Author: Derek Thompson

As President Obama seeks to court GOP members to attend a bipartisan summit on health care reform, Republicans are sharing their own ideas about what reform should look like. Newt Gingrich lays out his ten GOP ideas for Obama in the Wall Street Journal today. I want to focus on three in particular: Eliminating the employer subsidy, strengthening the individual market for insurance and sparing Medicare from cuts.*

Gingrich writes:

The current taxation of health insurance is arbitrary and unfair,
giving lavish subsidies to some, like those who get Cadillac coverage
from their employers, and almost no relief to people who have to buy
their own. More equitable tax treatment would lower costs for
individuals and families. Many health economists conclude that tax
relief for health insurance should be a fixed-dollar amount

He doesn’t come right out and say it, but Gingrich is essentially
calling for an end to tax subsidies for employer provided insurance. That could take a couple forms. We could eliminate the employer tax subsidy entirely (which
would make health insurance more expensive immediately for many
companies, especially small businesses), cap the subsidy, or tax
expensive insurance plans above a certain level and index the tax below medical
inflation so that the it hits more companies over time (which I support). In any case, it’s a new tax. It’s a tax increase. But Gingrich can’t explicitly call for a tax increase
because he’s selling “GOP health ideas,” and the “GOP health ideas” website explicitly rejects any plan that “raises tax on small businesses.”

The GOP website’s position is untenable. It’s impossible to strengthen the individual market
for health care if employer provided plans are tax-exempt. If you want
individuals and families to control their own health insurance, you
want them picking their own plans in the marketplace so that they know
what they’re paying for and how much they’re paying. But there’s no
incentive to leave your employer-provided insurance plan if it has
preferential tax treatment.

Finally let’s look at Gingrich’s plan to cut Medicare:

Don’t cut Medicare. The reform bills passed by the House
and Senate cut Medicare by approximately $500 billion. This is wrong.
There is no question that Medicare is on an unsustainable course; the
government has promised far more than it can deliver. But this problem
will not be solved by cutting Medicare in order to create new unfunded
liabilities for young people.

Gingrich’s doesn’t support extending health insurance to 30 million
Americans. He also recognizes that Medicare cuts, while eventually
necessary, would be presently unpopular. So he justifying rejecting
Medicare cuts because the money saved would be used to extend
health insurance to 30 million Americans. Well — personal politics coming in here, folks! — I just hate that.
Extending health insurance is a moral necessity and Medicare cuts are a
fiscal necessity, and the conservative argument that two rights make a
wrong is just another reason why I think bipartisanship on health care is all but impossible.
_______

*Ezra Klein wrote a great piece explaining how all of the four major tenants of the health care reform plan on the GOP’s “Solutions for America” homepage make cameos in the Senate bill.

The New York Times posted a surprising $90.9 million gain in the fourth quarter of 2009 as income tripled year-over-year based on cost cutting and improvements in the advertising market. To put things in perspective, the company lost about $100 million in the third quarter of 2008, so this is good news for the company. But the revenue model is in violent flux. Last year the Times’ announced that for the first time in history, it was collecting more from readers than advertisers — “in an industry where advertising revenue traditionally outweighed revenue from circulation by at least three to one.”

Let’s look at the hard numbers from Q4:
____

What’s Up:

1. Income: The Times’ $90 million fourth quarter brought yearly income to $19.9 million.

2. Cost Cutting: The company cut $475 million in all of 2009, or 15.5% of its operating costs.

3. Digital Advertising: Q4 saw a 11 percent increase in digital ads
(which include newspaper sites liek NYTimes.com and digital properties like
About.com). Online ads now comprise 23 percent of the total ad pie for
NYT.

4. Circulation Revenue: Circulation revenue inched up 2.4%, after the Times increased newspaper prices for the Boston Globe and NYT last year, according to the Globe.
_____

What’s Down:

1. Overall Revenue: Fourth quarter revenue fell $681 million, or 11.5%. That’s an improvement over Q3, when revenue dropped 17%.

2. Assets: To help repay $769 million debt, the Times sold its
NYC classical station in October and still has plans to shed its
interest in the Boston Red Sox and New England Sports Network regional
cable channel, according to the WSJ. Last year the company slashed its debt by $290 million.

3. Print Advertising: Paper ads dropped another 20%
year-over-year in Q4. That is an improvement, since they had been
falling 30% for most of 2009.
_______-

What It Means

Here’s what the numbers tell me. The NYT newspaper will have to continue to cut costs to stay in the red. This will mean fewer reporters, shared bureaus, and a lighter global footprint. But the newspaper will not have to completely re-scramble its DNA
to survive as a newspaper/blog hub hybrid. It’s short term strategy
will be to shed assets as overall revenue continues to fall. Its long
term strategy should be to augment its circulation pipeline.

In eleven months, the Times is scheduled to unveil a metered pay model
that will charge readers for navigating their site (it won’t count
horizontal clicks from blog posts and emails against the meter). Based
on some back-of-the-envelope math, The Big Money’s Frederic Filloux
estimated that if the Times could convince 10 percent of its online
readers to pay about $3 dollars a month for the site, it could see a 20
percent bump in online ad revenue. It’s good to see that digital ads
are recovering, but as that portion of the pie grows, the Times’ CPMs
will still not be able to sustain the company’s fundamental mission to
report original, global news. The Times is smart to innovate with a
meter, and it’s also smart to delay that innovation a year so it can
cut dead weight assets in the interim.

