Kerim's Lifelog

Hey, waddayaknow. My print piece for the magazine this month, "Five Six Myths About the Economy," is now up on the website. That's handy timing, what with Occupy Wall Street in full swing, isn't it? It's not quite as magisterial as Ezra Klein's take on Obama's economic policy this weekend (which I highly recommend), but it makes up for that with several lovely charts.

The chart below illustrates Myth #3, Lower taxes are the best way to grow the economy. I'm all in favor of low taxes if we can afford them, but in the moderate range that we set tax rates in the United States, their effect on economic growth and productivity is practically nothing. All the hot air in the world from our Republican friends just can't change that basic fact.

Anyway, there are more myths where that came from. Just click the link to bone up on what you need to know before you visit the relatives this Thanksgiving.

    

I haven't written about this for a while, but longtime readers may remember a couple of past studies suggesting that there's not much benefit to state programs that make it hard for teenagers to get drivers licenses. Today, a new, much larger study pretty much confirms this:

A nationwide analysis of crash data suggests that the restrictions may have backfired: While the number of fatal crashes among 16- and 17-year-old drivers has fallen, deadly accidents among 18-to-19-year-olds have risen by an almost equal amount. In effect, experts say, the programs that dole out driving privileges in stages, however well-intentioned, have merely shifted the ranks of inexperienced drivers from younger to older teens.

....The researchers found that states with the most restrictive graduated licensing programs — such as those that required supervised driving time as well as having night-driving restrictions and passenger limitations — saw a 26% reduction in the rate of fatal crashes involving 16-year-old drivers compared with states without any restrictions. But the rate of fatal crashes among 18-year-old drivers in those states jumped 12% compared with the states without restrictions.

....A similar trend was seen when comparing drivers in states with strong graduated licensing programs with those in states with weak programs: The rate of fatal crashes among 16-year-old drivers was 16% lower but was 10% higher among 18-year-old drivers.

Overall, since the first program was enacted in 1996, graduated programs were linked to 1,348 fewer fatal crashes involving 16-year-old drivers and 1,086 more fatal crashes involving 18-year-old drivers.

The study can't tell us for sure why this is, but the most likely explanation is that it's not really age that's the factor in all these crashes. It's inexperience. When states tighten up requirements to get a drivers license, a lot of 16-year-olds decide not to bother getting one. They just wait until they're 18 and they can get a license under the standard rules. So when they take to the road they may be a couple of years older, but they're still brand new to driving. The result is lots of crashes.

What's the answer? Rolling back the new rules is vanishingly unlikely, especially since they don't appear to have made things actively worse. But in sort of a parody of conservative caricatures of liberal regulatory overkill — except this time it's coming from the private sector — an officer at the Insurance Institute for Highway Safety suggests that if the new laws have unintentionally made 18-year-olds more dangerous, maybe we just need more law. Tighten up requirements on 18 and 19-year-olds and we'll be all set! Huzzah!

    

Here's a handy tool from the redoubtable Henry Waxman: a searchable database of Republican votes to dismantle environmental protections in the current session of Congress. Just in its first six months! And it doesn't even count the growing popularity of calls from GOP presidential candidates to simply eliminate the EPA lock, stock, and barrel. (Excuse me: the "job-killing EPA." Precise terminology is important here.)

Anyway, it's handy stuff if you want to know with precision just how deeply Republicans are committed to undermining the environment in the service of their corporate interests. You can search by agency, by topic, or by legislation. The full database is here. Have fun.

    

From Bruce Bartlett, commenting on the unwillingness of Democrats to stick up for their principles:

If Democrats are going to accept Republican premises, they shouldn’t be surprised if a majority of people eventually conclude that Republicans ought to be in charge of government policy.

Yep. Years ago, it was conservative Republicans who pointed out that if the choice was between a Democrat and a Democrat-lite, voters would most likely just vote for the real deal. They learned a lesson from that, and it's one that Democrats now need to learn. If you concede up front that deficits are our biggest problem, that tax increases are bad for the economy, that we can't afford any further stimulus, and that regulations are job killers, that's not going to win you many votes. After all, if this kind of thing appeals to you, why vote for a Democrat who only kinda sorta believes it? You might as well vote for the real deal instead.

