Author: Derek Thompson

High schools in eight states will introduce a college preparedness test program in 2011 that will allow 10th graders who demonstrate high school proficiency to graduate early and enroll in community college, reports the New York Times. One can see these tests as a dangerous incentive for kids to bolt from high school, or as a prudent warning system that teaches kids the skills they will need to graduate.

I spoke to Frederick Hess, the director of education policy studies at the American Enterprise Institute, about the new school initiative. He called it “fantastic” and questioned the assumption that high school should necessarily take four years for all students regardless of achievement or mastery. On first blush, I agree with Hess that this program offers students and families an intriguing way to streamline their education and careers — provided that the graduation tests are rigorous and their local community colleges are standing by to adequately prepare them.*

But Hess also noted five things that could go wrong with the program. (I’m more optimistic than Hess about a national standard for these kind of tests, but his other critiques are spot on).

1) Avoid national standards. Hess said he hopes the eight states
make a compact to write standard tests that are hard but fair, but he’s
worried about national programs impacting dozens of states, which could regress to the lowest common denominator and make the tests easier than they should be.

2) Some schools might not be ready. In the Free School Movement
of the 1960s and 70s, a handful of pioneers built terrific, daring
programs that offered a more open-ended curriculum. But the movement suffered when less committed and
knowledgeable imitators tried and failed to replicate the results. That
could happen here, Hess says. It’s easy to identify high schools that
can adequately prepare early college students, such as strong counseling and
committed faculty. This program could be wasted on schools that aren’t prepared to graduate college students in two years.

3) Teaching the test. As with any standardized test, there is
the risk that teachers wind up with a lot of instruction that’s purely
about prepping students to leave early rather than fostering a deeper
understanding of the material.

4) Culture change. If this program encourages students to study
hard and understand the demands of a college curriculum two years
before they graduate high school, that’s great. But the option to leave
school early could, for many students, make staying in school seem less
cool. It could push away kids who would have stayed four years and
applied to more selective schools without the early graduation option.

5) Are community colleges ready? “Community colleges have a lot
of love of late, for reasons that are’t clear to me,” Hess begins. This
program creates demand for colleges that might not be any better than
the high schools that kids have left early. “We have to make sure these kids
have good choices beyond high school. We have to make sure other
institutions are feeling pressed to improve.”

*Update.

Sen. Evan Bayh’s announced retirement has been interpreted in some corners as a sign that Washington isn’t a place for moderates with centrist solutions anymore. The capital has become an intractable, broken city where issues like debt reduction are sacrificed for partisan gain. Exuent the centrist … and with him, a nation’s hopes.

I think that’s pretty rich stuff. There is nothing inherently wise about moderation*, and it doesn’t seem to me that there was anything particularly brave about Bayh’s moderation. Sure I lament D.C. partisanship and bash Republican obstructionism when I get the opportunity. But it’s not as though we face an intractable debt crisis because of Washington gridlock. We face an intractable debt crisis because politicians have taught voters to expect much more than they pay for, and have no incentive in reversing those promises.

Our debt crisis is complicated. But the solution can be stated simply: raise taxes and cut entitlements. I can’t find a serious policy thinker
who has a different answer. But I can find you more than 500 elected
representatives who have, not partisan, but shared interests in doing
neither of those things. Raising taxes is unpopular with everybody,
especially Republicans, and cutting entitlements is (a) unpopular with
seniors and soon-to-be-seniors, who are the loudest and most consistent
donors and primary voters and (b) off the table for many Democrats. Even the “bipartisan” deficit commission was rigged to fail. In
other words, both parties seem to agree: the debt is serious, and they won’t do anything meaningful about it this year. That’s not the failure of bipartisanship. That’s bipartisan unity!

If one thing was made clear from yesterday’s event with Peterson-Pew
Commission on Budget Reform, it’s that experts seem to agree that the
debt is a crisis; that the solution involves a mix of tax increases and
Medicare cuts; and that Washington lacks both the will and incentive to
do anything about it. That Democrats and Republicans aren’t working
well together is ancillary to the fact that neither team particularly
wants to work on this issue at all.
____

*(This is really indulgent footnote, sorry.) Washington’s fascination with centrism reminds me of one of my favorite mondegreens.
Many people quote Aristotle as having once said “Everything in
moderation.” The proper translation is actually: “Nothing too much.”
What’s the distinction? It’s that there is no particular virtue in
moderation. In fact, one can be immoderately obsessed with appearing
moderate all the time.

President Obama’s $787 billion stimulus rescued the economy and saved two million jobs, if you listen to the White House. It wasted hundreds of billions of dollars on pork and do-nothing projects, if you listen to Capitol Hill Republicans (or, sigh, Americans). I think the truth about the Recovery Act is somewhere in the middle leaning toward the White House’s interpretation. But my opinion is a drop in an ocean of roiling discontent.

Three-fourths of Americans think the stimulus was mostly a waste. Only 12 percent know that the administration cut taxes in the stimulus with the Making Work Pay program. Anger about the stimulus is, I think, a proxy for three other vexations: anger over the unemployment rate; anger over the selective bailouts of Detroit and Wall Street; and an amorphous national perception that lots of people certainly seem to be angry, about something.

Richard Posner ties this anger to the reemergence of America’s debt as a serious national issue. He writes (my comments annotated):

It was inevitable that the depression was going to increase
America’s public debt, which had grown rapidly in recent years because
of the Bush administration’s fiscal incontinence. But had the
administration not decided to ask Congress to approve a $1 trillion
health care reform, the deficit would not have achieved the salience in
public discourse that it has achieved[1]. It is somewhat, though not
completely naive, of people to think that running a high and growing
deficit is as dangerous for a nation as for a a family (unless the
nation is Greece), but it is an understandable reaction and again one
the administration has been unable to counter[2]. The administration is
tongue-tied when it comes to explaining its economic policies, perhaps
because it has no effective spokesman.[3]

[1] Counterfactuals are impossible to prove one way or another, but I
see little evidence that health care reform turned us into fiscal
hawks. Here’s a page that collects polls about national priorities. In January 2010 CBS found four percent of Americans say debt reform
is their national priority; 52 percent chose the economy, and 13
percent chose health care. Polls from NBC and CNN suggest that concern about the deficit peaked during the summer of 2009 but have trended down since September, just as the health care debate heated up.

