Author: Derek Thompson

In Washington, D.C., there is a distinct thrill in announcing that you’ve identified a crisis in need of some solving. But that coming up with a solution part … not so thrilling, it turns out! Example: We have a serious long-term debt crisis. Everybody agrees. But there’s no political gain in being the first person to offer painfully granular ideas about tax increases and Medicare cuts. The political gain for senators is in whining to the Washington Post that nobody is “serious” about an issue whose seriousness they happen to be virtuosic at describing:

“We can’t let the government continue to run deficits of this magnitude,” said Sen. Evan Bayh
(Ind.), the only Democrat to vote last month against a short-term
increase in the debt limit. “What I’m going to look for is real,
credible, enforceable fiscal restraint.”

That’s rich stuff. Evan Bayh is a famous supporter of killing the estate tax,
which would increase the deficit by $250 billion over 10 years. For every tomorrow, he’ll to profess concern about the deficit. But so long as it’s “today”,
he’ll demonstrate concern for keeping the support of rich Indianans.
He’s “going to look for” serious deficit-busting ideas the way DC
Yellow Cab is going to look for the coat button I lost last week
somewhere around Dupont.

Instead of having a debate about the deficit, we’re having a debate
about how to have a debate about the deficit. The White House wants to select its own panel to brainstorm ideas.
Some senators think that idea is a “fraud” and want to select the
panelists themselves. It doesn’t matter who selects the panelists
because if they produce good, difficult ideas, nobody will vote for
them in an election year. If they produce bad, easy solutions, they
won’t make a dent in our long-term deficit.

The politicians are bad enough, but sometimes the media buys
into their colorful displays of anguish about the deficit in ways that
are equally annoying. Here’s the Washington Post on the Republicans’ aversion to a White House-selected deficit reduction panel:

A stronger approach backed by Sen. Judd Gregg,
R-N.H., would require Congress to pass legislation setting up the
commission and require a vote on deficit-cutting recommendations if at
least 14 panel members could agreed on a plan. But there isn’t enough
support in the House or Senate to pass this version of a commission,
given opposition from the right and left.

Sen. Judd Gregg’s “stronger” approach to reducing the deficit requires super-majorities to pass a Congress where even simple majorities are scarce — it is designed to fail. It’s the “stronger” approach to debt reduction the same way investing in time travel or particle teleportation would be the “stronger” solution to traffic congestion.

One can identify at least three driving factors of our long-term debt crisis. First, there is
already a deep disconnect between the services Americans expect to
receive and they taxes they support paying. Second, the recession will
retard GDP growth for the next few years at least, which will hurt
government revenue even as it pressures the government to spend more to
counter joblessness. Third in the next ten years as the baby boomers
retire, entitlement spending on Social Security and Medicare, especially, will explode.

Each of those driving causes is politically intractable. We aren’t
paying for our services, but Republicans and some Democrats won’t vote
for higher taxes. The recession is expensive, but unemployment will
still be extremely high next year. Entitlements are set to explode in a
decade, but both sides treat senior benefits with the skittish
sensitivity of a third-degree sunburn.

In the next nine months until election day, an elected’s willingness to
bemoan the national debt will be considered a critical measure of his
or her seriousness. But debt talk is so cheap, and reelection so expensive, that it’s probably best to think of the Senate’s trust deficit as an structural entitlement rather than a fresh crisis.

In the last few days, I’ve read and heard a lot of Massachusetts-inspired talk that funnels into two complaints about the White House: 1) Obama’s mistake in 2009 was that he never focused on jobs; and 2) Obama should have sought a simpler health care plan to get Republican support. I think both these interpretations are wrong.

First there’s the idea that Obama
messed up by focusing on health care to the exclusion of job creation.
Peggy Noonan puts it thus:

“At the exact moment the public was announcing it worried about jobs
first and debt and deficits second, the administration decided to
devote its first year to health care.”

I don’t know if this sentence is overly tricky or entirely wrong, but
it’s definitely something like both. “At the exact
moment the public was announcing it worried about jobs first” … ahem, that’s the exact moment we
passed a
$800 billion stimulus, followed by a $50 billion lifeline for the auto industry, while the Fed spent over a trillion dollars to prop up the housing sector
and make banks start lending to businesses. Maybe Obama didn’t do enough, but he certainly did something — and the Republican Party stood almost united against every part of it they could vote for. Steven Pearlstein gets this dead on.

The second myth is that the White House and the country
would have been better off if we had passed simpler health care
regulation rather than seek a $900 billion bill. These critics think we should have stuck with simple insurance regulation through taxes– such as banning rescission and rejecting coverage for preexisting conditions. But as Pearlstein writes, the problem with that

is that if you don’t require everyone
to buy insurance, then there will be lots of people who will wait to
buy their policies until they get sick and then demand coverage at the
“community” rate. That’s a great way to drive up premiums, which in
turn will drive even more healthy people to drop coverage, which will
raise premiums even further.