    

I almost forgot about this, but Ari Berman has a terrific piece in Rolling Stone this week about one of my pet topics: the relentless Republican drive to pass laws designed to reduce voting rates among traditional Democratic constituencies:

All told, a dozen states have approved new obstacles to voting. Kansas and Alabama now require would-be voters to provide proof of citizenship before registering. Florida and Texas made it harder for groups like the League of Women Voters to register new voters. Maine repealed Election Day voter registration, which had been on the books since 1973. Five states — Florida, Georgia, Ohio, Tennessee and West Virginia — cut short their early voting periods.

Florida and Iowa barred all ex-felons from the polls, disenfranchising thousands of previously eligible voters. And six states controlled by Republican governors and legislatures — Alabama, Kansas, South Carolina, Tennessee, Texas and Wisconsin — will require voters to produce a government-issued ID before casting ballots. More than 10 percent of U.S. citizens lack such identification, and the numbers are even higher among constituencies that traditionally lean Democratic — including 18 percent of young voters and 25 percent of African-Americans.

Here's my favorite passage:

After the recount debacle in Florida in 2000, allowing voters to cast their ballots early emerged as a popular bipartisan reform. Early voting not only meant shorter lines on Election Day, it has helped boost turnout in a number of states — the true measure of a successful democracy. "I think it's great," Jeb Bush said in 2004....But Republican support for early voting vanished after Obama utilized it as a key part of his strategy in 2008.

....That may explain why both Florida and Ohio — which now have conservative Republican governors — have dramatically curtailed early voting for 2012. Next year, early voting will be cut from 14 to eight days in Florida and from 35 to 11 days in Ohio, with limited hours on weekends. In addition, both states banned voting on the Sunday before the election — a day when black churches historically mobilize their constituents.

If this weren't so loathsome, you'd almost have to admire it. I mean, would it ever even occur to you to specifically ban voting on the Sunday before election? It wouldn't to me. But that's because I don't have quite the reptilian mind it takes to figure out that this might affect black churches disproportionately compared to white churches, and therefore provide a small advantage for Republicans.

But Republican strategy gurus have exactly that kind of mind. Thus we get laws like this one, plus many, many more designed for exactly the same purpose. Berman runs them all down for you, so read his whole piece. This is revolting far beyond anything we should accept as normal politics, and it's a disgrace that the Supreme Court allows it to continue.

    

From Economics of Contempt, formerly an in-house lawyer for an investment bank, explaining the difference between S&P and the other rating agencies when it came to making their case for getting a deal rated:

With S&P, it got to the point where we were constantly saying, “that’s a good point, but is S&P smart enough to understand that argument?” I kid you not, that was a hard-constraint in our game-plan.

That's actually one of the kinder things he has to say. The rest of the post is worth reading for the entertainment value alone.

    

When education researchers study charter schools, the gold standard is to compare kids who won a lottery to get in with kids who lost the lottery. That way you can be pretty sure that the kids themselves are pretty similar, and any differences are really, truly due to the school itself.

It would be nice to do the same thing for healthcare, but that's a dicier matter. What are you going to do, hold a lottery and give only the winners medical coverage? Of course not. Unless you're Oregon, which in 2008 decided to expand Medicaid but didn't have enough money to expand it to everyone who wanted it. So they held a lottery, and the lucky winners received Medicaid coverage.

Reearchers have now completed a study comparing the winners to the losers, and Jon Cohn reports on the results: on the positive side, winners got more health care and reported better health outcomes. On the negative side, emergency room use didn't go down and overall spending increased. And then there was this:

But the study demonstrates clearly, and persuasively, a different benefit of Medicaid: It provides beneficiaries with economic security. The Medicaid population was 40 percent less likely to borrow money or avoid paying other bills because of high medical expenses. The likelihood that unpaid medical bills ended up with a collection agency was also 25 percent lower. Not coincidentally, people on Medicaid were 55 percent more likely to report having a doctor they see regularly and 70 percent more likely to report they had an office or clinic for care.