I suppose
you could subscribe to the Mickey Kaus theory that Peter Orszag and the administration followers hoisted themselves on their own petard by selling health care
reform as fiscal reform from the start without recognizing that cost saving would be both elusive and politically troublesome. But the polls suggest that the sheer size of the spring/early-summer bailouts and multi-hundred-billion-dollar economic rescue plans drove most of the deficit fears.

[2] Posner’s right. It is naive to compare federal debt to family debt, especially in a recession when families will try to pinch pennies and the government will try to juice shortfalls in private demand with extra spending because families are pinching pennies. But it’s even more misguided for the administration to mock its own deficit spending — and Obama has done that, many, many times. He’s compared government money to Monopoly money, compared deficit spending to generational theft, and said the government should tighten its belt because families are tightening their belts, which is a confused misreading of his own counter-cyclical spending policy.

[3] The administration is responding to two rational stimuli: First it
wants to defend its own budget. Second it wants to reflect seemingly
widespread fears about out of control spending. But you can imagine how
difficult it is to both defend your deficits and sympathize with public fear about deficits. One way to chop this Gordian Knot is to find a metaphor that compares these huge deficits something good in the short term and bad in the long term. Like Vicodin use.

American Internet users spend more time on Facebook than on Google, Yahoo, YouTube, Microsoft, Wikipedia, and Amazon combined. Ben Parr of Mashable points me to the latest Nielsen online traffic numbers. While Google retains the lead in total users, Facebook absolutely crushes in time-per-person.

(Remember last year when Virginia Heffernan of the New York Times declared a growing Facebook Exodus because some of her friends thought the site was annoying? So much for that.)

Here are the charts, via Ben:

We knew that Facebook’s page views exploded in late 2009. In December, it notched as many page views as MSN and Yahoo combined.
But something else is happening. Facebook is becoming more than a
live-action yearbook. It’s becoming a major source of news, too.
Facebook now drives 3.5% of visits to news and media websites — almost
three times more than Google News. When 116 million uniques spend an
average of 7 minutes a day on Facebook, it necessarily becomes a place
to stay in touch with both people and stories. Whether it is good for
news consumption habits that Facebook traffic is booming as news site
traffic is falling (and it is), I don’t know. But Facebook’s foray into news —
combined with Google’s foray into social media with Buzz — sure seems
to set up a fascinating power struggle over where millions of Internet users consider their information “home.”

This morning I attended an event with the Peterson-Pew Commission on Budget Reform. An all-star lineup of panelists, from the CBO to the Federal Reserve, discussed the federal debt and how we should start to bring it under control after the recession.

Most of the event was head-nodding. The panelists broadly agreed that mounting federal debt was a looming crisis.
They broadly agreed that the main drivers were growing entitlements and tax receipts that failed to pay for guaranteed
spending. They broadly agreed that the solution to this crisis involved
specifying a target number for our debt-to-GDP ratio and making a
credible plan to hit that figure by a certain year.

And they broadly
agreed that the White House and Congress did not appear to have any sort of clue how to talk about the problem.

To be sure, there isn’t much good in scaring people about the deficit right away. Deficit spending today is both easy — short term interest rates are zilch and 10-year Treasuries are at a very low 3.6% — and necessary, since counter-cyclical spending is required to understudy for weak private demand in our economy. Obama came into office with a $1.2 trillion deficit, and unemployment is supposed to average 10 percent in 2010, according to the Council of Economic Advisers. With tax receipts decimated and private sector earnings falling, this year’s deficit should be big.

But if trillion-dollar deficits are a necessary, foul-tasting medicine for the weak economy today, they’re downright poison for the economy in the long run. This creates a challenge for the administration. On the one hand, Obama can defend his budget, which is predicated on deficit spending. On the other hand, to ready Americans for the tough choices ahead, he can raise fears about our long-term debt … which is also predicated on deficit spending. Doing both at the same time is bound to confuse people, and sure enough, when Obama last took on the issue of deficit spending, it was pretty confusing, to me!

In his speech defending the 2011 budget, Obama said “Families across the country are tightening their belts and making tough decisions. The federal government should do the same.” That’s not right. If families across the country are tightening their belts because dad lost his job, the government will spend more on unemployment insurance to the keep the family afloat. When jobless dads and moms across the country find work and their belts get bigger, the federal government will spend less. If we’re going to teach Americans about deficits and spending, let’s start with better metaphorical parallels: Families and the feds should never tighten belts together.

Large deficits should be thought of less like synchronized pantaloon-upkeep and more like a serious pain killer. After major surgery, doctors prescribe Vicodin because otherwise the pain could be unbearable. But the Vicodin supply is limited to a pill bottle, and it doesn’t come with the option to refill infinitely. In fact subsisting on Vicodin after the pain should have subsided is generally considered disreputable. So there’s your metaphor. Trillion-dollar deficits are like pain killers: occasionally necessary, even desirable, but only in doses.

The central question then isn’t merely “How afraid should we be of the debt?” but “How should we be afraid of the debt?” We should not fear a limited, prescribed dose of serious deficits. We should fear addiction. Be afraid, America. Be very afraid. Just not yet.

President Obama’s long-term fiscal strategy is to appoint a commission to figure out a long-term fiscal strategy, quipped economist Greg Mankiw this weekend in the New York Times. That’s fair, I think, but it’s not as though Congress is teaming with plans to control the debt-to-GDP ratio, itself (Paul Ryan, notwithstanding). Is the United States particularly poor at planning ahead with respect to paying down the debt?