To prevent this kind of debilitating “insurance spiral,” you could
add one more feature — a mandate requiring everyone to buy at least a
basic insurance package. Unfortunately, there are lots of low-income
households for which the newly mandated premiums could eat up as much
as a half of after-tax income, which hardly seems fair. So you’d
probably want to make sure that there’s enough competition among
insurers to keep premiums down, which is what those
government-supervised exchanges are all about. And you’d want to have
some subsidies to limit the financial hit to low-income families. To
pay for the subsidies, you’d either have to raise taxes or cut spending
in other areas.

And hey, that’s exactly the $900 billion health care reform plan on the table (er, the cutting room floor).

Obama made mistakes, but the freak upset in Massachusetts is a cause for creative reflection, not creative revisionism, among both Democrats and their critics.

The ironic thing about all these industries like music and journalism wanting to build something just like Hulu is that Hulu doesn’t really want to be Hulu, anymore. The free ad-supported hub for movies and television is thinking about charging for its most popular shows, like 30 Rock, Modern Family and House … all of which I watch. Good news for media, possibly. Bad news for me. Damn my increasingly expensive middlebrow tastes!

The Big Money’s Chadwick Matlin has done a marvelous job
explaining the existential crisis at Hulu, which he sums up this way:
“Hulu’s business model is all the rage with everybody but its owners.”
Recently music makers have come together to roll out Vevo, a site that
plays high quality, ad-supported music videos. Journalism publishers
are close to launching an online magazine “storefront” where users pay
for bundled magazine deals, or something like that.

If
I had to guess, I’d think the future of Hulu is going to be a
combination of free ad-supported television and paid content. The
transition could happen slowly. First, Hulu might build a small paywall
around its most popular content to see how many users make the jump. If
that works, it could turn to bundles. In other words, if you buy the
ABC package you might pay $5 a month to watch every episode from every
ABC show without ads. This would make Hulu work a lot like TV’s answer
to Netflix, which Chad reports announced 42 percent of its subscribers are streaming content digitally.

But this remains the central problem: If you want people to pay for
journalism, you can’t give it away from free. Magazines still give away
most of their content online, so why would I ever want to visit a
swanky “storefront” to pay for what I already have? Similarly, in order
to make people pay to watch TV online, you have to stop giving it away
for free on NBC.com, ABC.com and so forth. People don’t like spending
money, and they’re very good at finding loopholes around paid content
(…ask the music industry).

The same day Obama decided to formally declare war on Wall Street’s biggest corporations, the Supreme Court ruled that corporations can spend unlimited sums
of money to elect their favorite candidates and defeat their enemies. Bad timing, much?

If Obama passes this big-bank-busting regulation, it will almost
certainly be with mostly Democratic votes. And those big banks with
blank checks will threaten to sign oodles of cash over to Republican
challengers of all the Democrats who voted to destroy them. It’s like
the popular kid who, after months of deliberation, finally decides to
challenge the school bully to a showdown — only to learn that the
bully’s mom just married their teacher. If he backs down, it’ll be a
damning sign of weakness. If he beats up the bully, he’s got to expect
retribution on the report card.

There are two caveats to my observation. First the Supreme Court
decision doesn’t invent out of nothing the idea of corporate spending on elections.
Companies could already establish and donate to political action
committees (PACs), and as Dan argues, this ruling could arguably allow smaller businesses who lacked the resources to establish PACs to get in the game.

Second, the White House could strike back. The Obama administration’s response could take several forms, as Marc Ambinder outlines:
(1) Pass a law to overrule the Court; (2) Pass a law to make company
shareholders approve political spending; (3) Pass a “stand-by-your-ad”
requirement, such as “I’m Derek Thompson, the CEO of AtBixChan
Technologies, and I approve this message.” My sense is that those are
listed in increasing order of political likelihood.

Obama’s new plan to rein in Wall Street has two parts. First it tries draw a bright legal line between commercial banks and investment banks by prohibiting commercial banks from trading on their own accounts to make money for their shareholders (otherwise known as proprietary trading). Second, it caps the percent of certain kinds of deposits a bank holds in an attempt to make banks smaller, and make their failures less calamitous.

What’s wrong with this idea? A lot, according to my finance compatriot — heretofore identified as Dr. Gonzo. Below is our Gchat conversation (lightly edited) on the subject.*

Dr. Gonzo: Everyone is saying that Obama’s plan will “break up the banks” and end “too big to fail.” That’s complete [manure].

__________

*For a 360-degree perspective on the bank plan, you can also read Dan and Megan who have more positive takes on the bank plan.

