Derek Thompson

Emma Gardner of the Economist Group presents a visual look back at digital publishing in 2012. No visual struck me more than the graph below showing the extent of devastation to newspaper print ad sales since 2006: $20 billion in annual revenue, down the drain. In that time, digital ad growth has erased only 2% of the losses. How dreadful. [Quarterly figures below.]

Where did the digital money go? It went to new online marketplaces, and apps, and sites. And Google. Yeah, basically the money went to Google. In 2006, Google made $60 billion less than U.S. newspapers and magazines. Now it makes more ad money than all of U.S. print media combined. Wow.

Today, Instagram updated its terms of service, and the Internet exploded. The new terms said that businesses could pay Instagram to display your photos "in connection with paid or sponsored content," Nilay Patel explains. So, Miller Lite can use your photos of bars to advertise itself on the site.

If that sounds like whatever to you, then stay away from the tech blogs, which spent Tuesday afternoon in apoplexy. All day, I could feel myself getting angry that everybody was getting angry, and I couldn't quite figure out why. I think this is why:

There's a brilliant Louis CK interview with Conan O'Brien from a few years back, where he recalls listening to an imaginary friend complaining about the hour-long wait before his plane takes off. Louis CK unloads: "Oh really, what happened next? Did you fly through the air incredibly like a bird? Did you partake in the miracle of human flight, you non-contributing zero? Wow, you're flying! It's amazing!"

"Everything's amazing," he concludes, "and nobody's happy."

What the heck does this have to do with Instagram? Getting there.

We live in interesting times in the start-up world. Bio-tech is in a rut. Hardware is risky and expensive. So many of the smartest and most creative entrepreneurs of their generation have dedicated their lives to making you things for free. They're writing software, or creating online marketplaces, for you. Free. Of. Charge. Think about that. Think about how their brilliant software delights you, makes you literally happy, fills your spare time, organizes your work time, invents convenience where you never expected it, swallows your boredom in sepia tones, begs hours of your precious attention, does a bunch of other emotionally and productively and ontologically rewarding stuff ... and almost all of it is either vanishingly cheap or utterly free! Not since the cavemen, probably, did the brightest minds in the world turn their attention to making things that nobody had to pay for.

This is rare gift, made possible by at least two things: The duplicability of code, which drives the price of most software products to zero, and subsides from venture capitalists, who are happy to bankroll these ingenious inventors until they figure out a business model. Oops. I said it. Business model. Yes, so we all know these businesses are in fact business. I won't insult your intelligence with the pedantic reminder that "if you're not paying, you're not the customer, you're the product." Blah blah blah. People get that, I think. But they hate feeling like the product. It degrades them. And so every time one of these "two-sided" companies announces that they need to start attracting the second side (advertisers) in order to keep things happy for the first side (users), there is a freak-out of biblical proportions.

When digital users enter into a contract with a free company, they should have various expectations, including but not limited to: a right to privacy; a right to fair warning of changes to privacy; and a right not to be treated like an unwitting commodity. But they need to develop other expectations, too: That the road to digital monetization leads through a murky and un-mastered terrain; that every large free digital company trying to navigate this road is going to employ strategies like sponsored content that will initially make some people feel uncomfortable; that the content and information we upload to a site will never be truly our own, exclusively; and that we will be asked to pay with the only currency employable on a free site, which is our attention. 

The bottom line is that Instagram is the easiest, most elegant, and most popular photo-taking and -sharing application ever, and that is an achievement worth more than $0.0. Don't worry. They're not selling your photos. Still, everything is amazing, and nobody's happy.

Six in seven households have received some sort of government benefit, according to a new survey from Pew Research Center. Here are some highlights from the report, plus some extra bits of context. These graphs focus on government spending, as opposed to tax benefits -- such as the Earned Income Tax Credit and the lower rate on investment income -- which can also be considered forms of "government assistance," since a dollar not taxed can perform a similar role to a dollar spent.
 
1. The big picture is bigger than 'the 47%.' Fully 55% of all Americans -- including a majority of those self-identifying as Democrats, Republicans, liberals, moderates, and conservatives -- have received benefits from one of these six federal programs: Social Security, Medicare, Medicaid, welfare (TANF), unemployment benefits, and food stamps (SNAP).
2. ... Actually, it's more than the 70%.  If you broaden to households rather than individuals: "71% of adults are part of a household that has benefited" from at least one of those six programs.