I think both sides sometimes go overboard on Medicaid. Reformers often claim that overall costs will go down if you insure everyone because providing health coverage makes people healthier. Maybe, but I think there's little evidence of this. The fact is that if you add people to the Medicaid rolls, we're going to have to pay for it. Conversely, opponents of Medicaid like to claim that it doesn't actually improve outcomes. But this is true only if you look narrowly at things like life expectancies. You may not live much longer if you have health coverage, but guess what? Your life is going to be a lot better. You're less likely to lose your teeth, less likely to be in pain, less likely to be incapacitated with chronic illness, and more likely to receive treatments that demonstrably improve your quality of life. That's well worth it, even if you still end up dying at age 74.6.

And the economic peace of mind that even a modest program like Medicaid provides? That's yet another bonus. It's the least — literally the least — that a rich country can provide for its poorest residents.

    

Looking for employment opportunities that can help our flagging economy? Look no further:

The Pentagon now has some 7,000 aerial drones, compared with fewer than 50 a decade ago....Already the Air Force is training more remote pilots, 350 this year alone, than fighter and bomber pilots combined.

....The pressures on humans will only increase as the military moves from the limited “soda straw” views of today’s sensors to new “Gorgon Stare” technology that can capture live video of an entire city — but that requires 2,000 analysts to process the data feeds from a single drone, compared with 19 analysts per drone today.

There you go. Not only can we employ lots of people to build our new drone army, but we'll have to employ even more people to keep a close eye on every dangerous patch of ground on the planet. And luckily for us, those dangerous patches seem to be multiplying rapidly. Let's do a quick back-of the-envelope calculation:

• We have 7,000 drones today. Seems to be a growth market, so figure 20,000 drones in a few years.
• Let's say half of them have this fabulous Gorgon Stare technology. That's 10,000 drones.
• At 2,000 analysts per drone, this amounts to 20 million jobs.

Now that's what I call putting America back to work! Only a non-patriot could object.

    

The New York Times reports that corporate lobbyists are renewing a push for a "one time" deal that allows them to bring foreign profits back into the U.S. at a low tax rate:

Under the proposal, known as a repatriation holiday, the federal income tax owed on such profits returned to the United States would fall to 5.25 percent for one year, from 35 percent. In the short term, the measure could generate tens of billions in tax revenues as companies transfer money that would otherwise remain abroad, and it could help ease the huge budget deficit.

Corporations and their lobbyists say the tax break could resuscitate the gasping recovery by inducing multinational corporations to inject $1 trillion or more into the economy, and they promoted the proposal as “the next stimulus” at a conference last Wednesday in Washington.

This is ridiculous: I know that "stimulus" is the excuse du jour for everything, but companies don't expand and hire more people because their corporate treasuries are flush. They expand and hire more people when they think demand for their goods and services is strong. Besides, corporate treasuries are already flush with cash that isn't being used to expand operations. So why would this make any difference?

Kudos, then, to reporter David Kocieniewski, who points this out in the very next paragraph:

But that’s not how it worked last time. Congress and the Bush administration offered companies a similar tax incentive, in 2005, in hopes of spurring domestic hiring and investment, and 800 took advantage. Though the tax break lured them into bringing $312 billion back to the United States, 92 percent of that money was returned to shareholders in the form of dividends and stock buybacks, according to a study by the nonpartisan National Bureau of Economic Research.

Indeed, 60 percent of the benefits went to just 15 of the largest United States multinational companies — many of which laid off domestic workers, closed plants and shifted even more of their profits and resources abroad in hopes of cashing in on the next repatriation holiday.

That money didn't go toward corporate expansion last time and it won't go toward corporate expansion this time. It will just fill up corporate treasuries and get distributed to shareholders, who are disproportionately well off and unlikely to use the money for increased consumption. The whole thing is just a scam.

America's corporate tax code needs an overhaul. The way we treat overseas income might need an overhaul too — though doing it properly would require some new regulations that corporations might not like so much. But without that overhaul, yet another tax holiday does nothing except to make the rich richer. It won't do a thing to get the economy moving again.

    

For the past few decades, Democrats have been in charge of the California state legislature when it came time draw up redistricting plans after the decennial census. In 2001 a Democrat was governor too. But in 2008 and 2010, voters (including me) approved initiatives that took redistricting out of the hands of the legislature and gave it to an independent commission charged with creating compact, nonpartisan district lines. Yesterday they released their map of California's new districts. So what happened now that Democrats are no longer in charge?