Starbucks Via instant coffee has not “changed the way people drink coffee” as Howard Schultz predicted. But it has changed something equally dear to Schultz: The company stock price, which has tripled in the last nine months.

It’s easy to forget that Starbucks, which once grew along the streets
and stripmalls of suburbia like crabgrass soaked in MiracleGrow, posted
negative sales for more than a year. The company was facing steep
competition from McDonalds and Dunkin Donuts who were offering cheaper
and better coffee (respectively). But rather than double down on
double-shot mocha specials, Starbucks closed stores, cut suppliers, and
rolled out an Instant Coffee.

The initial reaction was mockery —
“Starbucks coffee wasn’t already making instant coffee?” and “How many
people are going to order a
triple-no-whip-lite-ice-skim-white-chocolate-mocha and decide they’d like a pack of instant to go with it?” — and so on. But now
Starbucks is laughing all the way to the bank after a record quarter. Following McDonalds and Dunkin Donuts down-market turned out to be a wise investment.

On a closing note, here’s Schultz:

“We lost our way,” he said. “We went back to start-up mode,
hand-to-hand combat every day” to find it…he uses phrases like “the
authenticity of the coffee experience” and “the romance, the theater of
bringing that to life.”

I’m with this Gawker commenter: What exactly is the authenticity of the coffee experience? Especially when you’re crediting your record quarter to higher-than-expected sales of instant coffee?

China’s economy grew by 8.7 percent in 2009 — and a blistering 10.7 percent in the fourth quarter alone.These are important paragraphs:

Retail sales rose 16.9 percent in 2009, as China encourage domestic
spending to make up for lost export business during the recession.

But
concerns are rising of a growing property bubble in China, fueled by
lending which has seen property prices grow 50 percent or more in some
cities.

Asia’s retail explosion is key for the US economy. With unemployment
stuck at 10 percent and unlikely to fall much over the next year, we
don’t have the firepower to lead a retail comeback on our own. It’s not just that we’re not buying many goods. We’re also stalling the construction comeback by moving less than at any time since World War II. In the short-term, we need
help from exports, a cheap dollar and voracious overseas demand. That’s
why the roar coming out of eastern Asia is good news indeed for the US
economy, and it’s the reason why manufacturing has been on a tear for the last half year even as unemployment inched higher.

But that second paragraph also explains why American policy makers will be keeping an eye on the
property “bubble” in China. Dan Indiviglio rounded up some smart
thoughts on whether China was at the precipice of a dangerous pop and
concluded … probably not. Still there are disconcerting facts about the pace of China’s real estate boom, like this: New home mortgages in the first nine months of 2009 were
$139.5 billion, four times the amount offered a year earlier.

The New York Times announced yesterday that it would charge readers to use its Web site starting in 2011 by capping the number of articles we read for free. The idea is that the Times can keep a core group of monthly visitors, lose a bit of traffic and advertising revenue, and make it up with subscriptions to unlimited use of the Web site. This is a good start. But it can be improved. Here are five more ways to make you pay for the New York Times’ Web site.

1) Keep the Top Homepage Story Free
The NYT has adopted the Financial Times strategy of running a “meter”
on readers so that they have to get our their credit cards after
reading X number of stories. But it could also take a page from the
Wall Street Journal, which keeps main stories free and charges for
deeper analysis. The Times could make its top story permanently free by
excluding it from the “meter” to keep readers coming back to read the most important story right now in the world. In other words, you could do nothing but read the top story on NYT all day, every day, and never run into the paywall.

2) Keep the Blogs Free
Felix Salmon is right about this:
Nobody will pay to read blogs. That’s not to say they shouldn’t. Truly,
I consider some blogs out there more insightful useful for
understanding politics and policy than newspaper articles. But somehow,
paying for access to a running diary of thoughts just seems wrong at
the moment. It would be like paying extra for
bread at a nice restaurant. I love bread. Sometimes it’s my favorite
part of the meal. But if I saw “breadbasket” itemized on the dinner
check, I think I might try to come at the sommelier with the
complimentary pen.

3) “Run the Meter” for All Other Stories, Multimedia, and Op-Eds
Excluding the story at the top of the homepage and the Times’ blogs,
they could run the meter for all other clickable items on the Web site.
So if the ceiling of free content were 30 articles a month, you would
have to start paying after reading, say, 15 regular articles, 5 Thomas
Friedman op-eds, 6 multimedia pieces and 4 editorials.

4) Add a Free “10 Stories of the Moment” Feature to the Homepage
This is the craziest idea I have. Here’s how it would work. The homepage editor of the site should curate a list of the top ten
“most important” stories on the site — just like The Daily Beast’s “Cheat Sheet” and Slate’s “Slatest” — except the Times’ Top Ten list would be all NYT content.  It would also be free. Each story entry would — similar to Cheat
Sheet and Slatest — be one paragraph stitched together from the lede,
the most important paragraph and most important quote from the original
NYT story. 