3. In fact, it's the 86%. After you add veteran benefits and college assistance, 70% of individuals -- and 86% of households -- receive a government benefit of some kind. Put differently, one in seven households doesn't receive assistance from the federal government.

4. The demographic breakdown. Federal assistance is more likely to go to women than men (61% vs. 49%); to blacks than whites or Hispanics (64% vs. 56% vs. 50%); and to rural residents than urban or suburban (62% vs. 54% vs. 53%).


6. Food Stamps are bigger than you think. You might not guess it from the relative attention paid to each program, but there are nearly as many people on Food Stamps (SNAP) as there are on Medicare.
7. But nothing's bigger than Social Security ... for now. Although Medicare and Medicaid are projected to grow faster than Social Security in the next ten (and, especially, twenty) years, SS is still the biggest benefit program from the federal government.

The fiscal cliff bargain is coming into focus and it starts with a blockbuster trade. Republicans are ready to place their sacred cow, tax rates for the rich, on the altar for sacrifice. In exchange, Democrats are ready to place their sacred cow, benefits for the elderly, on the altar, as well. Sacrifices all around. There is a Mayan joke here, somewhere.

The deal to avoid automatic tax increases and spending cuts in early 2013 was never going to please everybody. A little screaming was inevitable. It seems only fair, six weeks after the Democrats' decisive victories in the Senate and White House, that Republicans be asked to scream a bit louder about the final compromise. And we're on track for just that. Boehner has opened to the door to higher tax rates above $1 million. Democrats wanted higher tax rates above $250,000. Most of the difference can be bridged with limited deductions for the richest 2 percent or so. In return, Democrats are seriously considering a proposal to slow the growth of Social Security benefits by switching to a different measure of inflation (full explainer here).

Basically, this is a progressive tax increase in exchange for a progressive benefit cut. That's not a bad deal for Democrats. It might even be a good trade.

Liberals would prefer to get their tax increases without giving up anything on entitlements. Second to that fantasy, changing the way we measure inflation is probably the least bad entitlement reform acceptable. It protects the poor more than moving the retirement age for Social Security or Medicare, and it changes Social Security payments very, very slowly. [Update: To protect the very poor who live very long, the solution is simple: Low-income SS rebates, which the administration is already seeking.]

Here's how it would work. Seniors would get the same initial Social Security benefit that they are projected to receive today. But under the new proposal, the checks would grow slower, pegged to a more conservative measure of inflation. That sounds like it would hit low- and high-income recipients equally. But the richer half of the country that reaches the age of 65 can expect to live more than five years longer than the poorer half. Since older recipients will see the bigger cut over time, it's fair to say that slowing the growth of Social Security benefits is a barely progressive, but clearly progressive, cut.

The switch to a new "chained" consumer price index would cut Social Security benefits, by about $100 billion over 10 years. It would also raise taxes by about $60 billion. Under a slower-growing measure of inflation, more households would move into higher brackets, taxing their top dollars at higher rates. Measuring the distribution of tax changes under chained-CPI is a bit controversial, but Marc Goldwein and Adam Rosenberg calculated that "more than 40 percent of the additional revenues generated by the chained CPI would come from the top quintile."

Trading a clearly progressive tax hike for a marginally progressive spending cut should be an acceptable exchange. But it is not yet a *good deal.* Ezra Klein reports that unemployment benefits and a dash of extra infrastructure spending is forthcoming. Good news. But I'm miffed that the White House is reportedly giving up on the payroll tax cut, which is great stimulus, and the debt ceiling, which is an awful gimmick that has been used to squeeze further cuts from the White House.

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We have to talk about the gender wage gap in Ireland. It's the highest in the world. But there's a catch. It's not men earning more than women. It's women -- those without children, at least -- earning more than men.

Irish women without kids earn 17 percent more than the typical male worker, according to new research from the OECD. Along with Australia, Luxembourg, and the Netherlands, it is one of four rich countries where women without children report higher wages than men. The graph below shows that gender pay gap. In Germany, the U.S., Korea, and Japan, by comparison, childless women average between 3% and 24% lower wages than men.

Once kids enter the picture, the picture changes.

