Kevin Drum

Ths Scourge of the Ballot Initiative

| Mon Apr. 20, 2009 11:57 AM EDT

Life in the Golden State:

California voters routinely use the ballot box to approve big spending on big things — canals and superhighways, light-rail systems, levees and social programs.

Now, with the state struggling financially, they're being asked to do some ballot box demolition.

State lawmakers fighting to escape a riptide of budgetary red ink have two propositions on the May 19 special election ballot that would yank more than $2 billion from a pair of popular programs that help some of the state's most vulnerable: young children and the mentally ill.

This is one of the reasons I loathe the initiative process these days.  Take Proposition 1E.  It asks me if I'd like to temporarily transfer some funds earmarked for mental health services to the general fund.  The amount at stake is a little over $200 million per year.

This is ridiculous.  I have no idea if this is a good idea or not, and for a trivial sum like this I'm not about to spend hours poring over ballot arguments.  It's like having a municipal initiative here in Irvine to decide if we want to plant a new tree in front of city hall.  But year after year, we keep passing these absurd initiatives because, after all, they're all for a good cause.  Education!  Mental health!  Children's hospitals!  Bullet trains!

Bah.  This is why we elect a legislature.  Unfortunately, thanks to some even earlier initiative nonsense, the California legislature is unable to actually pass a budget during a recession.  Our current pile of six initiatives (1A through 1F, for some reason or another) is on the ballot solely because one (!) member of the state senate extorted them as the price for his vote on a compromise bill to raise some taxes and cut some spending a couple of months ago.  So now we have a special election, at a cost of God knows what, so that the good people of California can decide, among other things, whether to move 0.2% of the state budget from one account to another.

Idiocy.

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Quote of the Day - 4.20.09

| Mon Apr. 20, 2009 11:22 AM EDT

From Atrios, after attending a technology conference:

I do think there's a tremendous not very understood generation gap forming between those who grew up online and those who didn't, along with the class-based digital divide within generations.

I agree!  And lately I've been wondering if this is quite as benign as I used to think.  Mysteriously, however, I'l have to leave it at that.  More later, maybe.

Good News, Bad News

| Mon Apr. 20, 2009 7:20 AM EDT

The bad news: no blogging from me on Sunday.  Sorry about that.  The good news: in its place, several thousand steaming words on marijuana legalization were produced for the summer issue of the magazine.  You can't wait to read them, can you?

By coincidence, one of the things I puzzled over a bit while I was researching my piece was the total size of the cannabis business in the United States.  Basically, the numbers I saw didn't seem to make much sense, but since I wasn't planning to use them anyway I didn't bother trying to track down the problem.  Perhaps in honor of 4/20, though, Michael Hiltzik did it for me:

Let's start, as [Jon] Gettman did, with a standard quantification of U.S. domestic cultivation today: 10,000 metric tons, or 22 million pounds. This figure has a curious history. It first appeared in a 2003 report by the Bush White House. Yet, as Gettman observed, that was nearly triple the estimate of 3,500 metric tons the feds had been using for years.

....The government backpedaled in 2007, when the Justice Department estimated the domestic crop at 5,650 to 9,417 metric tons. That's a huge margin — like saying the distance from L.A. to New York is between 1,000 and 6,000 miles.

....Gettman acknowledges that concrete information is exceedingly scarce in this field. "When you drill down, the only hard fact is they seize a lot of plants," he said.

The "soft facts" include the size in dollars of the U.S. marijuana market. Gettman's 2007 estimate of $113 billion is in the stratosphere compared with some others. In a 2001 report, the federal government pegged the black market at $10.5 billion, a discrepancy that suggests either that we became a nation of total potheads over the following few years, that pot prices experienced an inflation rate that would make the rise in college tuition look sick, or that somebody's numbers are way off.

In other words, no one really knows.  Which doesn't surprise me.  One of the things I've found out over the past few weeks is that virtually all of the research related to cannabis is, perhaps fittingly, sort of hazy.  The research is hard to do, it often points in contradictory directions, and natural experiments are hard to come by.  We know a fair amount, but our confidence level in what we know isn't all that great.

But enjoy 4/20 anyway.  Just don't blog while high, OK?