Why parasite your own work and give it away for free in bite-size? At
least three reasons: (1) It keeps people coming back to the site as a
free source of important stories and breaking news so that the Times retains both traffic and ad dollars; (2) Nobody reads entire NYT articles anyway; (3) Aggregators are stealing the
Times’ content already, so why not beat them at their own game and
create a free digest of your best stuff right there on an NYT
ad-supported page?

5) Show Freeloaders What They’re Missing
I’ve already asked the Times to keep make it’s main story free, keep
its blogs in front of a paywall, and give away the beating heart in the
ten biggest stories of the hour. What am I thinking? First I’m
thinking that readers won’t pay to read blogs. Second, I’m thinking
that if the Times doesn’t create some free, easy-to-navigate Top Ten
list of the biggest stories every hour, millions of news junkies will
abandon the site in favor of a thousand other breaking news sources
like CNN and Reuters where they can read nearly identical stories for
free. News is a commodity. The Times’ advantage is theoretically in its
analysis and in-depth reporting. So the 2011 Web site needs to be
aggressive about bundling its most tantalizing stories together to create the impression that the monthly subscription — whatever it is — is a small price to pay for the kind of analysis, and insight and glittering multimedia information they’ll glean from the site.

In short, the Times has to walk a tightrope. To keep readers, it has to remain a free source of at least some breaking news. To turn readers into subscribers, it has to promote the heck out of its juiciest stories and sell its most colorful content loudly.

Amazon has released a kit to let developers create apps for the Kindle — just a week before as techies expect Apple  to debut its much-ballyhooed, but never before seen, tablet-slate-thing. It’s impossible to know what kind of Kindle apps an army of third-party developers will produce, but it’s likely that Amazon is hoping that the wisdom of the techie masses will help their product keep up with the lightspeed rumors about Apple phantom product.

I know that my colleague Megan has trouble seeing what need the Apple
device is supposed to satisfy. And I agree, to an extent. But I think
it’s also premature to decide we have no need for a product whose only
known feature is its flatness. Last night the Wall Street Journal
reported that the Apple Tablet could be a player for magazines, newspapers, books, text books, music, games, and video.
Hey that sounds cool! But again, if all the Apple Tablet rumors ever
were true, the device would be able to stream movies while typing your
dictated emails while curing your restless leg syndrome. Also, it would
have been released two years ago.

But the broader point is that even though the Apple Tablet doesn’t even exist
yet, the rumors swirling around its non-existence have generated a kind
of gravitational force that’s pushing Amazon to turn its own device
into an e-reader-plus. Megan and I might have no use for the
Apple Tablet, but if the e-reader wars only improve the utility of the
Amazon Kindle, it’s a win.

If Scott Brown’s Massachusetts upset sends health care reform into a free fall, Democrats will start looking for something that feels more solidly populist — like bank regulation, or job creation. If the unemployment rate is the next object of the Democrats’ reform agenda, here’s a graph they should probably pay attention to. It’s the CBO’s jobs-per-dollar analysis of 11 employment-boosting ideas.

Sorry if the graph is a little difficult to read. You can open up the full report here.

 
Here’s the good news: Increasing aid to the unemployed is the big winner because the jobless are strapped for cash and more likely than almost anybody else to spend what their checks quickly, sending the money back into the economy. To Congress’s credit, they just extended unemployment benefits in November.

Here’s the bad news: The CBO doesn’t seem to put much stock* in reducing income taxes or extending the AMT exemption, even though Obama’s early budget called for reducing income taxes for everybody except the top 5 percent of tax payers. 

Paul Krugman points to this report to hail the job creation tax credit but it’s noteworthy that the CBO admits they don’t really know how well this policy works in practice. After the 1973-5 recession, the authors note, the New Jobs Tax Credit gave firms a tax break if they increased total employment by at least two percent. The policy was too complex for many firms to apply, and later studies struggled to agree that the tax credit boosted jobs by a significant number. A Department of Labor report ultimately concluded that it was impossible to observe what hiring would have been done without the credit.

It’s an important reminder that the CBO is a group of very, very smart individuals, but their
conclusions are only as good as their models.

Washington is a strange city. Congress is stacked with politicians who already spend plenty of hours thinking about and disagreeing over public policy. But somehow, we think that putting them in a room and telling them “You’re a commission!” will provoke a chorus of kumbaya, no matter the issue. It’s as if politicians think they can trick their friends into agreeing to all sorts of politically difficult compromises by saying the magic word, “panelist.”