The second graph here is the same as the first, but with red bars showing the gender gap that emerges when you compare female workers with children (many of whom move to part-time jobs) to all men. In Australia, women without children out-earn men more than any other country except Ireland; but after children, the wage gap plunges to U.S.-levels.

That leads us to the final graph: The cost of kids. I wanted to calculate and show how far women's earnings fall behind men's after they have children in each of these countries. This graph has the answer. In the Netherlands, women work almost 2 hours more per day than men, and female employment has climbed to over 70% if you factor in part-time workers, the cost of having children is about 7 percentage points compared to male earnings. In Korea, where more married women are expected to leave their jobs and female participation rates haven't much budged for 20 years, according to OECD, female earnings plummet compared to men after kids.

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BONUS GRAPH: More from OECD for you stat heads...

This month's Atlantic magazine predicts that we are on the verge of a U.S.-based manufacturing renaissance, as companies see the advantages to making more goods at home, such as more control over the final product, lower energy costs from moving goods across an ocean, and a falling "wage gap."

Simply put, U.S. factory workers are a much better deal than they were just ten years ago.

Here is a T. Rowe Price graph of unit labor costs -- basically, that's a measure of how productive our manufacturing workers are -- which shows that U.S. has spent the last ten years gaining on some of our key trading partners. (When these lines are going down, that means U.S. factory workers are getting cheaper relative to the competition...)

... so that's exactly what's happened. Chinese workers used to be a huge discount for American companies. But they've lost half of that productivity discount to the U.S. in a decade. Canada and Germany have lost about 40% of their advantage.

As Alan Tonelson wrote out to James Fallows in an email published on our site, one would expect U.S. manufacturing to grow faster than a sluggish U.S. economy if it's truly in a renaissance (as it did in 2010 and 2011). Instead, GDP has grown by about 2% percent in 2012, while manufacturing output "has actually fallen - by 0.54 percent."

He's got a point. Long story short about U.S. manufacturing: It's had an awful half-century, an awful, awful last decade, a pretty good last two years, and a rough 2012 (much of it thanks to trouble with overseas markets as opposed to production problems inside our own borders.) But our cover stories don't guarantee that manufacturing will lead the next phase of the recovery, starting in January, but rather that there are unmissable trends that portend a shift of factory activity back to the U.S. in the next few years. I think that's right, too.

And here is one truly unmissable trend: U.S. manufacturing workers haven't been this good a bargain in decades.

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We don't yet know if today's tragedy in Connecticut will spark a national debate over gun control, or whether, like many massacres before it, it will fade quietly without leaving its mark on a single law. If the past is any indication, the public response to these shootings isn't what you might think.

Three graphs tell the story. The first, from Quartz, shows that public support for gun control doesn't go up after mass shootings in the US. In fact, it has repeatedly gone down. Those down-ticks are part of a growing public aversion to gun control that dates back to the early 1990s.

So most Americans are against gun control right? Not so fast. The second graph, from a truly spectacular post by Ezra Klein, shows that there is broad public support for specific gun control policies, in particular: background checks; gun registration; banning high-capacity clips; and banning semi-automatics.

As a principle, "gun control" isn't popular. But specific gun control laws have national support. Yet, it gets more complicated. Even the term "national support" belies demographic gaps.

While nearly every demo -- men, women, white, blacks, Democrats, Republicans, north, south -- is more likely to support gun rights today than in the early 1990s, it remains true that fewer than half of the following demographics are clearly anti-gun-ownership-rights, in general: women, blacks, Democrats, and northeast residents. More than 55% of men and Republicans recently told Pew it was more important to protect rights of Americans to own guns.

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Now we are engaged in a great tug-of-war over a few points in the top tax rate in Washington. But even if the White House pulls hardest, it won't amount to much of a victory for the long-suffering middle class. The sources of their income stagnation are too deep, too varied, and too long-term for Clinton-era tax rates to cure them.

"There is a huge amount of focus on progressive taxes in our policy world but progressive taxes are not much of a solution to this," said Lawrence Mishel, president of the left-leaning Economic Policy Institute. "We need to get unemployment down rapidly. We need to greatly change our labor standards. We need to raise the minimum wage."