The good news from January’s jobs report was that official unemployment unexpectedly fell from 10% to 9.7%. The bad news was … just about everything else. Catherine Rampell from the New York Times’ Economix blog spots a particularly glaring statistic: The average length of unemployment in this recession is 31 weeks, the longest on record. In fact it’s 50% longer than the previous record from the early 1980s. This graph is scary:

That means 4.12 percent of the labor force have been jobless for at least half a year, and that doesn’t even include the millions of discouraged workers who have stopped looking altogether.

One explanation for this recession’s extended unemployment is that we’re also seeing the largest numbers of permanent layoffs ever — those are jobs that disappear and never come back for rehiring, like auto workers, or clerical worker, or (gulp) newspaper reporters. For the first time ever, permanent job losses account for more than 50 percent of the unemployed.

Source: Bureau of Labor Statistics

Getting these people back to work will require something more than companies returning to their pre-recession profitability. It will require new companies, new industries, new areas to invest. Twelve months ago, I would have pointed to green technology, but without a carbon price to advantage wind, solar and other alternative energies, I don’t know that green jobs will thrive merely on the back of government subsidies and weatherization tax credits.

The White House expects that jobs will continue to come mostly from health care, education, and government. If we don’t add another industry to that trinity, we’re looking at a long, long job slog.

If information wants to be free, it’s failing.

Every year the average American spends $1000 a year on services like cable, Internet and video games. Add another $1000 for cell phone services, writes NYT’s Jenna Wortham, and “the average family is spending
as much on entertainment over devices as they are on dining out or
buying gasoline.” Actually, $2000 a year to carry the world in your laptop and your phone could be the low end for real tech junkies.*

Content
providers like to explain away their plunging revenue by saying,
information wants to be free. It’s obviously the case that the Internet
has challenged journalism and music by turning the former product into freely consumed URLs and the latter into freely downloadable files. But even if we feel like we’re consuming the New York Times and Taylor Swift’s new album for free over the Internet, we’re paying thousands of dollars a year to access all that “free” content.

Nick Carr argues that we pay this price because we really do value content highly. He puts it this this way:

The reason we fork out all that dough is (I’m going to whisper the rest
of this sentence) because we place a high monetary value on the content
we receive as a result of those subscriptions and fees.

We tell ourselves that we’re paying for connectivity, but obviously we’re paying to be connected to information. So how are media publishers failing if we’re paying more than ever for our media? The key seems to be that consumers have learned to put a price on access, but not on individual content. For example, my roommates have decided that paying $30 a month for Internet access is a good deal. But by that math, $1 a month seems too expensive to subscribe to Vanity Fair, which after all is just one of thousands of potential sources to learn about politics and culture and find pictures of celebrities. Today’s media mindset is “A thousand dollars for access, and not one cent for content.”  

______________________

*Gizmodo has an awesome chart here:

See how it looks when you add it all up:

That’s right: if you want to stay even close to fully connected,
you’re expected to cough up nearly $1,000 a month. Not for hardware.
For fees.

President Obama wants to work with Republicans to craft a jobs bill that rewards employers for adding workers to their payrolls. Bipartisanship on the jobs act is a noble effort — maybe even good politics — but it’s not a realistic goal. Republicans have made it pretty clear they won’t support tax incentives for employers, which is the most politically palatable part of the White House’s job creation strategy. Other measures like state aid, infrastructure spending and unemployment insurance extensions were the heart of the House jobs bill which every single Republican voted against.

But really, what’s the game plan here?

Jon Chait’s theory is Obama’s strategy against opponents is consistent*: “take them up on their claim to some shared goal (nuclear disarmament,
health care reform), elide their preferred red herrings, engage them
seriously, and then expose their disingenuousness.”

Maybe, but it’s pretty clear to me how this turns out. Republicans will
ask if Obama’s willing to consider an across-the-board tax cut. He’ll
say no, because he doesn’t think it will create jobs and he knows it
will add significantly to the deficit. Then Republicans will say they
couldn’t reach a deal, Obama will have to build a job creation bill
with Democrats only, and Republicans will 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.”

That will re-dig the trenches. Mainstream news will describe Congress
as a partisan pit, and public opinion will begin to turn against the
bill because they think Democrats are forcing legislation through, and
the bill is taking too long to come together, and they don’t think it
will work, anyway because the press surrounding the bill will be mostly
negative. Moderate Democrats will get nervous and ask to pare down the
bill, which will probably make it less effective, and months later, if
Democrats actually pass the weak-sauce law, it will necessarily lose
Republicans, alienate independents and frustrate liberals.

So yeah, bipartisanship. Let’s have at it.

*Chait’s dissecting the plan to hold a bipartisan health care summit, but it’s the same principle.

The stock market is mysterious. Myriad data points and projections go into investors’ decisions to bet on the future earnings potential of the 30 companies that make up the Dow Jones Indust… oh no, wait. I’m sorry. That’s all wrong. Predicting the stock market is very easy. Did liberals just do something? OK then, the market is going down.

The Wall Street Journal op-ed section has a lot of bad habits, but one of the worst is blaming the White House for every stock market crash. I’m serious. Every. Single. One. And adjusting for typical WSJ nonsense, this is the worst paragraphs I’ve read in a long time:

From the beginning of this historic rally–up 73% over the 316 days
since last March’s market bottom–politics has been an important theme.
That horrific bottom was reached after Democrats in Congress rammed
through a $787 billion stimulus bill so quickly that no senator or
representative could have possibly read all 1,073 pages of it. That
hastily concocted porkfest should not be credited with turning stocks
around. Rather, it should be blamed for the more than 18% loss that
stocks suffered in the 24 days from the date of its enactment to the
day of the March bottom.