I’ve outlined a couple reasons why I think a deficit commission is doomed. But here are three more:

1) Some Commissions That “Worked” Really Didn’t. The Greenspan Commission, which is often held up as the apotheosis of commissions, didn’t actually work. According to this
New York Times article, the commission designed to fix Social Security
in the early 1980s was deadlocked before Reagan privately brokered a
deal with House Speaker Tip O’Neill to raise payroll taxes and trim
benefits. To be sure, the commission provided the political cover for
two enemies to strike a compromise. But that means that at best it was
a convenient facade rather than an effective policy-brainstorming tool.

2) Commissions Can’t Find Solutions If We Don’t Agree on the Problems. Another example often cited as evidence of a commission’s mystical
powers is the Defense Base Closure and Realignment Commission. That
panel met when Congress decided it needed to close excess military
bases. But as Stan Collender writes,
“it start(ed) with an agreement that bases and other DOD facilities
should be cut. The only question, therefore, is which ones.” There is
no analogous agreement on Capitol Hill that taxes should be raised, or
that Medicare benefits should be cut, or the Social Security needs
tinkering. There is only the obscure fear that our
deficit needs to be a smaller number.

3) Commissions Won’t Work Now, Anyway. Remember the “Gang of Six” charged with guiding health care reform? That was like a lot
like a commission in that it was a group of politicians sitting a small
room together for a long time, contributing to the illusion that the
crucial criterion in any political compromise is a compact seating
arrangement. The Gang of Six produced nothing except anxiety and the lie that health care reform was an issue within the scope of bipartisan compromise. Its leader Max Baucus
emerged with his own health care bill three months later, which unnecessarily delayed
the HRC process by a quarter-year.

Scott Brown’s Massachusetts victory means that if the House doesn’t pass the Senate version of health care stat, the Democratic Party will have to look somewhere else to build momentum for their agenda. Brian Beutler listens to their plans:

So what’s next for the Senate? Leaders and rank and file members say: Jobs, jobs, jobs.

“The country is speaking to us, and we will show we hear them in the
agenda we pursue over the next year,” reads a statement from Sen. Chuck
Schumer (D-NY) to TPMDC. “Our focus must be on jobs, the economy and
delivering for the middle class.”

I don’t entirely understand the logic behind this.

One week ago, the jobs stimulus bill was on life support,
and the health care bill was basically a fait accompli. About one in
six House Democrats didn’t vote for the jobs bill in December. That’s
basically the same as health care reform. A handful of Senate Democrats
have said they won’t vote for the jobs bill because it will increase
the deficit. Health care has (or at least had) 59 senators behind it.
What’s more, there’s no indication that Republicans are willing to work
with Democrats on a jobs bill that sends tens of billions of dollars to
bail out state payrolls. What exactly about this issue strikes
Democratic leaders as a logical “check-down” if they turn away from
health care?

If you want some real talk on the deficit and Washington’s harlequin act to fix it, please listen to Daniel Indiviglio. If you want to hear politicians croon utter nonsense about the debt with their fingers crossed behind their backs, please listen to Sen. Judd Gregg.

Republican commission advocates remain skeptical that a presidentially
appointed panel would have the clout to tackle the nation’s toughest
fiscal problems. Sen. Judd Gregg
(R-N.H.), a sponsor with Conrad of legislation to create a budget
commission by law, called a presidentially appointed panel “a fraud”
designed to do little more than give Democrats political cover.

“It’s a fraud among anyone interested in fiscal responsibility to
claim an executive order could structure something that would actually
lead to action,” Gregg said.

This is rich, hypocritical stuff.

In Gregg’s budget commission, a debt reduction bill would require
super-majorities to pass in the House and Senate. That’s strange, because super-majorities are scarce in Congress and non-existent for bills that
deal with tax increases and entitlement reforms — both of which are
necessary parts of any serious deficit reduction plan. Oh wait … that’s exactly the point! Gregg rigged his
budget commission to fail so he can grab credit for proposing deficit reduction without actually having any unpopular deficit reduction ideas pegged to his reputation. And this guy has the audacity to use the word “fraud.”

I don’t necessarily trust the White House panel to accomplish any more than Gregg’s ploy to play deficit doctor. I’m pretty down on serious deficit fighting in general because Democrats won’t propose service cuts in election years and Republican aren’t likely to support tax hikes in any year that, well, begins with the month of January. It seems to me that the only difference between the panels is that Gregg doesn’t get any credit for the empty gimmick if the White House picks all the panelists.

The New York Times announced that it will start charging frequent online readers who do not subscribe to the newspaper. Rather than exhume the TimesSelect experiment from last decade, which built a paywall around the op-ed columnists and long feature pieces, the new pay-to-read strategy borrows from the Financial Times:

Starting in early 2011, visitors to NYTimes.com
will get a certain number of articles free every month before being
asked to pay a flat fee for unlimited access. Subscribers to the
newspaper’s print edition will receive full access to the site.