He's right: The middle class crisis -- and its resulting income inequality -- is the most important economic story of our time. There are a million ways to tell it, and here's another: an annotated slide show, culled from the amazing 2012 edition of the State of Working America from EPI.

Here we go:

ANNOTATED CHART-GUIDE TO THE MIDDLE CLASS CRISIS

The income of a typical working-age family grew considerably in the late 1990s. Around 2000, it stopped growing. In 2007, it started falling.

Adding to the mystery is the remarkable de-coupling of productivity from real hourly compensation for all workers, including college graduates. The break seems to have occurred in the 1970s and accelerated very recently. Productivity grew steadily in the 2000s. Compensation didn't. It even hit a wall for college graduates.

Where did the gains from productivity go? Well, they went to the top. Household income, adjusted for inflation, has grown 12X more for the top 1% than for the middle 20% ... and 24X more than the bottom 20%.

The full story of income inequality cannot simply be told with wages, where the 40-year growth gap between the top 10% and the rest is "only" about two-to-one.

To understand the full story, you have to look at capital income -- from assets like housing and stocks and bonds. This is where income growth for the top 1% has positively exploded, taking income inequality to record highs.

This is not a new trend. This is an old trend going back to before the Reagan administration. Since 1979, the top 5% took home more than half of total income growth. The top 1% took nearly 40%.

EPI's conclusion that health care costs and technology have nothing to do with stagnating wages for the middle class is controversial (see here and here for other takes). But its diagnosis for the three "wage gaps" is still compelling. Slide here, graphs to follow.

First, let's look at the gap between the super-super rich and the rest. About 60% of the increase in the top 1%'s share of total income seems to come from the expansion of the financial sector and the explosion in executive pay in non-financial compensation.

At the same time that their incomes have grown, effective tax rates on the super-super rich have fallen, especially since our laws give preference to income from capital gains. This is huge, because the top 1% has controlled more than 40% of stock market wealth since the 1980s. The next 9% owns another 40%. Stock wealth hasn't exactly democratized.

Since 1960, average effective tax rates have fallen dramatically for the top 0.1% -- much of it thanks to preferences for capital gains income. Progressive taxation won't fix the middle class crisis, Mishel pointed out to me over the phone, but it can discourage sky-high CEO salaries and provide more public funds to pay for infrastructure, education, and a safety net.

  We're moving from the tippy-top of income to the very bottom here. As taxes have fallen at the top, the minimum wage has fallen at the bottom. In 1964, the minimum wage was about 50% of the average worker's hourly earnings. By 2011, that figure fell to 37%.

Although the minimum wage probably has a light effect on middle-class wages, it goes a long way toward explaining the falling market wages of the very poor -- especially among women, for whom it explains about two-third of the "50/10 wage gap" change in the last 40 years.

  Explaining the stagnation of the middle class is more complicated. According to EPI, the story begins in manufacturing, where trade with less developed nations (who can produce cheaper goods with cheaper labor) hurt wages among the non-college-educated class that once relied on manufacturing jobs.

As manufacturing eroded, so did unions, whose coverage fell from 27% in the early 1970s to just 13% in the late 2000s. Without unions, middle class workers without skills to move into higher-paying jobs lacked the collective power to bargain for higher wages.

An under-rated source of income growth for the middle class in the last 30 years, in face of slow-growing hourly wages, has been increased hours and the rise of dual-earner households, where the mother and father supplement each others' income. As a result, household income might actually *understate* the middle-class crisis by counting the rising participation of women.

Upshot: Middle-class household income grew by about 19 percent between 1979 and 2007. But after accounting for rising health care costs ($1 buys less care every year), subtracting government transfers like unemployment insurance, and adjusting for rising hours worked ... you find that middle-class household income actually grew by only 4.9% across four decades.

So, there's your crisis. And it's not something we can fix with a tax tweak for the top 2%.

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Attention publishers: For all the attention given to "bold rich multi-media experiences," young mobile news readers still prefer stories the way their great-great-grandparents did: In columns of text.

In the eyes of employers, marketers, and brand gurus, Generation Y tends to be treated like a separate species, forged in the primordial stew of Internet, whose habits are so positively alien to the rest of the country that they've inspired a cottage industry: The How-Do-You-Solve-a-Problem-Like-Millennials? genre.