In other words, the stock market crashed because Democrats succeeded in passing the stimulus. But wait. After the Congress rejected the first government bailout in September 2008, the Dow dropped 778 points. That was the single worst market value loss in American history, and it happened after a stimulus plan failed. Guess who the WSJ blamed? Democrats for failing to pass the stimulus!

In reality, I don’t know what makes markets move. Here’s what I know. In the 300 days after the Recovery Act passed, the market soared a
“historic” 73%. Economists from the CBO and Goldman Sachs credited the
stimulus with adding up to four percentage points to our third and
fourth quarter GDP growth. In the meantime the Federal Reserve spent
trillions of dollars buying bad assets as the government set a floor to
big bank losses and assured the financial system that it would not
allow another major failure, and the administration administered a
stress test of banks that clearly helped them to recapitalize. Don Luskin’s conclusion? Forget last 12 months, let’s focus on blaming the administration for some stock fluctuation last March!

Of course, this sets up a couple doozies: (1) if the market grows only when Democrats fail, why did it rally last spring and summer when the
Democrats’ agenda looked more certain? And (2) how do you explain the
recent stock market fall-off that occurred after the Massachusetts
upset threw a wrench into the Democrats’ plans? Luskin:

It’s because the immediate reaction to the Brown election–in both
parties–has been a dangerous lurch toward antibusiness populism.

Of course, this is utter silliness. Financial regulation was nearly declared nearly dead last week.
Going by the Luskin Theory of Dow Fluctuations, that should have sent
stocks soaring. Instead the market hit a three month low yesterday. Explain that one, Luskin.

Truly, the WSJ has outdone itself today.

It’s Call Americans Stupid Week at your local East coast liberal news outlet. Days after Slate’s Jake Weisberg implored us to “blame the childish, ignorant American public” for our political crisis, the New Yorker’s James Surowiecki listens to the public’s screams and says it’s “just not clear that they’re making any sense.” Is James Surowiecki making any sense?

He is. Weisberg’s piece held up individual polls to make Americans look
hypocritical, which meant marshaling somewhat unfair evidence (polls are often
misleading and limited) in pursuit of a defensible thesis. Surowiecki
paints with a fatter brush: “if Democrats pass a stimulus package,
they’ll be lambasted for
increasing the deficit; if they don’t pass a stimulus, they’ll be
attacked for not caring about jobs.” Sounds about right.

The central insight here is simple, but also easy to overlook: If unemployment stays around 10 percent all year, Obama and the Democrats should not expect to get the benefit of the doubt on any piece of legislation. Presidents live and die by approval ratings, as John Judis wrote, and approval ratings live and die by employment. Here are Reagan’s numbers grafted with unemployment (for more examples, click here):

It’s one thing to say: the Senate should pass a jobs bill, and quickly. It’s another thing for the Senate to actually pass a jobs bill, even slowly. The people might be confused, but their scatter-shot take on simultaneous job-creation and deficit-reduction is reflected in the world’s greatest deliberative body. As I wrote here, every Congressman would acknowledge that we need
more jobs, but key senators won’t vote for the money to incentivize
hiring. Moderate Republicans won’t even vote to re-direct money paid back from TARP to send to small businesses. The White House can’t spend the deficit up without upsetting moderate Democrats, but Congress won’t even vote on a commission to bring the deficit down in the future. If America’s economic worldview stinks, it’s a fish that’s rotting from the head.

Google’s Super Bowl ad for its search engine was the best commercial of the night, as far as I’m concerned. But the Wall Street Journal’s Martin Peers asks a fair question: “Why did Google choose the one product it doesn’t need to advertise for its first Super Bowl commercial?”

It’s worth breaking the question down a bit. Why wouldn’t Google want to advertise its main driver of revenue?

Sure, you could argue that Google isn’t facing much of a challenge in the search market. Despite a
heavy marketing campaign from Microsoft, Google added more than twice
as many searches as Bing in December, according to Peers. So why not
advertise another product, like one of the Android-based phones, which face stiff competition
from iPhone and BlackBerry?

My theory would be that Google is still protective of its search
product (which generates 97 percent of its revenue), especially as the market moves off computers and more people
search on their phones where they might not have the same muscle memory
to type in “Google” before every query. Indeed, my BlackBerry defaults to
Bing and the iPhone is rumored to switch its default browser to Bing,
which could take significant trafic away from Google’s placed ads on
mobile devices. In addition, I’ll bet Google wanted to take a shot at
Microsoft, with an ad that said: We know you can launch a $100 million marketing campaign for Bing, but we can make the whole world talk (and maybe also cry) with one $3 million ad in the most high-profile TV event of the year. That last part clearly worked out nicely.

Sometimes you need a picture to understand a policy. So when I say things like “It’s hard to make meaningful spending cuts if you don’t touch mandatory spending,” that doesn’t mean much if we can’t visualize how much of the budget is mandatory spending — that is, spending mandated by existing law.

This is what it means: the New York Times has created an awesome interactive Flash graph of the president’s 2011 budget — with a button that makes all the mandatory spending disappear so you can see exactly how much Obama’s spending freeze is leaving warm.

Here’s a 30,000-foot view of the budget:

And
here’s the budget if you white-out mandatory spending, which includes
Social Security (bottom left box), Medicare and Medicaid (top middle to
right), and income security programs like food stamps and unemployment
insurance. National security, the top left box, is also almost entirely exempt from the freeze.