This is the right decision.

I have nothing much to add on this post
from yesterday, but I do want to reiterate that this move underlines
the slow shift away from ad-supported media. Ads aren’t going away. But
online ad rates can’t support titanic publications like the Times. In
the future online newspapers are going to use advertising less like a rolling walker,
and more like a cane. In other words, advertising will continue to help
papers move toward their revenue goals, but the days are over when
publishers could lean on them and expect to stay upright. Here’s what I
wrote:

‘There’s a deeper story here. It’s nothing less than the slow death of advertising revenue. For the first time ever, the NYT is making more money from circulation than advertising. Next year, the FT expects
content revenue — “cover price rises, online charging and corporate
clients” — will eclipse ads. Worrying about traffic numbers and ad
figures is important, but it’s becoming secondary. A newspaper like the
New York Times — with a monstrous staff reporting stories, writing
pieces, taking pictures, and designing original multimedia and graphics
— cannot stand on a foundation of freeloading readership. The survival
of the news business requires readers to (re-)learn that the news is a
business that produces a product — that has a price.’

President Obama announced plans yesterday to expand the Race to the Top education program, which invites states to apply for slices of a $4 billion pie of additional school funding. Last year Obama launched the program with two major messages: (1) We need to locate effective teachers by studying student data, and (2) we need better standards to keep some states
(ahem, Mississippi) from setting their education bar so low that they
gut the word “standard” of all meaning.

In future iterations, Race to the Top will allow not only states, but
also individual districts, to apply for additional federal funding.
This change makes sense for two reasons. The first is wholly practical. Most
school funding comes from local property taxes, and accordingly
education policies, and their success, can vary dramatically on a
district-by-district basis within a state. The second reason this makes
sense for the administration is more political. Appealing to individual
districts provides a way to circumvent governors like Texas’s Rick Perry
who don’t want to accept additional education funds.

[Obama] also took a jab at Texas, where Republican Gov. Rick Perry is
refusing to compete for Race to the Top for fear of a “federal
takeover” of his schools. Mr. Obama said, “Innovative districts … in
Texas whose reform efforts are being stymied by state decision-makers
will soon have the chance to earn funding to help them pursue those
reforms.”

Since states are facing a historic bottoming out of tax revenue, this
is a shrewd time for the federal government to dangle billions of
dollars in front of state education officials in exchange for big
reforms. For example, Race to the Top funds cannot go to states, like New York, that
prohibit student performance from affecting teacher assessments. But you can imagine that a state, like New York, running a $13.7 billion 2009-10 deficit might be tantalized to take much needed money in exchange for ruffling the feathers of the teachers’ unions.

It should also be said that with health care’s prospects looking dim, a renewed focus on education could be a good way for Obama to build the bridges Americans think he’s burned with Republicans and to reclaim the mantle of a new kind of progressive — one whose policies combine a liberal belief in the power of government money with a federalist faith in our states to govern themselves. In any case, Democrats will be looking for reasons to not light themselves on fire in the next few weeks. Education policy wouldn’t be a bad place to refocus their energies.

Since calorie counting was mandated in New York City in 2008, nutritionists, libertarians and foodies have watched to see if it changed consumers’ appetites and orders. One well-circulated experiment found that the calorie counts had zero impact. Atlantic bloggers Megan McArdle and Corby Kummer debated the implications (Megan’s saw her skepticism validated; Corby noted that some companies had changed ingredients under the harsh light of calorie data.)

But this research from NBER, by Bryan Bollinger, Phillip Leslie, and Alan Sorensen, finds that publishing calorie counts can change our incentives after all:

We study the impact of mandatory calorie posting on
consumers’ purchase decisions, using detailed data from Starbucks. We
find that average calories per transaction falls by 6%. The effect is
almost entirely related to changes in consumers’ food choices–there is
almost no change in purchases of beverage calories. There is no impact
on Starbucks profit on average, and for the subset of stores located
close to their competitor Dunkin Donuts, the effect of calorie posting
is actually to increase Starbucks revenue. Survey evidence and analysis
of commuters suggest the mechanism for the effect is a combination of
learning and salience.

And so long as we’re on the topic of changing buyers’ behavior, here’s
another experiment about how the sound of certain prices can make
consumers think a price sounds like a better or worse discount (via the
New York Times):

In one experiment, researchers told consumers the regular and sale
prices of a product, asked them to repeat the sale price to themselves,
and then, a few minutes later, told them to estimate the size of the
discount in percentage terms. Products with “small-sounding” sale
prices (like $2.33) seemed like better deals than products with
“big-sounding” sales prices (like $2.22).