Catherine Rampell wrote a great piece
looking at how other countries tie their governments to the mast of
fiscal responsibility. Germany and Switzerland have rules about how
much they can spending based on the economy. Sweden and Denmark have
fiscal policy “counsels.” Brazil has a Fiscal Crimes Law that can
actually lock up a politician for profligate spending. Yikes.

Her last point sounds about right: “The most foolproof way to impose fiscal discipline may be to instill a sense of crisis.” I suppose you argue say we’re not there yet. True, the sound of a $1.6 trillion deficit is a little terrifying. And the prospect of trillion-dollar deficits into the future is more than a little terrifying. But interest rates are still low. The bond market seems to believe that in a decade, the United States will have something like a fiscally responsible government and a rapidly growing economy. (Well, that or the low rates represent a “flight to safety” in light of other countries’ even more rocky fiscal situations.) That’s not to say that the bond market is right, or even reasonable. If anything proves the markets’ lack of clairvoyance, it’s the recession we’re still feeling the aftershocks from. My guess is that we won’t see much real action on the long-term debt until lawmakers begin to feel squeezed by much more bearishness in the US bond market.

Will Netflix take down HBO as the nation’s premier movie channel? Edward Jay Epstein has an interesting piece in Gawker about the roadblocks Netflix faces as it moves online to create a virtual channel for movies.

Netflix started as a movie-mailing service that could send subscribers unlimited rentals for a flat fee. But recently, in a move that cuts mailing costs and gives subscribers on-demand access to movies, the company is transitioning to the Web. Streaming Netflix online creates what Epstein calls “a ‘Watch Instantly’ service [that] effectively creates a virtual channel that
directly compete[s] with Pay-TV for the wallet and clock of viewers.”

But that’s where technology meets the law.

Netflix’ movie-mailing service is
fair under the law because Netflix is only re-selling DVDs it’s already
bought from retailers and wholesalers. However, streaming DVDs online is not legal without digital rights. That means Netflix has to
buy rights for new movies to create a virtual channel that can compete with HBO.

First the company made a deal with Starz Entertainment to sub-license its rights, but movie studios immediately threatened to punish both Starz and Netflix for the agreement, because it directly threatened one of Tinseltown’s top revenue
generators. Licensing deals with TV channels — including Pay TV, cable
and broadcast — bring in $16 billion, almost all pure profit.

That’s why January’s deal between Netflix and Warner Bros. Home Entertainment is so interesting. Netflix appears to be ready to pay studios directly for their movies, just like HBO.

Home Entertainment announced Wednesday that they have expanded
their licensing arrangement for streaming movies, and Netflix now has
licensing rights to more of the studio’s catalog content. In exchange,
Netflix agreed to do something it has never done before. The
movie-by-mail service won’t offer new releases from the studio on DVD
or Blu-ray discs until 28 days after they go on sale.

Greg Sandoval breaks this down nicely: Netflix wants streaming rights
for new movies; Warner Bros. wants a window of one month, so that
voracious fans of WB’s newest DVDs have to buy the movies instead of
stream them. The deals makes sense for both sides, and offers a behind-the-scenes glimpse of Netflix’ future online.

As Netflix moves toward HBO, HBO is also moving toward Netflix. Epstein reports the company is working on HBO Go, an online channel that gives subscribers access to all of HBO’s titles. Today, Netflix remains a perfect service for fans of older movies (which account for two-third of Netflix’ revenue), but it wants to be a major player in new releases, as well. That means that in the all-important digital-rights game, it’s going to play catch-up for a while.

The debate over the jobs bill revolves partly around the larger question: did the first stimulus work, or not? Briefly: I think it did a lot more good than bad, but defending it can be difficult. It probably added to GDP growth, but to prove that would require a counter-factual that we don’t know — GDP growth without the stimulus. It probably reduced unemployment, but to prove that would require another counter-factual that we don’t know — the unemployment rate without the stimulus.

That’s one reason I’m indebted to EPI economist Josh Bivens for what I think is the most illuminating point about the stimulus’ effect I’ve heard:

In a podcast
with The Nation’s Chris Hayes, Bivens explains how we can measure the
effect of the stimulus on disposable income and, indirectly, to
consumption, which makes up between 60 and 70 percent of our GDP. If
you look at personal income minus government transfers — this is a good
proxy for how the private sector is doing at generating income growth
without counting government assistance — that measure has fallen by 8
percent since the recession began. But disposable personal income —
what people have the ability to actually spend, due to tax breaks and
government transfer payments like unemployment insurance — is actually
up one percent. One reason consumption hasn’t fallen off the cliff, he suggests, is that Recovery Act has extended billions of dollars of transfer payments and tax credits as the private sector suffered.

Here‘s the graph showing “the difference in year-over-year growth in personal income minus transfers versus disposable personal incomes“:

The problem with the stimulus, Blevins concludes, it that it might end
to soon. In the second half of this year, the White House expects it to
add almost nothing to GDP growth, just as unemployment is finally
falling. That’s one reason why Blevins thinks that despite the Recovery
Act, we’re still in for a “long, ugly muddle.”

As the smartphone market explodes, it’s perfectly reasonable to ask whether these devices are actually improving our productivity. On the one hand, it’s clear to me that answering work email on DC Metro — when I’d otherwise be listening to Coldplay and staring at the floor — adds productivity where there would otherwise be mere idleness. On the other hand, I’m sensitive to the argument that we don’t always use our BlackBerrys, iPhones and Androids in a terribly efficient way.