If you’re thinking about curbing spending, don’t judge outlays by which box is biggest today. Also look at the long-term trend, from the CBO. I suppose saying it for the 100th time doesn’t make it any more true, but here it is: Our long-term fiscal crisis is a health care crisis, especially a Medicare crisis. That’s one reason why I respect Rep. Paul Ryan for sticking out his neck and drawing up a plan to curb health care expenditures in the next twenty years, even if his method — dramatically slow the growth in Medicare spending — would be a blunt and unpopular pitch to the AARP.

The Internet Age brings us an on-demand world. If you want to listen to U2, you can find them on YouTube. If you want to watch 30 Rock,
you can catch it on Hulu. Who in their right
mind would actually pay for media, anymore?

Well, most of us actually. If we’re unwilling to pay for individual U2 songs or 30 Rock episodes, we’re more than willing to pay for the Internet access to download music, and the cable service to watch TV. Perhaps information doesn’t want to be free. Perhaps information wants to be bundled.

There are a lot of reasons why bundling works especially well on cable, James Surowiecki writes. It’s cheaper than à-la-carte because it vastly reduces price-per-channel. Moreover, we like to pay for choice. The same way I’d rather pay a full amusement park pass, or a full gym pass — rather than an entrance fee plus individual charges for the machines — I pay for thousands of cable channels I won’t necessarily watch because I’m pricing in the possibility that I’ll watch them in the future.

But the cable model is in flux. Years ago, if I wanted to watch shows on television, I had to buy a television and wait for the shows to air. Enter sites like Hulu that let me watch almost any show on Fox, CBS and NBC that I want, at any time, if I’m willing to sit through an ad. Today, both sides are moving toward the other. Comcast expanded on-demand for TV and introduced the website Fancast, which is essentially a Hulu for Comcast customers. Just as cable companies are trying to becoming nimble like Hulu, Hulu is trying to catch up with cable companies
by introducing a bundling plan to pay for its most popular shows.

Americans are still willing to pay for access to content — for Internet service and cable — but many of us are reluctant to pay for individual pieces of online content. This is especially true in media like journalism and music, where the proliferation of free articles and songs online depreciates their perceived price. Some analysts see this phenomenon and conclude that information wants to be free. But cable has survived the information-is-free revolution so far because cable is not content, but rather access to content. It is an unlimited buffet with an all-included pass to the world of television. The challenge for journalism and music is to create a platform that creates a buffet out of industries that have always served their content a-la-carte.

Is it fair for Obama to write his own budget and blame Bush and the recession for much of its components? Generally, I think so, because Bush’s prescription drug bill, wars and tax cuts continue to soak up so much red ink. But former Bush economist Keith Hennessey objects. His main theory is pretty simple: If you write the budget, you own the deficit. His main three points are (via James Kwak):

1. If you don’t like the prescription drug bill, repeal it.
2. If you don’t like the Middle East wars, end them.
3. If you don’t like the Bush tax cuts, let them lapse.

This critique is straightforward without being serious. Obama has the power of the pen, but not of the purse, or of the polls. That is to say: He couldn’t do these things by fiat, and even if he did, it would result in a popular backlash that would make the Tea Parties look like actual tea parties. Republicans have made it clear they vote won’t for Medicare service cuts, so it’s politically insane to push a partisan bill to repeal Medicare D. There is no congressional will to evacuate the Middle East — and even if there were, you’d be acting against the advice of just about every general in the armed services. Raising taxes on the middle class with unemployment near 10 percent would be a gift to Republicans. The administration and the country face daunting problems, but these “solutions” would be ruinous, both politically and in practice.

Hennessey writes: “It is strange for a President to complain repeatedly about ten-year old policies and then not propose to change them.” The strategy might be strange, but it doesn’t mean Obama’s wrong on the merits. The Bush year policies — the tax cuts, wars and Medicare drug bill — added $700 billion to the deficit in 2009. The recession added about $500 billion. The stimulus package added a little under $200 billion.

There are two questions here: (1) should Obama keep blaming Bush for the deficit, and (2) is Obama responsible for the $1.6 trillion figure? You can argue in good faith that No is the answer to both questions.

What did I learn from watching the Super Bowl advertisements last night? Men are turning into girls. It’s good to be green, but even better to laugh about environmentalism. The Super Bowl is an acceptable place to talk about baby politics and compoundable interest on the debt. Also, we’re all going to die, so we might as well drink Bud Light.

Advertisements are an interesting reflection of culture. To be memorable, you have to shock without offending. That means you have to swim well within the the mainstream but also against the current. Here are the five ad memes I spotted last night:

1. Don’t Be Such a Girl, Man

Were Super Bowl ads always this
obsessed about men avoiding emasculation? Probably. But last night,
three ads in particular were a parade of anti-effeminacy. First, in a FloTV ad,
play-by-play announcer Jim Nance advised a guy shopping with his
girlfriend to “Change out of that skirt, Jason!” by buying a hand held
TV device — because what Real Men need is a mobile strategy for
avoiding their girlfriends.

Second a Dove body wash ad
follows a man’s life — from the moment of conception through marriage
chores — and concludes: “You’re a man! Now that you’re comfortable
with who you are, isn’t it time to [buy male gender-specific Dove body
and face wash products]?” The implication was a little weird. Why do
men have to prove that they’re comfortably manly to buy their own body
wash? Clearly Dove, nervous about their soft feminine branding,
overcompensates a little here.

Third, and most bluntly, a
Chysler Dodge Charger ad stares into men’s defeated faces as they count
off all the ways they’ve promised to emasculate themselves to please
their bosses and wives. “I will be civil to your mother,” goes the
voice over. “I will put the seat down. I will take my socks off before
getting into bed. And because I do this, I will drive the car I want to
drive.” And the words plastered over the awesome, manly image of a
black Dodge zooming down the street: MAN’S. LAST. STAND. In other
words: I will be miserable, and because I am miserable, I will drive a Chrysler. No, thank you.