Republican challenger Scott Brown seems likely to pick up Ted Kennedy’s old Senate seat in Massachusetts. That would give Republicans a filbuster-enabling 41-vote minority in the Senate, and Democrats are rightly freaking out about the future of their agenda. So should the party go small and eschew big legislation. In other words: Should Obamaism descend into–gasp!–Clintonism?

Noam Scheiber asks the question in this
perceptive TNR piece about what Obama should do with his
social/economic agenda if the Democrats lose in Massachusetts today.
This is a telling paragraph:

According to the Senate aide, the first four weeks of the chamber’s
legislative year–which begins on January 19–will be devoted to three
initiatives: finishing up health care, hashing out a job-creation bill,
and raising the government’s debt limit, the last of which is like the
colonoscopy of Senate votes (necessary and not that
time-consuming in the grand scheme of things, but seemingly
interminable while it’s happening). Which means the earliest the Senate
could start working on regulatory reform, the next major item in the
queue, would be late winter. Unfortunately, the process of finalizing
that bill could take months. That leaves cap-and-trade on its
deathbed–“I can’t rule it out, but it’s fair to say it’s losing
steam,” says the Senate aide–to say nothing of other initiatives like
K-12 education.

Hate to say it, but I think Noam (or his source) is being too
optimistic even with this pessimistic read of the Senate’s near future.
If Brown takes Massachusetts, the House and Senate will have to
scramble to put health care reform on the president’s desk before Brown is seated. Next up, you’ve got a job creation bill whose prospects were dimming
among conservative Democrats like Bayh and Baucus even when the 60-vote
majority seemed safe. Passing a messy health care bill, followed by a
messy job creation bill and then raising the debt ceiling will
give Republicans months of ammunition to capture and hold moderates who
are getting skittish on the deficit.

The Senate has for a long time been less like an avenue to pass
legislation, and more like mud pit to watch it sink. A Brown victory
would effectively change the Senate’s consistency from viscous to solid
amber. A united Republican opposition would block anything resembling
Big Liberal Agenda, and Democrats will almost have to play small to create even the illusion of a working Senate. What kind of ideas would work? A small jobs bill that leans harder on tax cuts could make it out of Congress. Or Democrats could pass something small for the environment like the “green bank” proposal, “which would
use government money to help fund clean energy investments, and for
requirements that utility companies generate a certain amount of
renewable energy within a decade or so.”

If Brown wins tonight, the commentariat will be focused on What Democrats Did Wrong. Liberals will say they didn’t move fast enough, or treat 2009 like the precious window of opportunity it was. Republicans will say they moved too fast, and Massachusetts is the public pumping the breaks on an out-of-control experiment in liberal one-party rule. It doesn’t really matter who’s right. A 59-41 Senate with a united opposition is, unbelievably, the equivalent of a house divided against itself.

With Conan O’Brien set to receive $40 million to walk away from the “Tonight Show,” the television media is circling to pin the blame for NBC’s broken late night carousel. Months after moving Jay Leno to primetime, the network announced that they would return their leading chin to late night, prompting O’Brien to demand a severance deal. Is this mess all Jay’s fault for sticking around, and being generally lame? Or Conan’s fault for failing to capture a late night audience, and being too goofy? Or NBC’s fault for coming up with the generally horrible idea in the first place?

Let’s start at the beginning. The problem with late night comedy is that it’s really neither late night nor comedy.

The NYT’s David Carr and his daughter have been watching the Jay Leno show recently, he
writes. But not on TV. On Hulu. The first problem with late night
comedy is that it’s no longer always late night. We can watch most
television shows online at any time. But late night TV — whose
transience is literally a part of its genre title: Late Night
TV– loses all cultural currency mere hours after their hosts sign off because the news changes and the jokes stale.

That is, if the shows haven’t lost all cultural currency to begin with. Carr explains:

But as things stand now, by the end of the day, we all have been
bombarded by news and commentary from all manner of media, making “The
Tonight Show” and its ilk increasingly seem beside the point, no matter
who is delivering the monologue. In its glory days, “The Tonight Show”
served as a search engine on culture, letting us know which politician
had made a gaffe, which corporate evildoer had been caught doing evil
and which starlet had experienced a wardrobe malfunction.

Now the search engine is the search engine — or more likely, any number of “did-you-see” alerts received by e-mail or on Facebook, Twitter or other sites we visit from our desktops or on our cellphones.

The choice to watch late night TV used to be: Leno or Letterman. Now it’s
Leno, or Letterman, or Community on NBC.com, or CSI on Hulu, or
Arrested Development on DVD, and so forth. Late night TV used to live in the alpine
wilderness of midnight television, where no primetime dramas dared to
tread. Now it’s fighting to survive in a jungle where every show on TV
is, technically speaking, “on.”