James Kwak, the wonderful economics blogger at Baseline Scenario, argues that BlackBerry has “made a fortune off the myth of
efficiency.” Let’s take a look at his argument:

The reason BlackBerry is so popular with corporations is
the idea that now people can be working while waiting in lines at the
airport.* (Judging from the ads, this is the core use case.)
That time is now money, at least according to the efficiency theory.
But what are people doing? They are clearing out emails. If there is
any benefit to anyone, it is that they will spend a little less time in
the evening clearing out emails on their computers; but they won’t be
doing any other work, because the length of their workday isn’t set by
a clock, but by their sense of when they’ve done enough for the day.
(For a lot of people, their willingness to knock off at the end of the
day is related to the amount of email left in their inboxes.)

Surely a smart phone’s utility extends beyond
airport security lines. Every day introduces dead weight time for which
a smart phone at least offers a connection to our work, our friends, and
the outside world.

To the “cleaning out emails” point, I find that I actually save quite a bit
of time cleaning out my inbox on-the-go so that when I get back to my
computer, the emails waiting for me are the emails I want to respond
to. This is as close to pure time saved as I can imagine.

In addition, a lot of the supposed BlackBerry benefit is destroyed
by four factors. First, working on a BlackBerry is less efficient than
working on a computer (it takes more time to get the same stuff done),
so some of your benefit (time waiting in line) is wasted in lower
productivity.

He’s right that using a BlackBerry is much less productive than
using a computer. But that’s hardly damning. Assuming that the time I
spend waiting in line, or on the subway, would otherwise be spent
staring at the floor, even slow typing of necessary emails is time
saved.

Second, checking your email constantly causes you to
respond to emails and deal with issues that you could have simply
ignored had you waited until you got home or to your hotel (since
questions or issues posed in email often resolve themselves if you
simply wait a few hours).

BlackBerrys don’t “cause” us to respond to all mail (we’ve already
established that they’re useful for deleting email, too). Instead they give us
the opportunity to respond to important news immediately, which is a
more efficient way of solving pressing issues than waiting until you
get home.

If somebody without a BlackBerry finds that after-hour work questions “often resolve themselves if
you simply wait a few hours,” maybe it’s because workers with BlackBerrys were resolving those questions
before he knew they
existed. One thing is certain: Not responding to questions is not more efficient than responding to questions.

Third, having a BlackBerry causes you to
spend more time on email than you need to, because you can.
But people lobby their companies to pay for their BlackBerrys because
they want them, and companies often agree because they think they’re
getting a more efficient workforce.

I suppose I don’t see how spending more time on email is necessarily
unproductive, or even sub-optimally productive. Again, if I’m on the
subway listening to Coldplay and staring at the floor, I’m
accomplishing nothing of particular use for my company. If I’m
responding to my boss’s questions (even slowly, with typos), my
BlackBerry has contributed to both my efficiency and my boss’s without
forcing me to sacrifice anything terribly meaningful.

Fourth, the quality of work you do
on a BlackBerry is lower than on a computer. For example, with a
computer, you can answer a question by finding a specific data source
and actually finding the answer; with a BlackBerry, you are more likely
to give an unhelpful answer like “try looking at source X,” which you
may have misidentified, and which is less helpful to the person asking
the question.

To the bold part: Sure, but I’d imagine few employers expect their workers to compose final draft memos on the BlackBerrys. The work on smart phones is best thought of as a way to stay connected and bridge the time between seats at your desk. It’s sort
of like telling my roommate doing push-ups in the apartment, “You know that’s a much
lower quality work-out than joining a fully stocked gym.” That’s
right, of course, but it’s not an argument against doing push-ups at the
apartment (which incidentally lacks a fully stocked gym).

James ends: “In case you’re wondering, I have no BlackBerry and no
similar device
for checking email while waiting in airport lines. (My dumbphone can,
in a real pinch, check my email, but it’s so bad at it I rarely use
it.)” I appreciate this honesty. But not owning a smart phone limits one’s analysis their usefulness. I find there’s always a few minutes of dead weight time during the day, and
the ability to fill even these few minutes with responding to work,
friends and family email is actually quite useful.

But I’m
interested in what the commenters think about their own smartphones…

Google Buzz, the addition to Google Mail that lets users share thoughts, links, photos and more with their friends, is off to a big start: hitting 9 million posts and comments before the end of its third day. That comes out to 160,000 posts and comments an hour — what Mashable (the blog world’s social media Bible) calls a “staggering, staggering number.”

But will it catch on? Does the world need another news-sharing device?

To be honest, my first instinct was skepticism. After all, I already
have places to share my favorite links: Twitter, Facebook, emails,
Gchat away messages and conversations. Why did I need another platform?
Of course, that was a common reaction to Google chat as well. Most
Gmail users at the time were already using instant message services like AIM. They
didn’t “need” another IM program. But the simple genius of Gchat
was its location. The email window turned out to be the logical place
to have real-time conversations because it was already a window dedicated
to keeping in touch with friends and colleagues. And Gchat took off.

The simple genius of Google Buzz (if you’re already a Gmail user) is
also its location, directly under your inbox icon. This just makes
sense. When users sign into Gmail they see two numbers in the top left
corner: first, the number of unread emails, and second, the number of
unread Buzz items. One number for the things other people want you to
do, and one number for the things other people want you to read.

Much of the commentary on Buzz has focused on whether it “kills”
Twitter or Facebook. I’m not ready to give the emperor’s thumb down to
either of those behemoths, but certainly Twitter has more to worry
about. Facebook for me is still a pulsating yearbook first, photo album
second and news sharer third. Twitter is a news sharer exclusively, and
it’s seen healthier days. Homepage traffic has flat-lined recently, and it’s conceivable that — given the now-famous statistic that more than half of Twitter registers have never tweeted
— we’ve entered a period of decelerated excitement about the product.
Buzz, which can import Twitter feeds (along with Flickr and Google
Reader), debuts with an audience of 150 million and growing. What’s more, it’s an audience that is sticking around, since I’m inclined to agree with Farhad Manjoo that it’s the best mail service on the planet.