But a new report from the Pew Research Center (pdf) suggests that, when it comes to reading the news on mobile devices, young people aren't so different. First, they use their tablets and smartphones to read the news at nearly identical rates to 30- and 40-somethings. According to Pew, between 30 and 50 percent of practically every demographic, except seniors, uses mobile phones and tablets to read news -- whether it's men or women, college-educated or not, making less than $30,000 per year or more than $75,000. All told: Thirtysomethings and fortysomethings are just as likely as teens and twentysomethings to use their smartphones and tablets for news.

There are some small differences. Men are more likely to read longer articles. Women are more likely to use social media. Non-whites are more likely to watch videos. But the trends are consistent across the under-50 demographic. When it comes to reading the news, Millennials aren't the unique demographic. Seniors who haven't transitioned from print are.

Here's another surprise. Young mobile readers don't want apps and mobile browsers that look like the future. They want apps that look like the past: 58% of those under 50, and 60% of Millennials, prefer a "print-like experience" over tech features like audio, video, and complex graphics. That preference toward plain text "tends to hold up across age, gender and other groups." Pew reports: "Those under 40 prefer the print-like experience to the same degree as those 40 and over."

Publishers be warned: For all the attention given to *rich multi-media experiences* news-readers still enjoy reading the news the way their great-grandparents did: In columns of paragraphs.

Let's close with some happy news for digital publishers: Young people, especially non-whites, are considerably more likely to interact with ads on tablets than older readers (smartphones, with their impossible small screens and awful AdMob invaders, remain a separate challenge). Interested in text paragraphs and receptive to advertising? Maybe Millennials are easier than we thought.

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What if I told you we could raise taxes, cut entitlement spending, and break the cliff stalemate for good, by changing one obscure policy? Ladies and gentlemen: Meet chained CPI.

If you're growing weary of the fiscal cliff, I do not blame you. Budget deals can be powerfully wearying stuff. But they are rarely as complicated as they seem from a distance.

Take, for example, the new proposal that some Republicans and Democrats think might end this terrible cliff showdown for good. It would involve a simple change to the way we measure cost-of-living. The proposal is called chained consumer price index -- or chained CPI.

Please don't run away. Yes, this sounds like an awfully fusty and complicated idea. That's somewhat the point, as Matt Yglesias mischievously points out, since fusty and complicated ideas are the least likely to raise the ire of voters who don't understand them. But chained CPI, in addition to being key to a budget deal, is also simple to understand.

LESS SPENDING, MORE REVENUE

Each year, wages and prices tend to go up. You know that already. But by how much? Washington needs to know. Social Security checks are supposed to grow each year to keep up with the cost of living, and tax brackets are supposed to go up each year to avoid a stealth tax increase on households.

Today, Washington tracks cost-of-living changes with various inflation measures that calculate the price of a "basket of goods." That's good for keeping track of a finite set of prices. But what if people start buying stuff outside that small basket? A classic example: If the price of romaine lettuce skyrockets, today's inflation measure assumes your salads get much more expensive, and your cost-of-living would go up. In the real world, though, maybe we'd just buy more iceberg lettuce. Maybe we'd stop eating salad, altogether.

The simple idea is that Washington measures inflation too generously. It assumes that people don't substitute similar goods when one thing gets too expensive.

The solution is to build a "chain" between each month's basket of goods to provide "a more realistic measure of inflation," Marc Goldwein explained. This "chained" index would offer a more accurate picture of what consumers are actually buying. But we're not just changing measures for measurement's sake. It would also save between $200 billion and $300 billion over the next decade by very, very slowly cutting Social Security and raising taxes.

It's easy to see why a "more accurate" (i.e.: slower-growing) inflation measure would cut Social Security. Social Security recipients get a first check based on their life earnings. That check grows with inflation. Slower-rising inflation adjustments means slower-rising Social Security payments.

What does CPI have to do with tax revenue? Inflation touches wages, too: $50,000 in 1980 is $140,000 today. Nobody wants to tax middle-class families like they make 3X their income. So, as wages rise, the IRS raises tax brackets to keep up. But under a slower-growing measure of inflation, the IRS would keep up less. Some households would pass into higher brackets than they otherwise would. Their top dollars would be taxed at higher rates. Revenue would rise. Deficits would fall.