The second problem with late night comedy is that it’s not comedy — at
least not to me and everybody I know. I can’t remember the last time somebody recited a Jay
Leno joke, or sent along a David Letterman monologue, or implored me to
watch last night’s Conan O’Brien – Andy Richter interaction. But I get
Daily Show clips sent to me all the time. Precisely because late night
comedy is designed to appeal to everyone and offend as little as
possible, it inevitably appeals to no one and surprises as little as
possible. Stephen Colbert and Jon Stewart — the real heirs to late
night comedy as a brand of actual comedy — peddle media satire and
criticism with an edge of partisanship. They’re funny because they’re
unpredictable yet purposeful, incendiary with a point.

Late night television has lost more than an audience, or a host. It’s lost its reason to exist.

After suffering years of doomsday headlines about plummeting advertising revenue and personnel cuts, the New York Times is reportedly near a decision to charge for access to its website. Currently, all content on NYTimes.com is free to read and watch. But the paper’s guardians are looking to boost online revenue by making readers pay — even if it means a fall-off in overall traffic and advertising. Gabriel Sherman has the report at New York Magazine’s Daily Intel blog:

New York Times Chairman Arthur Sulzberger Jr. appears close to
announcing that the paper will begin charging for access to its
website, according to people familiar with internal deliberations.
After a year of sometimes fraught debate inside the paper, the choice
for some time has been between a Wall Street Journal-type pay wall and the metered system adopted by the Financial Times, in which readers can sample a certain number of free articles before being asked to subscribe. The Times seems to have settled on the metered system.

This is the right choice. It’s also the only choice.

I can understand that the Times wouldn’t want to adopt the Wall Street Journal model, which makes top stories free and puts deeper analysis behind a paywall. After all, that isn’t terribly different from the TimesSelect strategy it tried and abandoned last decade. TimesSelect made most news stories free, but built a wall around the stable of op-ed columnists — Friedman, Dowd, Krugman, etc — and longer stories. The paper later tore down the paywall in the hopes that a spike in traffic would boost advertising revenue. Traffic did spike, and ad revenue did jump, but not nearly enough. The paper lost $35 million in the third quarter of last year.

The Financial Times model lets registered users read 10 articles a month. Past that, you have to pay for access. It’s a harsh model for readers seeking free news, but it’s been very successful for the FT.* I can see the NYT implementing a combination of FT’s “meter” model that also keeps some main stories free. In other words, the first iteration of the NYT’s strategy would be a soft blending of WSJ and FT models. Free lead stories would keep casual readers coming back, maintaining a solid baseline of online traffic. Meanwhile, the meter system would suck in dedicated Times readers, and their monthly subscription dollars.

There’s a deeper story here. It’s nothing less than the slow death of advertising revenue. For the first time ever, the NYT is making more money from circulation than advertising. Next year, the FT expects content revenue — “cover price rises, online charging and corporate clients” — will eclipse ads. Worrying about traffic numbers and ad figures is important, but it’s becoming secondary. A newspaper like the New York Times — with a monstrous staff reporting stories, writing pieces, taking pictures, and designing original multimedia and graphics — cannot stand on a foundation of freeloading readership. The survival of the news business requires readers to (re-)learn that the news is a business that produces a product — that has a price.

So of course in the short-term, the New York Times will lose traffic. That’s the trade-off. If your
website is all free, you hope to raise readership and risk losing money. If you create a paywall, you hope to raise money and risk losing readership. The Times finds itself on a crumbling cliff these days and the only option is to jump and hope you hit land that isn’t crumbling as quickly. I wish them all the luck in the world.

_______

*There’s an ongoing debate about whether the FT and WSJ thrive with a paywall because (a) they offer financial information you can’t find in generalist publications like the Times and (b) accordingly, many of their clients are corporations who buy large subscriptions for their companies and are less sensitive than an individual web browser to minor changes in subscription fees.

A housing bust triggered the economic downturn, but even with GDP bouncing back, the housing news is rotten. Foreclosure filings increased 14% in December over November, according to USA Today. And once again, this news is all about the handful of states with the worst foreclosure rates: Nevada, Arizona, California and Florida. We return to the awful state of MichiCaliFlAriVada.

This graph from USA Today helps to tell the story:

After a decade where Americans borrowed against home equity to fuel
consumer spending, the glut of foreclosures in California and Florida
casts a shadow on a sustainable consumer-fueled recovery, certainly
with those two sunny states leading the way. It’s no surprise why the states with the highest foreclosure rates in 2008 are also the states with the worst credit card debt and unemployment.

Once again, I think this
recovery has to be fueled in the early rounds by something else, like
exports to East Asia where GDPs are growing at a fast clip and
consumers are taking advantage of the cheap dollar to buy lots of our
stuff. Indeed, manufacturing is just about the only industry that seem to be growing at a sustained rate for the last half year.