But eyes on the prize: What does this mean for advertising, which drives more than 90 percent of Google revenue? It’s wise to think about Buzz in the framework of Google’s ad strategy, which emphasizes the growing mobile market. Fundamentally, Buzz gives Google’s ad robots a better sense of what you’re reading, what you’re interested in, and accordingly, what you’ll buy. Justin from Mobile Marketing Watch has some interesting ideas:

In its demonstration of Buzz on Tuesday’s unveiling, Google showcased
so-called conversation “balloons” appearing on a smartphone’s Google
Maps screen. This location-based “buzz” lets a user’s followers know
where they are and what they’re doing at all times, integrated heavily
with Google maps. Imagine, if you will, an ad for a restaurant or a
small boutique shop also popping up somewhere, either in the balloon or
on the Maps screen itself, or perhaps a survey request from a nearby
coffee shop, with the promise of a 10 percent discount on a latte if
you fill in the form.

Great point. The unique opportunity in mobile advertising is in the adjective. Your audience is on-the-go, surrounded by shops and restaurants that want their money. Google Buzz won’t necessarily be the keystone in that strategy, but it will help ad loalgarithms continue to nail down who Google customers are, and what they want to see — and buy.

In an interview with Bloomberg this week, President Obama resisted directly criticizing the bonuses of JPMorgan Chase and Goldman Sachs CEOs, noting that they were “savvy businessmen,” but adding that Wall Street bonus structure deserves rethinking in light of the economic meltdown. John Judis parses Obama’s answers and is sickened. I’m not. Let’s hash this out:
Here’s what I find the most important exchange of the interview:

BBW: Let’s talk bonuses for a minute. Lloyd Blankfein:
$9 million. Jamie Dimon: $17 million. Now, those were in stock and less
than what some had expected. But are those numbers O.K.?

Obama: First of all, I know both those guys. They are
very savvy businessmen. And I, like most of the American people, don’t
begrudge people success or wealth. That is part of the free-market
system. I do think that the compensation packages that we have seen
over the last decade, at least, have not matched up always to
performance…

On the merits, I see nothing wrong with that answer, as I elaborated here. But Judis pounces:

Overall, the impression the interview leaves is of a president
surprisingly oblivious to the fury that is sweeping the nation. Obama
has occasionally attempted to speak to it, or read speeches that
address it. But this interview shows that, in the choice between Main
Street and Wall Street, his natural inclinations lie more toward one
side–and it ain’t Main Street.

I think this — and other liberals’ — anger over the interview is a
fig leaf. The interview doesn’t matter. This is part of a much larger
debate about whether Obama would be more effective if he breathed more
fire — if he pushed reconciliation on health care, made recess
appointments to circumvent the Republicans’ holds, directly criticized
GOP leadership more pointedly, twisted moderate Democrat arms “like LBJ
would’ve!”, and, yes, took on Wall Street excesses and abuses with
great vengeance and furious anger. That’s not the guy we elected, but
he’s the guy liberals still dream about waking up to.

So the important question is: Would that Obama — the “I’m feeling your
pain, and mad as hell, and not going to take it anymore” guy — be more
successful? It is very difficult to know. The public still likes
the president. More celerity on health care might have helped Democrats
beat the ticking time bomb of Massachusetts, but an overly partisan
White House might have sacrificed the trust mantle to Republicans.
A good point I’ve read about this interview is that you don’t see the
GOP criticizing it because, really, there’s not room for a conservative
to criticize the idea that bankers are smart, success is often earned,
but Wall Street bonus culture could use tweaking.

I understand that liberals are upset about the lack of smoke pouring
out of the president’s nostrils, and maybe they’re right after all. But
the interview sounds to me like the Obama we elected: A left of center
guy thinking through complicated issues out-loud.

The bipartisan jobs bill crafted by Sens. Max Baucus and Charles Grassley immediately faced a flurry of angry Democratic lawmakers who want more direct spending and fewer tax cuts. Dem ringleader Harry Reid broadly dismissed the plan as larded with tax breaks, and told TIME magazine he has the caucus’ “blessing” to reject the bill, but keep the hiring tax credit.

This would all be very disappointing on some level if it weren’t so predictable.

Just this week I wrote that I could see the jobs bill’s bipartisanship evolving like this: Republicans
ask for broad tax cuts to stimulate job growth. Democrats say that’s
not sufficient to create jobs. Republicans say they can’t make a deal. Democrats go it
alone, and Republicans counter every proposal with:
“This is more of the same old failed policies from Democrats, who are
spending our way into a bottomless hole and tragically burdening on our
children with debt without doing a thing create jobs.” Turns out that’s pretty much what’s happening...

___

I also wanted to add a short rant:

White House Press Sec. Robert Gibbs is still saying stuff like this: “The American people want to see Washington put aside partisan differences and make progress on jobs.” This sounds so old
to me.

Is anybody else tired of the idea that partisan differences are
something we expect anybody to “put aside” when they start debating
important legislation? To be sure, debates over important legislation
sound like precisely the time it’s in everybody’s interest to speak
their mind. “Partisan differences” are what makes parties different.
The phrase is an antagonizing euphemism for “what people think.”

You
can criticize the filibuster for putting a TRIMAX wheel lock on
legislation, or the absurd proliferation of Republican holds, which are
obstructionist beyond any reasonable definition of partisan. But this
obsessive focus on bipartisanship for the purpose of bipartisanship
only fetishizes something that Americans begin to value, and expect, and demand and neither party expects to work.

Rep. Paul Ryan’s plan to balance the budget is elegant in its simplicity and startling in its implications. He would freeze non-defense discretionary spending, privatize Social Security and turn Medicare into a voucher program that depreciated against medical costs. That’s intense stuff, to be sure — I think too intense — but I think Paul Krugman is still missing the lesson of Rep. Paul Ryan’s roadmap for entitlement spending.