I’m not sure what drove this particular bout of masculinity, but it’s an interesting reaction to Bush years when it seemed like every ad made fun of super-masculine men rather than rushed to the defense of guys who feel emotionally sterilized. I wish I could properly explain the trend, but all I can honestly do is note that I’m seeing it.

2. Let’s Laugh at Environmentalists!

Mainstream
America has a tortured relationship with going green. Many of us who
think we should be more eco-aware also feel a little silly about
embracing environmentalism too strongly. This schizophrenia was on
display in last night’s ads. First in a Bud Light ad where a man builds
a home out of beer cans, a girl compliments him for using recycled Bud
Lights to insulate his house. “Enviro-what?” he responds. “Oh they’re
not empty…” In other words: Walls of cold beer! And the guys proceed to wreck the place in a thirsty
frenzy.

In
an ad for the new Audi A3 with clean diesel, a troop of “Green Police”
terrorize a town by arresting people for using plastic bottles,
installing fluorescent light bulbs and throwing out batteries. So we’re
advertising eco-awareness by … mocking eco-awareness?
“Environmentalists can be so over-the-top ridiculous, right? Hahaha.
Buy our green car.” Funny, but weird and revealing. Is this country
really so skittish about being green that we have to self-deprecate our
concern for the environment?

3. Drink at the Apocalypse

There
were not one but two separate Bud Light ads about drinking in the face
of death. The funnier spot, cleverly pegged to the Lost premiere,
featured a haggard group of plane crash survivors who ignore a woman
planning their escape when a guy finds the beverage cart: “It’s full of
Bud Light!” Boozing ensues.

In
the other Bud Light ad, a group of scientists spot an asteroid
approaching and ring in their doom with Bud Light. As we’re coming out
of (and in many ways, still in) the Great Recession, I suppose that a
bit of gallows humor feels topical and ameliorative.

4. Internet Memes are Mainstream Memes

There is no way that my father or mother has ever seen the five-second YouTube clip of “dramatic chipmunk”
turning to the camera over theatric, descending chords. But Carmax made
not one, but two commercials of animals turning dramatically based on
this clip. Spreading the joke out over two commercials — dramatic
cockatoo! dramatic monkey! — felt old almost immediately. But the
implication was interesting. Along with the Vizio ad starring Beyonce
that showed a machine dumping YouTube celebrities into the belly of a
phone, these commercials signaled that YouTube memes are now officially mainstream
memes, too. I’d be interested to know how older viewers reacted to these ads.

5. Politics in the Super Bowl

Was anybody else
surprised by all the political ads in the Super Bowl? There was that ad
about the debt with children intoning scary things about compoundable
interest rates. There was also, unfortunately, an ad from that
debt-riddled government about the Census (as my colleague Dan quipped:
Nice use of $3 million, gov!). There was the much-anticipated pro-life
ad with college football star Tim Tebow and his mom (which I found very
tasteful, and you can watch below). And there was a FloTV ad for handheld television
that was basically a review of five decades in televised upheavel in
America. Literally: Race riots! Impeachment! Wars! Timothy McVeigh!
9/11! Katrina! “Don’t Miss a Moment!” Actually Flo, I would have liked
to miss quite a lot of that stuff…

I’m all for bringing politics to the people, but I don’t think it goes down well with chips and light beer.

Why did popular support for health care reform plunge?

Well, it didn’t. If you look at the Pollster moving average of health care support and opposition, the story isn’t falling approval, but rising dissent.

As you can see below support for health care reform slips a bit, but it
mostly hovers around the mid-40s. The real action here is the red line:
Opposition spiked last summer and has steadily inched up to 50
percent.

But this still requires some explanation. To be sure, Medicare cuts and
tax increases to offset the subsidies were never going to be an easy
sell, but judged individually, many elements of the health care plan
have polled well. Clive Crook offers his thoughts:

I
think opposition is driven less by specific concerns of this sort and
more by general disgust and exhaustion. As this saga has dragged on and
on, it is incredible to me that nobody has tried to explain and justify
any specific reform to the general public. The process has been
unfathomable, and entirely inward-looking. People see that a major
complex change in the works. This promises to transform services that
most of them (remember) are satisfied with, so they have something to
lose. But nobody is in charge. Nobody is even talking to voters about
it, except to pat them on the head now and then and say “trust us”. I’m
surprised that the majority opposed to reform is not bigger.

That’s a good observation. It’s only natural to associate time spent
on a project with complexity and change. (To really dumb things down
for a bit: if your plumber goes into your bathroom, shouts curses and
clangs metal for three hours only to come out saying, “Just made a few
tweaks!” you will be rightfully suspicious of his visit.) Congress has
spent half a year building a near-trillion-dollar bill, and every few
months, Obama comes out to tell Americans, “For the vast majority of
you, this changes nothing.” It does have that alright now, move along, nothing to see here, please disperse kind of false-seeming calmness.

This reminds me of Ezra Klein’s recent statement
that while he first considered Sen. Max Baucus’ interminable Gang of
Six experiment a useful cover to show conservative Democrats that there
was no compromise to be had with Republicans, he now partly blames the
Gang for wasting three months. I think the Pollster map supports the
theory. Between June and September, there was no Senate bill to like or
dislike, and yet the opposition achieved plurality.

It’s difficult to draw any large lessons from the health care
boondoggle, but one good one might be that big reform bills are more
like milk than wine. Some things by nature do not get better with time.

