hookerville) had an airport meltdown last week:

According to an HOH tipster who witnessed the scene, the Louisiana Republican arrived Thursday evening at his United Airlines gate 20 minutes before the plane was scheduled to depart, only to find the gate had already been closed. Undeterred, Vitter opened the door, setting off a security alarm and prompting an airline worker to warn him that entering the gate was forbidden.

Vitter, our spy said, gave the airline worker an earful, employing the timeworn “do-you-know-who-I-am” tirade that apparently grew quite heated.

That happened to me once.  I didn't barge through the door, and I wasn't important enough to credibly demand if the gate agent knew who I was, but I sure was pissed.  Obviously Vitter needs to learn a little impulse control, but I guess I sympathize a little bit here.  If you show up at your gate 20 minutes before the flight is scheduled, they really ought to let you on.