You're looking at three to five Republican members of Congress that just kind of vanish," said Matt Rexroad, a Republican political consultant in Sacramento who advises clients on redistricting. The prospect of Democrats securing two-thirds of both state legislative houses is "very much in play," he said. No single party has held a supermajority in both the Assembly and Senate in many decades.

....In Washington, some GOP strategists expressed confidence that Republicans would be able to compete in some of the proposed new districts that appear to favor Democrats, possibly limiting the loss of seats to just one or two. But analysts were predicting otherwise.

"At minimum, [Democrats] should pick up two to three seats, but that could go as high as four to five," said David Wasserman, House editor of the Washington-based Cook Political Report, which monitors redistricting.

Welcome to California. After decades of gerrymandering warfare that usually ended up in the courts, Democrats in the Golden State took a different tack in 2001. Instead of gerrymandering for maximum partisan advantage, they made a nice, cozy arrangement with their GOP rivals: gerrymandering with the primary goal of protecting incumbents of both parties. It made everyone happy. Especially incumbents.

Democrats largely opposed the initiatives that created the new redistricting commission. (So did Republicans.) The new map shows just how self-destructive that was. Their districts aren't quite as safe as they used to be, and they may have to work a little harder to hold onto them. But as my mother always said, hard work never killed anyone. In this case, despite their best efforts to avoid it, hard work will likely make California even more solidly Democratic than it is now.

    

Ryan Chittum takes a look at two stories about delays in writing new financial regulations, and concludes that the Murdochization of the Wall Street Journal's news pages is proceeding apace:

The Journal’s frame is that Wall Street is upset over the delay of derivatives rules and that it’s causing “uncertainty.”....The Times, though, points out that it’s Wall Street that is delaying the rules.

....This is a prime example of the Times out-Journaling the Journal, giving us the context and background we need to get our arms around what’s really going on. The WSJ misleadingly presents the story almost as if it’s a natural disaster—delays that just happen for no reason or, if you read between the lines, government incompetence....Which just goes to show you, as we’ve seen before with the Journal, that “uncertainty” is a red flag that an argument is almost surely utterly bogus corporate PR.

The Journal's news pages used to be first rate. There's still plenty of good stuff there, but hackery has been advancing steadily ever since Rupert Murdoch bought the paper and started installing his own retainers in top positions. It's pretty sad.

    

A friend emails to alert me to the following interesting timeline:

May 27: Secretary of State Hillary Clinton visits Islamabad with a list of five top militant leaders that Washington would like to see dead. One of them is Ilyas Kashmiri, a terrorist leader who is close to al-Qaeda and suspected of playing a role in both the Mumbai massacre of 2008 and several attacks within Pakistan, including last month's attack on a naval base in Karachi.

May 29: Syed Saleem Shahzad, the Pakistan Bureau Chief for Asia Times Online, disappears. Shahzad, who has been critical of Pakistan's ISI and has exposed its cooperation with al-Qaeda elements, is known to have had contacts with Kashmiri and other jihadists.

May 31: Shahzad is found in a canal 80 miles outside of Islamabad, tortured and beaten. His cell phone is wiped clean from the previous 18 days.

June 3: Kashmiri is reportedly killed in a U.S. drone attack.

My friend asks: did the ISI simply kill a journalist who embarrassed the government and the military? Or did they torture his contacts out of him, as they've done to journalists before, on our behalf?

There are other alternatives, of course, including the possibility that the ISI had nothing to do with either Shahzad's death or the drone attack on Kashmiri. They just aren't very plausible. There's probably a pretty good story here for an enterprising reporter who's not afraid of ISI reprisals.

    

Republicans, of course, are against earmarks. They're a sign of the corruption of the budgeting process. They drive up federal spending. And they put politics before common sense. Bad, bad, bad.

Unless, um, they're hidden. MoJo's Adam Weinstein reports today on MFET, a $1 billion defense appropriation slush fund approved in the House version of the Republican budget, $650 million of which is being funneled to members' pet projects:

Details on the size or beneficiaries of the projects funded by the MFET are hard to discern from the defense bill's lengthy list of procurements. But armed services committee members on both sides of the aisle have left clues. In the days following the voice vote approving their budget, they pumped out press releases trumpeting the projects they'd scored for their districts. Since the MFET funds came from other cuts in the Pentagon budget, the members could claim their projects would be offset by spending cuts elsewhere. Rep. Allen West (R-Fla.), a tea party freshman who sees himself as a budget hawk, secured $8 million for engines for Army drones, funded by savings from "wasteful DOD offsets." Rep. Chris Gibson (R-N.Y.) bragged that he'd secured a federal study to open a nanotechnology lab on the SUNY-Albany campus in his district, as well as $7 million in funding for additional nanotech research. Rep. Martin Heinrich (D-N.M.), announced $3 million in funding for a nonprofit called the Technology Ventures Corporation, which would "help expand innovation in New Mexico's emerging satellite industry."