As Congress wrangles over a jobs bill in the next week, the central debate is: What kind of tax cut will stimulate the most growth? The White House has gotten behind a “hiring tax credit” that would give an employer $5000 for each worker added this year. In contrast, a bipartisan plan anchored by Sen. Chuck Schumer and Sen. Orrin Hatch would cut 2010 payroll taxes cut for all new hires.

Let’s compare the pluses and minuses of each plan:

Hiring Tax Credit

What It Is: This is how the White House described its job creation plan:

• Tax credits for new hires. A small business that
hires ten new employees in 2010 will receive a $50,000 tax credit to
help offset the costs of those new hires. However, if the same small
business lays off ten employees in 2010 and hires five new employees,
it would receive no credit.

• Tax credits for pay raises. A small business with 50
employees that, through increased hours or higher pay, provides all of
its employees a $1,000 real wage increase in 2010 will receive a $3,100
tax credit, enough to cover the Social Security payroll taxes on those
increases.

Why It Might Work: All job creation schemes will inevitably
reward employers for jobs they would have created anyway. But Tim
Bartik at the Economic Policy Institute found modeled the hiring tax credit and predicted only 1 induced jobs for every 5.6
subsidized jobs. But the White House goes even further.
Since boosting demand and growth is about hours and wages in addition
to raw job number they’ll incent wage increases by refunding payroll
taxes “for every dollar that [employers] increase those wages faster
than inflation.”

Why It Might Not: Three large reasons: it can be gamed, it can
be complicated, and it doesn’t juice demand
enough from the start. It can be gamed by swapping full-time employees
for part-timers. The CBO found the the New Jobs Tax Credit from the
mid-1970s was too complicated for many firms to actually use, which led
to mixed results. 
Finally, critics ask: what if nobody takes advantage of the
credit because employers are holding off hirings until demand grows?
After all, $5000 isn’t a lot of money. If you’re an employer facing
thinning profits, you’re not going to hire somebody for the promise of
a couple thousand dollars. You’ll hire somebody when business picks up.

Payroll Tax Break

What It Is: This is the one-paragraph summary from Schumer and Hatch’s NYT op-ed:

Starting immediately after enactment, any private-sector employer that
hires a worker who had been unemployed for at least 60 days will not
have to pay its 6.2 percent Social Security payroll tax on that
employee for the duration of 2010. The Social Security trust fund will
then be made whole with spending cuts elsewhere in the budget between
now and 2015. That’s it.

Why It Might Work: Some say the hiring tax credit does too
little to juice demand from the start. But the payroll tax hits both
employers and employees — meaning a payroll tax cut would put money in
the hands of both employers and employees. This is significant from the
demand side because workers, armed with extra dough, might buy more
goods, increasing the broad demand that many employers want to see
before they start hiring. Moreover, Schumer and Hatch argue that since
their tax break ends in 2011, employers are incented to hire
immediately to maximize the tax benefit. They also argue that it’s easy
for employers to understand: they just zero out the tax on their
payroll software, and that’s it.

Why It Might Not: Like any incentive program, this plan could
conceivably be gamed by employers, or alternatively appear too
complicated for them to even use it. The other concern is cost. The CBO
estimated that the budgetary cost of increasing employment by one
full-time person for one year would probably be between $56,000 and $125,000.
Their models indicated that a payroll break for new hires would be one
of the most cost-effective strategies for juicing employment, but not
everybody agrees. EPI’s Bartik would argue that elimating payroll taxes
for all of 2010 ultimately costs the federal government more per added
worker than a one-time hiring tax credit. In other words, the
generosity of this plan is both its strength and weakness.

Not a single Republican in the House or Senate voted to increase the debt
ceiling to $14.3 trillion, without which the United States would soon
go into default. Here’s how the Wall Street Journal covered the story:

Underscoring how both parties have largely retreated to their
respective corners,* the House voted Thursday to raise the government’s
borrowing authority to $14.3 trillion with no Republican support.

I don’t like nitpicking newspaper stories for latent bias, but this strikes me as a completely unfair sentence.

The fact that every Republican in the House and Senate cast a vote to
take Treasury to the brink of default does not underscore how “both
parties” have retreated to their corners. It underscores how deeply
Republicans have dug in their heels as a party of utter opposition, even when the practical implication of their votes would wreak havoc on the market. Sadly, this vote and this WSJ sentence combined underline exactly how easy it
is for a party to run an obstructionist agenda while escaping blame for
obstructionism.

US debt faces a middle- and long-term crisis — there is no argument there — but voting against
raising the government’s borrowing authority as the Treasury is one
month away from hitting the ceiling is an utterly impractical vote.
Passing the legal ceiling would put Treasury in
default on its debt obligations, gutting the value of government bonds
and sending unfathomable shockwaves through international markets. Every Republican in Congress just voted for that, and today’s news is: Look how partisan both parties are being. Weird.

______
*Also, 37 Democrats voted with the Republicans against raising the debt ceiling. Not sure how that fact corroborates the claim of mutual partisanship, either.

Is the Internet subverting democracy? Robert Wright makes the case (via Andrew Sullivan):

The division of readers and viewers into demographically and
ideologically discrete micro-audiences makes it easy for interest
groups to get scare stories (e.g. “death panels”) to the people most
likely to be terrified by them. Then pollsters barrage legislators with
the views of constituents who, having been barraged by these stories,
have little idea what’s actually in the bills that outrage them.

It’s no exaggeration to say that technology has subverted the
original idea of America.