Phthalates

| Sat Apr. 18, 2009 7:08 PM EDT

Blue Girl comments on recent research showing that phthalates (substances added to plastics to increase their flexibility, pronounced THAL-ates) may be one of the causes of skyrocketing childhood obesity:

I spent a significant portion of a 24-year career in endocrine research. In the first fifteen years, I did not see a single case of Type II [diabetes] in a juvenile.  Toward the end, I routinely taught diabetic education counseling classes that were geared exclusively to groups of teenagers....That is a lot of diabetic kids.  And what I can tell you anecdotally is that every single one of the things that have gotten the blame for the epidemic I have observed to exist, so this is a 'big picture' problem if ever there was one.    

Diet and exercise can not be discounted, we have always had chubby kids who didn't eat a proper diet or get enough exercise, but very few were considered obese, and literally none of them were diagnosed with Type II diabetes, a disorder of the endocrine system....But we can't overlook the revolution in food packaging over the last thirty years or so, either.  When I was a kid, in the 60s and 70s, soda pop (which wasn't made from corn syrup back then) came in aluminum cans or glass bottles, not in plastic; and meat came in butcher paper, not polystyrene trays and plastic wrap.

Childhood obesity is far higher than it used to be, but it's not brand new: there have always been kids who were sedentary and ate lots of crappy food.  But 30 years ago, these kids just got flabby, they didn't get diabetes.  Today they do, and it's possible that phthalates may play a role in this.  More research, please.

Politics as Entertainment

| Sat Apr. 18, 2009 2:17 PM EDT

Matt Yglesias passes along an email from a reader:

One interesting thing about how much Fox news and friends are covering these tea parties is that it’s illustrative how much conservatism has been transformed from a political movement into an entertainment demographic. Political movements, I would think, are defined by a common set of semi-coherent policies and proposals that movement sympathizers hope to see implemented by government. Entertainment demographics are defined by shared tastes or predilections that media companies can target for ratings.

Actually, doesn't this apply to all politics these days?  Bob Somerby has been on a tear recently against the snark-based lefty shows on MSNBC hosted by Keith Olbermann and Rachel Maddow, for example, and although I don't buy his entire argument, he does have a point.  Unfortunately, this is just the way things are.  An old saying says that politics is  show business for ugly people, but in the past this mainly meant that politicians themselves were showmen at heart.  Today, though, with the rise of Rush Limbaugh and Crossfire and CSPAN and Fox News and Drudge and Politico and Jon Stewart and now MSNBC, the entire enterprise is thoroughly infused with the ethos of Hollywood.  Like it or not, liberals had to get with the program or die.

Given the fact that virtually everything in the world has been entertainment-ized these days, it's hard to see how politics could have avoided this fate.  Finance is entertainment.  Cooking is entertainment.  Science is entertainment.  Real estate is entertainment.  Sports has always been entertainment.  Hell, entertainment itself is having a hard time competing these days.  What are the odds that politics, of all thing, could have bucked this trend?

I guess about zero.  After all, it's a better way of making money.  Paddy Chayefsky was right all along.

Kevin Drum Smackdown Watch

| Sat Apr. 18, 2009 12:39 PM EDT

A couple of days ago I asked why Goldman Sachs was paying back its TARP money even though it also had an outstanding $5 billion investment from Warren Buffett on far more onerous terms.  Why not pay Buffett back instead?  What's more, why do a risky capital raising first?  If they're really well capitalized already, why not just pay back the money immediately?

A reader appears to have the all-too-obvious answer: they can't.  The terms of the TARP agreement say this about repurchasing shares other than the Senior Preferred shares issued by the Treasury:

The [Treasury's] consent shall be required for any share repurchases [...] until the third anniversary of the date of this investment unless prior to such third anniversary the Senior Preferred is redeemed in whole or the [Treasury] has transferred all of the Senior Preferred to third parties.

So until they pay back the TARP money, they can't repurchase Buffett's shares.  As for the capital raising, there's this:

Senior Preferred may not be redeemed for a period of three years from the date of this investment, except with the proceeds from a Qualified Equity Offering (as defined below) which results in aggregate gross proceeds [...] of not less than 25% of the issue price of the Senior Preferred.