Eleven days ago, on February 1, Paul Krugman wrote: “Right now the GOP literally has no ideas about how the nation should actually be governed.”

Today, February 12, Krugman writes:
“Even as Republicans denounce modest proposals to rein in Medicare’s
rising costs, they are, themselves, seeking to dismantle the whole
program. What I’m talking about here is the “Roadmap for America’s
Future,” the budget plan recently released by Representative Paul Ryan.”

You can see the intellectual honesty problem here. On the one hand, Krugman
says the conservative movement has no ideas. Shame on them. On the other hand he says
he rejects conservatives’ ideas, because they’re conservative. And shame on them. We have
reached the point of cognitive gridlock, no?

Krugman’s right that Republicans
will cut Medicare when they’re in power (no
person who’s ever seen a budget projection thinks we should leave
Medicare alone). He’s also right that it’s an audacious act of
hypocrisy for people like Newt Gingrich to reject Medicare cuts today
15 years after shutting down the federal government to force … yup,
Medicare cuts.

But hypocrisy isn’t the right reaction to glean from the Ryan roadmap. Paul Ryan is under no
contractual obligation to follow his party’s monolithic dullness. Bruce Bartlett totally nails it: the lesson of Paul Ryan’s budget is that dismantling one of the most popular programs in the country is the only way to avoid higher taxes. His plan is a conservative apotheosis (naturally, he’s a
conservative) but it’s also a dystopian parable about what the world
would look like if we never raised taxes or changed the way we pay for
health care.

That should galvanize liberals, not make them cry hypocrisy.

*Update: I think parts of this post might have been unclear, as the comment section has made apparent. The commenters are right that the first Krugman quote comes from the day the Ryan proposal came out, and it’s unlikely that he saw the roadmap or the CBO report at the time. In light of that, it was unfair of me to assume he wrote those words aware of the plan.

That said, I think my overall point stands. This is the simplest way to say what I meant. It seems to me that three things are true:

1. Republicans want to cut Medicare.
2. Most Republicans are saying: Shame on Democrats for wanting to cut Medicare.
3. Paul Ryan says he wants to cut Medicare.

If there is hypocrisy here, it is between points 1 and 2, not 1 and 3. Paul Ryan is one person. He is not the party. If anything, the party has distanced itself from his plan. I think Ryan’s proposal does a certain service to the Medicare debate. It demonstrates that without tax increases we would have to revamp our entitlement program beyond recognition, and possibly destroy it. It is a revealing alternative to the Democrats’ plan because it shows exactly how harsh serious spending cuts would have to be to avert trillion dollar deficits. By all means, let’s call out Republicans for hypocrisy. But this plan provides an opportunity to have a deeper debate about the imbalance of spending and tax revenue.

Apple is prepared to start selling TV shows for one dollar to build interest in its celebrated new iPad. Today, television shows on iTunes sell for $2.99, but Apple is hoping that the reduced price will either juice interest in its new shiny hardware and/or stoke overall TV episode sales.

But this is about more than TV. Apple is starting a small revolution in three big categories.

The first is with the e-reader market. Apple’s competitive advantage in
this world is not books — Barnes & Noble and Amazon have been in
the book business a lot longer than Apple — but entertainment.
To be successful to potential e-reader buyers, Apple will market the
iPad as an all-encompassing entertainment hub that, oh by the way, can
also read books. That means building an e-book platform but also the
apparatus for consuming music, television, movies and forthcoming
digital platforms. The e-reader world is responding. Amazon recently acquired a touch screen technology company and is
rumored to be building a color screen in response to the iPad.

The second level Apple is testing is the TV market. Having
revolutionized the a la carte music market by selling individual
songs on iTunes, Apple is moving on to the a-la-carte television market
by selling individual TV shows on iTunes for a dollar. This will be a
fascinating move to watch because the TV market has long been the
opposite of a-la-carte. On TV, it’s all about bundling: cable charges
viewers for access
to thousands of shows at one flat rate. Even Netflix, which rents and
streams TV shows and movies, charges a monthly fee for X number of
rentals rather than charging individually for specific shows. People are used to
paying for television, but (unless they’ve been downloading TV episodes
from iTunes already) they’re not used to paying for individual pieces
of TV content. We’ll see how this shakes out.

The third level Apple is challenging is the computer market. The Apple
iPad is a simple personal computer. It can run Microsoft Word*, it can
access the Web, and do other computery things. But the Apple iPad can’t multitask — not yet anyway — so it
cannot be a first-order work computer. The difference between the iPad
and other personal computers — and I think this is key — is that most
PCs are work machines on which you can procrastinate, whereas the iPad is an entertainment machine on which you can work. That’s a big difference and the iPad’s profit margin relies partly on consumers’ willingness to move into the second category.

*As commenters point out below, Apple has not announced that the iPad will run Microsoft Word, only that it will be compatible with Word.

Sens. Max Baucus and Charles Grassley released a wide-ranging jobs bill, which everybody agrees has a decent chance to get bipartisan support and a better chance to create a disappointing number of jobs. The bill provides an exemption from Social Security payroll taxes for every worker hired in 2010. The exemption is capped at $106,800. It also provides a $1000 tax credit reward for keeping the employer on payroll for more than a year. The cost: $13 billion over 10 years. The bill also allows companies to write off up to $250,000 of certain capital expenses.

The problem, everybody seems to agree, is that the reason most employers aren’t hiring is not that they are afraid of incurring more payroll taxes. Instead, it’s that there is not enough demand for their products or services to boost profits they would use to hire more workers.