He goes on:

The founders explicitly rejected direct
democracy — in which citizens vote on every issue — in favor of
representative democracy. The idea was that legislators would convene
at a safe remove from voters and, thus insulated from the din of narrow
interests and widespread but ephemeral passions, do what was in the
long-term interest of their constituents and of the nation. Now
information technology has stripped away the insulation that physical
distance provided back when information couldn’t travel faster than a
horse.

It’s true that the Internet lowers the barrier to creating information
and allows easy access to that information, which helps
“micro-audiences” cocoon themselves in corners of the Web. The
fragmentation of the Internet
allows different groups to create, and live in, their own “split”
realities, as I’ve written.

But here’s the rub.

[Be forewarned: The rest of this piece has nothing to do with
Obama’s health care plan, it’s just general thoughts about technology
and the media… OK, proceed!]

Wright is interested in how scare stories in one corner of the
Internet become national news stories. He blames technology and
pollsters. I’ll blame the media. The media likes to give hyperbolic
statements both a platform and a panning. But statements like Sarah
Palin’s “death panels” and Joe Wilson’s “you lie” seem to provide the
only avenue for mainstream media to discuss issues like Medicare cuts
and insurance for immigrants. Before mention of death panels,
there was no national conversation about cuts to Medicare. After death panels, talking heads faced off on the issue every night for a month.

Last year I wrote a blog post called How Joe Wilson, Sarah Palin Killed the Health Care Debate. I wrote: “Just as Sarah Palin’s death-panel blathering obscures what should be a
substantive debate over how to cut Medicare costs without harming
services, Joe Wilson’s locker-room shout-out caricatures the real
controversy about health care for illegal immigrants.” Regular commenter John Thacker objected:

Quite frankly, this is completely untrue. The media ignored the
“real controversy” until Joe Wilson’s screaming…

No one pays attention to reasonable criticism. Only hyperbole.

Maybe we’re both right. What if hyperbole eclipses honest debate in the mainstream media precisely because
there is no mainstream media debate outside the shadow of hyperbole?
What if complicated issues like Medicare inflation and immigrant care
are doomed to loiter outside our attention until some controversial and
seductive comment — “Death Panels!”; “You Lie!” — turns them into a
national fixation? It’s our fault, too.

Bank of America agreed to a $150 million settlement with the SEC — five times the original amount — the same day New York Attorney General Andrew Cuomo slapped the bank with a long-expected lawsuit for concealing crucial information from shareholders. There are three main accusations in the lawsuit. I’ll tell you if I think they’ll hold up:

1) Before the shareholder vote in December, BofA concealed Merrill’s losses from shareholders.

2) After the shareholder vote, Bank of America forced the
government to save the merger with taxpayer assistance after discovering losses
only slightly higher than previously known.

3) BofA did not disclose Merrill’s bonus timing or amount possibly on numerous occasions.

Let’s begin with (1): that BofA purposefully concealed huge losses from shareholders. The timeline of events (see graph –>) makes this perfectly obvious. On Dec. 3, BofA revised Merrill’s loses $2 billion. It
considered this update “not material”, using perhaps the most liberal interpretation of the word material I’ve heard. On Dec. 5, BofA shareholders, ignorant of this new
internal forecast, approved the deal. Two weeks later, Merrill’s
quarterly loss increased by another $2-3 billion. More than “material,”
this revelation was so horrifying that CEO Ken Lewis went to Washington to void the deal entirely! To review: a $2 billion write-down was immaterial. Another $2 billion write-down was a dealbreaker. That looks very bad, indeed.

On accusation (3) it’s equally obvious BofA misled shareholders about Merrill’s bonuses. Former Merrill
CEO John Thain was reportedly fired in January for paying $15 billion in
bonuses to his employees. But in the SEC suit last summer, BofA acknowledged in a brief: “It Was Widely Understood From Merrill Lynch’s Public Disclosures that Merrill Lynch Intended to Pay Multi-Billions of Dollars in Year-End Incentive Compensation”
dating back to October 2008 — three months before Thain’s resignation. Once again, BofA concealed information to ease the epic merger through the shareholder vote.

Now about accusation (2) that BofA defrauded taxpayers for an additional $25 billion to help the Merrill merger … I honestly just don’t know. Everything I’ve read suggests that after the second $2-$3 billion write-down, Ken Lewis freaked out and legitimately wanted out of the merger. My understanding was that he only stayed in with the threat of the board being liquidated by Treasury, and some extra loans. My understanding was that if there was foul play, it government intimidation of Wall Street rather than the other way around. I’m interested to see how the evidence shakes out.

The irony is that from 2010’s vantage point, this merger is actually in danger of working out very well! Merrill retained one of the best wealth
management programs in the world. Ten months after the deal,
Merrill was hauling in 30 percent of BofA’s profits. Last year I spoke to a source on the
Merrill side close to the merger during the bad honeymoon period. Here’s what he said:

So what do you think Ken Lewis was thinking [when he went to the government for money], I asked. “I think he
panicked. He could have said, ‘These are bad losses but Merrill
wouldn’t have needed to be bought if the losses weren’t terrible. We
still believe going forward that over the next 3, 5 10 years, this is
great deal.‘ Instead of doing that, he panicked.”

______
Editor’s note: Much of this blog post draws on reporting from last year in the following articles. Here I spoke off the record with a Merrill source. Here I traced the timeline above. And here I elaboated on why maybe we shouldn’t blame BofA as much as Cuomo would like us to.

President Obama’s budget calls for the 2001 and 2003 Bush tax cuts to expire for Americans making more than $250,000. This will not be popular — not among the rich, not among Republicans, and especially not among rich Republicans. But I am none of those things, so here I go defending it!