Goldman got $10 billion in TARP money, and they weren't allowed to pay it back unless they raised at least $2.5 billion first.  So that's what they did.

Unless I'm missing something, this appears to answer all my questions.  Goldman paid back the TARP money first because they were required to, and they raised money before doing it because they had to do that too.  Mystery solved.

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Financial Innovation

| Sat Apr. 18, 2009 12:16 PM EDT

Ben Bernanke gave a speech on Friday praising financial innovation and warning that we shouldn't be too hasty in dismantling the progress of the past few decades.  Ryan Avent comments:

According to Bernanke, no one, "wants to go back to the 1970s," but neither could Bernanke point to a truly helpful piece of financial innovation developed after that decade. His examples of successful financial products? Credit cards, for one, which date from the 1950s. Policies facilitating the flow of credit to lower income borrowers was another, for which he credited the Community Reinvestment Act of 1977. And, of course, securitization and the secondary mortgage markets developed by Fannie Mae and Freddie Mac in...the 1970s.

In fact, the only post-70s innovation Bernanke pointed to was the rise of subprime mortgage financing, which, Ryan points out, might not be quite the compelling example he thinks it is.  So what has financial innovation gotten us, aside from massive profits for clever bankers?

Beats me.  I remember that Dani Rodrik asked this question a few months ago, and I also remember that he didn't really get an awful lot of persuasive replies.  The broad answer usually boils down to "easier access to credit," but in hindsight, that wasn't necessarily such a terrific innovation after all, was it?  The innovation crowd probably ought to take another crack at this.

Friday Cat Blogging - 17 April 2009

| Fri Apr. 17, 2009 3:01 PM EDT

Spring has fully and completely sprung, and the backyard is now kitty paradise.  With any luck, it will stay that way for the next six months.  Enjoy your weekend, everyone.

Cuba Update

| Fri Apr. 17, 2009 2:52 PM EDT

The latest from Havana:

Cuba has offered a surprise olive branch to the United States ahead of Barack Obama's regional debut at the Summit of the Americas.

Raúl Castro, Cuba's president, said Havana was open to talks about "everything", including contentious issues which have bedevilled relations for half a century, in a further sign of thaw between the two governments.

"We have sent word to the US government in private and in public that we are willing to discuss everything, human rights, freedom of the press, political prisoners, everything."

And the American response:

The United States welcomes as an "overture" an offer of wide-ranging talks from Cuban President Raul Castro, Secretary of State Hillary Clinton said Friday.

"We have seen Raul Castro's comments. We welcome this overture. We're taking a very serious look at it," Clinton said [in Santo Domingo] at a press availability with Dominican President Leonel Fernandez.

Maybe something comes of this, maybe it doesn't.  But Fidel Castro never would have made such a conciliatory statement, and George Bush never would have responded positively to it if he had.  Times have changed on both sides of the Florida Straits.

Do Not Call

| Fri Apr. 17, 2009 1:47 PM EDT

From the LA Times this morning:

Satellite television provider DirecTV Inc. agreed to pay $2.31 million to settle charges that it made more than 1 million calls to its customers who had — as was their right — placed themselves on a Do Not Call list, the Federal Trade Commission said Thursday.

And why did the company make the calls? To ask the customers to remove themselves from the list, the agency said.

I've been getting daily recorded calls for the past couple of months telling me that THIS IS MY LAST CHANCE to reduce my credit card interest rates.  Finally, instead of hanging up immediately, I decided to listen to the whole spiel and get through to an operator to ask to be taken off their list.  The first one hung up on me.  The next day I tried again.  The operator said "Thank you sir" and then hung up.  The next day I tried yet again.  Finally, I got an operator who actually acknowledged my existence.  And the calls stopped.

That was two weeks ago.  Yesterday the calls started again, though I haven't gotten one yet today.  Apparently, then, the lesson is that it takes three tries to get credit card companies to leave you alone, and even at that they only leave you alone for two weeks.  $2.31 million is too good for these people.

(And anyway, as my credit card company ought to know, I don't carry a balance on my card.  So I don't care about my interest rate anyway.  Idiots.)