Ah, Washington. Not only are these earmarks, despite some laughable attempts to suggest otherwise, but they're stealth earmarks that don't even have to be disclosed. This actually makes them worse than old style pork. It turns out you can take the boy out of the pig sty, but you can never take the pig sty out of the boy.

    

Every month Steve Benen publishes a handy chart showing job gains and losses since January 2008. Looking at the latest dismal numbers for May, he concludes, "Any sane person should look at these numbers and conclude that the economy desperately needs a boost."

But it's worse than that. As I mentioned yesterday, the U.S. economy needs to add about 150,000 jobs per month just to stay even with population growth. This means that you really need to look at how many jobs we gained above (or below) 150,000, not above or below zero. So here's Steve's chart, modified to show just that. As you can see, the last eight months, when the economy has supposedly been starting to recover, has actually been virtually flat. Relative to population growth, we've been generating no new jobs at all.

So yes: "Any sane person should look at these numbers and conclude that the economy desperately needs a boost." Even the not especially sane ought to have figured that out by now.

    

Like me, you've probably been hearing for years that small businesses are the engine of job creation in the United States. But that's an outdated view. The number of new startup businesses has declined sharply since the beginning of the recession, while the number of jobs created by startup businesses has been declining for over a decade. As this chart from the BLS shows, the number of jobs created by new businesses peaked in 2000, began declining at the start of the Bush administration, and has been plummeting ever since:

The number of new establishments for the year ending in March 2010 was lower than any other year since the series began....The number of jobs created by establishments less than 1 year old has decreased from 4.1 million in 1994, when this series began, to 2.5 million in 2010. This trend combined with that of fewer new establishments overall indicates that the number of new jobs in each new establishment is declining.

....The number of jobs created from establishment births peaked in the late 1990s and has experienced an overall decline since then. The decrease in birth-related employment during the latest recession is the largest in the history of the series, followed closely by the period of “jobless recovery” after the 2001 recession.

Since the recession began in 2008, the biggest net generator of jobs has been neither small businesses nor large businesses. It's been medium-sized businesses.

    

During the financial crisis the Fed made hundreds of billions of dollars available to European central banks in order to facilitate payments that needed to be made in U.S. dollars. But Bloomberg’s Bob Ivry reports that there was much more going on: the Fed was actually making direct — and very secret — loans to European banks at interest rates as low as 0.01%.

The $80 billion initiative, called single-tranche open- market operations, or ST OMO, made 28-day loans from March through December 2008, a period in which confidence in global credit markets collapsed after the Sept. 15 bankruptcy of Lehman Brothers Holdings Inc.

....“I wasn’t aware of this program until now,” said U.S. Representative Barney Frank, the Massachusetts Democrat who chaired the House Financial Services Committee in 2008 and co- authored the legislation overhauling financial regulation. The law does require the Fed to release details of any open-market operations undertaken after July 2010, after a two-year lag.

....Credit Suisse’s borrowing peaked at about $45 billion in September 2008....RBS’s use of ST OMO hit about $30 billion in October 2008....Frankfurt-based Deutsche Bank’s use peaked at about $20 billion in October 2008, its chart shows.

This is via Felix Salmon, who comments:

Why did the Fed set up a short-term lending program which seems to have been aimed overwhelmingly at European banks? And how does lending $45 billion to Credit Suisse support the flow of credit to U.S. households, in any but the most circuitous manner? It’s probably not worth asking the Fed these questions. But it does seem that the governments of Switzerland, Germany, France, and the UK should all be sending thank-you letters to 33 Liberty Street if they haven’t already done so: it’s entirely possible that the New York Fed bailed out their banks without those governments even knowing about it. That’s just how generous we are, in this country.