In the spirit of positive, constructive debate, I wanted to take on this post from one of The Atlantic’s correspondents, former Rep. Mickey Edwards. President Obama promised to let the Bush tax cuts expire throughout his campaign,
and Edwards said he voted for Obama, so I’m not sure why he’s upset surprised. Here’s his paragraph, with my
thoughts numbered and footnoted:

Noticing
that the country (actually, it’s the government, not the country) [1] is in
a deep, deep financial hole, the President has proposed to shrink the
outgo-income shortfall by raising taxes. [2] The first part of that job,
therefore, is to determine whose taxes to raise–everybody’s (hardly
palatable in an election year) or just those of a particular sub-group.
The decision was easy, especially given the worldview, common among so
many Democrats, that high earners are ipso facto the bad guys of
society [3], even if that income has been earned by hard work at two or
more simultaneously-held jobs and is offset by the non-frivolous but
non-deductible needs of loved ones (these incidentals are not taken
into account). So how to determine who are the baddest of the bad guys.
The apparent conclusion: anybody who earns at least $250,000 a year.

Facebook’s page view explosion in the last months of 2009 — plus new evidence that it is becoming the major driver of news — has some analysts wondering whether the site is taking over Google News and personalized Google Reader accounts as America’s leading information hub. To me the issue boils down to a question: should we get our news from our friends, or from the news?

Surely, the answer for most of us is: both. I visit the New York Times’ homepage and Google News and blogs, and I also follow the URLs in friends’ tweets and email alerts to articles. But I never would have expected that Facebook would actually supplant Google as the premier driver of stories on the Web. It turns out that’s exactly what is happening:

Hitwise analyst Heather Hopkins reports
that in the last week of January, Google Reader accounted for only .01%
of visits to news and media Web sites and Google News pushed only 1.39%
of the category’s traffic. Meanwhile, in just the last six months, the
share of traffic going to media sites from Facebook has doubled to
3.52%. Overall, including search result traffic, Facebook has become
the fourth largest source of traffic for media, behind Google, Yahoo
and MSN.*

Does this mean that Facebook is supplanting Google?
Well, no. Google owns the online ad market, commanding a quarter of all
traffic and $22 billion in online ad revenue. Facebook’s ad strategy is
burgeoning, but its 2009 revenue totals were around $400 million —
which is a little more than a dollar for every Facebook user.

But the emergence of Facebook as a real driver of news stories tells us something important about how news works.
Getting our news from our friends is nothing new. It’s as old as the
concept of neighborhood gossip. But if Hitwise analytics are capturing
a true trend in media, and the share of Facebook outbound links really
doubled in the last six months, it paints the picture of an
increasingly nichefied world of news readers. Friends are reading what
their friends are reading, who are reading what their friends
are reading, and so on. It presages the deterioration of top-down news,
and the rise of news-reading groups whose news sources and opinions
become a centripetal, self-perpetuated cycle of information — or
disinformation.

In his 2008 book True
Enough,
Farhad Manjoo explains that the fragmentation of the Internet
allows different groups to create, and live in, their own “split”
realities.
This is especially true in politics, where increasingly facts can’t find
us anymore–instead, we find our own political “facts” in the corners
of
the Internet, like our friends’ Facebook feeds, that reflect our
beliefs. Facebook is a unique and wonderful artery to our friends’
lives and interests. But if we define our reading by our friends’
libraries, we will all find what
we already expected rather than what we need to know.

___________________
*As the Atlantic Wire’s John Hudson explained, even these numbers
underestimate Facebook’s dominance. With 193 billion page views in
December 2009, Facebook was almost as trafficked as Yahoo and MSN combined.

The New York Times lost a generation of readers in the last decade, according to Gothamist editor Jake Dobkin. How? By producing too much original content. He writes:

Five years ago The Times could have bought the best local blogs in New
York for a song– instead, they decided they could do it better
in-house, and completely surrendered the 20-40 year old demographic to
sites like ours …

But in the paper’s slavish devotion to originality and old-fashioned
reporting, they’ve lost their most important civic role, which is being
the master curator which tells people in the city what’s important each
day.

“Slavish devotion to originality” is a weird way for a blog to talk about the reporting — the nourishment — it needs to survive. Blogs play an important role in journalism by stir frying the news, but it’s a derivative role. Good bloggers are like talented collage artists, clipping words and images and assembling them in a way that illuminates something original, for both the author and the audience. But in order to clip, and embellish, and illuminate, and collage, we need … you know, the news.

If the New York Times simply bought all the best Big Apple blogs, it
would cease to be the New York Times. It would simply turn into a
gigantic Gothamist, or a Huffington Post for Manhattan — a blog hub that remixes the news with a pinch of
original reporting. That’s fun to read and cheap to produce, because for most people, it doesn’t require leaving your desk. The Times costs a lot of money (and
loses a lot of money) because reporting from the four corners of the
world and the five boroughs of New York is expensive stuff.

It seems obvious that a world without original reporting would be a
world without blog posts that analyze original reporting, right? Dobkin
rebuts:

I’ve been asked a bunch of times whether I’m worried
Gothamist won’t have anything left to curate once the Times goes out of
business. But I’m not– first of all, new billionaires seem to roll up
every year with their vanity media products, dumping tons of new
content at our doorstep.

Stop right there. It sounds like Dobkin concedes that the survival
of large major news organizations might eventually rely on eccentric
billionaires to finance it. In other words, there is no financial model
for original reporting, only the distant hope of charity. If charity is the alternative to no New York Times or Wall Street Journal, then I’ll take the eccentric billionaires. But you can’t support a small army of original reporters on a pinch of stir-fried words.