The derision for this bipartisan bill is — sigh — bipartisan. Hugh Hewitt scoffs
at the idea that employers will respond to a $1000 gimmick. Steve Benen
and other liberals think the bill is way too small to work. I’ve been
back and forth on the potential success of tax incentives for hires. My history of writing about hiring tax credits is long, but the history of their unqualified success is short. When the CBO looked at the 1970s New Jobs Tax Credit, they found … well, very little evidence to prove either its efficacy or wastefulness.

A bit of cheeriness to end: CBO’s economic models project that the payroll tax credit is one of the more efficient ways to stimulate employment — bested only by increasing aid to the unemployed (who’ll spend it quickly, making unemployment insurance a no-brainer way to lift sagging demand).

If President Obama wants a jobs bill with enough votes to pass Congress and enough firepower to create jobs, maybe his speechwriters should get started on a fall 2010 speech explaining why it’s not working to the public’s satisfaction. That’s the message from this AP story:

It’s a bipartisan jobs bill that would hand President Barack Obama a
badly needed political victory and placate Republicans with tax cuts at
the same time. But it has a problem: It won’t create many jobs…


As for the bill’s effectiveness, tax experts and business leaders said
companies are unlikely to hire workers just to receive a tax break.
Before businesses start hiring, they need increased demand for their
products, more work for their employees and more revenue to pay those
workers. 

Jonathan Chait’s take makes sense: Passing the jobs bill will be a political victory today because it shows the Democrats doing something, anything. But it could turn into a political liability in the fall when it turns out that “something, anything” didn’t move the unemployment rate meaningfully.

The Council of Economic Advisers report doesn’t do much to raise hopes of a jobful recovery. Last year, the White House embarrassingly
projected that a stimulus would keep unemployment under eight percent.
Instead it crossed ten percent. So you can understand why the CEA would
want to be more circumspect about its projections this year. And
circumspect, its projections are: 10 percent unemployment average for
2010; rising unemployment for the next few months as discouraged
workers re-enter the workforce; and 9.2 percent U1 by the end of the
year.

The jobs picture is unsightly, unyielding, and most importantly,
unspinnable. But that doesn’t always stop the administration from
adding a twist. White House advisers frequently point to jobs that
have been “created or saved,” but this coinage has become such a PR
joke that even President Obama poked fun at the term by claiming to
have created or saved one turkey at the Thanksgiving Turkey Pardoning.
My understanding was that the administration was going to drop the phrase entirely, but here it is again in the CEA report:

All told, the Recovery Act has saved or created some 1½ to 2 million
jobs so far, and is on track to have raised employment relative to what
it otherwise would have been by 3.5 million by the end of this year.

At the end of the day, I suppose it doesn’t matter what your
terminology is. Voters don’t look at CEA economic models, they look at
the unemployment rate. If Democrats want to create or save their own
jobs, they need to move the latter.

In Hank Paulson’s new book On the Brink, the former Treasury secretary reveals more information about the bizarre union of Bank of America and Merrill Lynch. I knew Bank of America CEO Ken Lewis was nervous about the deal and tried to back out of it in December. Here’s what I didn’t know.

From a first read by WSJ editor David Wessel:

In October 2008, after the government had pumped money into BofA,
Merrill and other big banks, Lewis confided to Paulson that he was
worried Merrill CEO John Thain would try to wiggle
out of the deal; he wanted Paulson to insist that Thain go through with
it. Paulson says he never mentioned the call to Thain. Less than three
months later, of course, Lewis would talk about backing out of the
deal, completing the purchase under pressure from Paulson and Bernanke.

John Thain was about to back out of the merger in October? I’ve covered this topic for a few months now and I spoke with a source close to Thain
at the time of the deal, but I’ve never heard that story. There are at
least two reasons to question either Lewis’ statement or Paulson’s
recounting. First, Merrill was days away from bankruptcy when Bank of
America agreed to buy the company for a rather generous $50 billion, 86
percent of BofA’s stock price. Merrill’s precariousness was no secret,
especially to Thain who had been brought in to save the company from
its increasingly likely demise.

More importantly, two months after this conversation, Lewis went to DC
precisely to “wiggle out of the deal.” To be sure, by December
Merrill’s fourth quarter writedowns had quadrupled, from $3 billion to
$12 billion (and they would finish the quarter at negative-$15
billion). But Thain knew the losses would be excruciating, my Merrill
source told
me. That’s why he had no recourse but to merge with a commercial bank
and why lawyers wrote an airtight MAC (material adverse change) clause
to keep Bank of America from using deteriorating losses as an excuse to
back out of the deal. It’s puzzling to imagine Thain would be looking
for the escape hatch in October, as well.

I don’t agree with Paul Krugman’s take on Republicans and Medicare here:

One of the truly amazing things about the health care debate is the way
Republicans have managed to pose as defenders of Medicare…

It’s all hypocrisy, of course. Remember what the 1995 government
shutdown was about: it was Newt Gingrich trying to force Bill Clinton
to accept, yes, deep cuts in Medicare. And it’s not just history:
Republican plans to balance the budget rely crucially on … deep cuts
in Medicare.

Consider the “Roadmap for America’s future”
released by Paul Ryan … it would involve substantially less
Medicare spending than under the Obama administration’s budget

You almost have to admire the audacity: Republicans are denouncing
Obama for proposing Medicare cuts, while themselves proposing much deeper Medicare cuts. And they’re getting away with it.

No, Paul Ryan’s budget is not hypocrisy. Let’s review some facts:

1. Gingrich shut down the federal government in 1995 to force Medicare cuts.

2. GOP Minority Leader John Boehner opposes any cuts to Medicare (and Gingrich now agrees).

3. Rep. Paul Ryan’s alternative fiscal plan would drastically cut Medicare — and Boehner distanced himself from the plan.

Pace Krugman, “they” are not proposing deep cuts. Ryan is. The hypocrisy here is not between facts (1) and (3). The hypocrisy here is between facts (1) and (2). Some
Republicans, not named Paul Ryan, who participated in a government
shutdown to force Medicare cuts in 1995 are now railing against the
idea that the Democrats’ health care plan would force Medicare cuts. That’s the problem.

Democrats often bemoan (or marvel at) Republicans’ ability to maintain a monolith of substance-free opposition. Heck, I’ve said as much.
But it sounds like Krugman is essentially accusing Ryan of hypocrisy
for nothing more than defying a nonsense GOP position on Medicare. But the position is nonsense! It should be defied! If we’re going to take apart Ryan’s budget, let’s have at it. We can
start with the fact that it’s probably too crazy to work.
But Ryan’s attempt to solve a serious problem in an unserious party
deserves something more than a complaint that he’s being inconsistent
with his brand.

On most days, my work goes like this: something happens, I read about it, and I blog it. Today, I’m desperate for things to write about because the snow storm has shut down New York City and Washington, D.C., the two cities that create most of the news that I blog. If nothing’s happening, then I can’t read about it, and I can’t blog it, and my productivity suffers. And I’m one of the lucky ones, since I can work at home while most jobs require something more than an Internet connection.

Scanning Twitter and away messages on Gchat, most of the thinking about this snow storm’s effect on the economy seems to focus on the idea that we can kiss goodbye the $100 million we spend daily to run the federal government. But as you might guess, the actual economic impact of snow storms is a lot more complicated than a minus sign.

Stephen Gandel from TIME magazine has some interesting thoughts
on the topic. Most interestingly, he gets me thinking about the clean-up effort.
To shovel away the snow, the local government usually taps less
fortunate workers for temp jobs. These workers are more likely to spend
their next marginal dollar, making them prime candidates for government
spending with a high multplier. Gandel goes on:

NYC is paying $12 an hour to people hired for snow removal. So some of
that money will come back to the local government in the form of taxes.
Yes, most of these people probably fall in a very low income bracket,
but chances are they will spend most of the money they make, generating
sales tax, and more economic activity … Call it the snow stimulus.

Some analysis assumes that each snow day’s hypothetical
production is simply lost, forever. That misses something important.
Anybody who’s called in a sick day knows that your work doesn’t just
disappear. You have to make it up somehow, and often before a deadline
that pre-existed your day off. Some productivity will be lost, but it
certainly isn’t equal to an entire day’s work.

Or consider planned purchases. I need a new shirt and was going to buy
one this week, until the snowpocalypse shut down DC transportation. I’m
still going to need the shirt next week, and I’ll buy one if this God forsaken blizzard ever stops. So my purchased was delayed,
not canceled. This obviously doesn’t hold for time-sensitive
transactions. Like food. I won’t pay for two lunches each day next week
just because I’ve stayed inside and eaten Special K for the last three
days. Those transactions are, in fact, lost in the snowblivion.

In an interview with Bloomberg/BusinessWeek, President Obama toned down the anti-Wall Street rhetoric and called the heads of JPMorgan Chase and Goldman Sachs “very savvy businessmen.” Naturally, everybody is furious now, because indirectly complimenting bankers for being clever is a monstrous act of treasonous barbarism, or something.

Let’s see what Obama really said. The Bloomberg begins like this:

President Barack Obama said he
doesn’t “begrudge” the $17 million bonus awarded to JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon or the $9
million issued to Goldman Sachs Group Inc. CEO Lloyd Blankfein,
noting that some athletes take home more pay.

The president, speaking in an interview, said in response
to a question that while $17 million is “an extraordinary
amount of money” for Main Street, “there are some baseball
players who are making more than that and don’t get to the World
Series either, so I’m shocked by that as well.”

“I know both those guys; they are very savvy
businessmen,” Obama said in the interview yesterday in the Oval
Office with Bloomberg BusinessWeek, which will appear on
newsstands Friday. “I, like most of the American people, don’t
begrudge people success or wealth. That is part of the free-
market system.”

This makes it sound like Obama is specifically
defending the $17 million and $9 million bonuses. He wasn’t, really, defending any kind of bonus. If anything, he was softly criticizing Wall Street’s bonus culture. The
actual exchange went like this:

QUESTION: Let’s talk bonuses for a minute: Lloyd
Blankfein, $9 million; Jamie Dimon, $17 million. Now, granted, those
were in stock and less than what some had expected. But are those
numbers okay?

THE PRESIDENT: Well, look, first of all, I know
both those guys. They’re very savvy businessmen. And I, like most of
the American people, don’t begrudge people success or wealth. That’s
part of the free market system. I do think that the compensation
packages that we’ve seen over the last decade at least have not matched
up always to performance. I think that shareholders oftentimes have not
had any significant say in the pay structures for CEOs.

What sentence here is supposed to get my blood boiling, exactly? These are
obviously savvy, politically aware businessmen. When Blankfein
announced that he would be taking a $9 million all-stock
bonus after some of Goldman’s most profitable quarters ever (he took a
record $67.9 million bonus in 2007), plenty of news
organizations called
the move savvy. For Obama to state the same isn’t a capitulation to
Wall St., it’s an acknowledgment of fact. Moreover, Obama is absolutely right
that Americans don’t normally begrudge success or wealth. That’s one reason I’ve been told that middle Americans usually don’t want to jack up the top marginal tax rate — “It could be me one day,” and so forth. Obama’s also
right that the kind of success and wealth achieved on Wall Street
hasn’t match up with performance in the last few years. Some tweaks to bonus pay protocol would be nice to see.

Liberal
blogs are suffering conniption fits over the idea that Obama didn’t
spend the whole interview sweating in an apoplectic rage about bonus
figures. I can’t muster their indignation. Responding to a question about Goldman’s bonuses just days after its CEO converted his pay to stock and slashed it by 80 percent, Obama spoke calmly about how Wall Street’s bonus culture has misaligned incentives. Good for him. And bad on Bloomberg News for splicing his quotes suggestively.