All told, chaining CPI would cut Social Security spending by about $112 billion in the next decade and taxes would go up by about $90 billion. The compounded savings, including on interest payments, would be about $300 billion. They would look like this:

A GOOD IDEA?

Putting a chain on CPI has attracted support from Republicans who'd like to cut Social Security, Democrats who want to appear receptive to entitlement fixes, and moderates everywhere who argue that our current inflation measure is too generous.

They all might be right.

But while some have argued that "chained CPI" isn't a spending cut or tax increase, it's clear that the outcome of chained CPI is, unavoidably, spending cuts and tax increases. It cuts Social Security the most for the people who live the longest (they do tend to be richer) and it raises taxes moderately on workers who earn a wage that is close to a new tax bracket. There is a real risk that low-income seniors who live long lives could see smaller Social Security checks than they would today. But if this moderate and slow-moving deficit saver is the linchpin to an otherwise fair deal, Republicans and Democrats can do much worse than adopting a chained CPI.

The unemployment rate in November fell to 7.7%, the lowest since the last full month of President George W. Bush's presidency. The economy added 146,000 jobs (97,000 if you count revisions to the last few months). That's basically equal to our 2012 average of 157,000 net new jobs per month ... which is basically equal to our 2011 average of 153,000 net new jobs per month.

Yes, this was a pretty average jobs report. But if the numbers hold -- in light of Hurricane Sandy and the fiscal cliff and trouble with manufacturing in response to iffy global demand -- this pretty-average report amounts to better-than-average news for the economy heading into 2013.

Beneath the roiling month-to-month numbers, the last two years have seen static, calm, and steady growth. The economy expanded by 1.8% annually for 24 months while we gained 150,000 jobs per month across eight seasons.

The Bureau of Labor Statistics produces this report from two separate surveys. The jobs-added figure comes from a survey of firms. The unemployment rate comes from a survey of households. While today's jobs-added figure was a pleasant surprise, the unemployment rate fell for a more disturbing reason. Half a million people left the workforce.

Why is our workforce shrinking even as the number of workers are growing? That sounds like a paradox. It's more like a simple math problem. America is getting older. More people are retiring as a share of the economy, because the boomer generation is bigger than the younger Generation X. Add to that the long-term trend of men working less -- read Jonathan Rauch on the decline the middle-class man -- and the continued weakness of the economy that might be discouraging some able-bodied men and women, and you've got your answer.

"Gangnam Style" is the most popular YouTube video of all-time. But its nearly 900 million views have made its artist, the K-pop sensation Psy, just $870,000, according to AV Club.

But don't cry for Psy. His single still managed to make more than $8 million in international downloads, endorsements, and commercials. This is the graph that tells you how a global dance sensation makes $8 million:

Clearly, the economics of superstars is alive and well in music. But just as it has for journalism, the Internet's effect on music has been to expand its reach far beyond its capacity to expand its revenue. The fact that a billion listens isn't even worth a million dollars tells two clear stories: Music has never been better for the people who listen to it -- and it's hardly been worse for the people who make it.

Introducing "The Obvious Bill"

Real talk: There ought to be no grand bargain deadline, because there ought to be no fiscal cliff, because there ought to be no debt ceiling. In some alternative universe where "ought to" is reality, Congress doesn't hold votes on its right to spend money; doesn't set economic time-bombs; and doesn't bring the country to the brink of recession every 18 months.

Back in this universe, Congress does have a debt limit, which lawmakers did use to build a fiscal fjord, which Washington is using now to force a grand bargain on the deficit before the New Year. The official media narrative, elegantly captured by Jon Chait, holds that Congress is hopelessly divided on everything, and the only way we'll move forward is through disaster or grand bargain.

But that's wrong. Congress is not hopelessly divided over everything, and there is a path forward that is neither disastrous nor grand bargainish. It requires one simple thing: That Democrats and Republicans vote on the parts of the "grand bargain" that they already agree with.

Democratic and Republican interests overlap in three key areas.

-- First, just about everybody wants to keep the Bush/Obama tax cuts where they are for income up to about $250,000.

-- Second, majorities in both parties want to avoid the sharp cuts to defense, Medicare reimbursements, and non-defense spending in 2013.

-- Third, lots of people want to keep talking about a grand bargain, whether it's to appear serious to donors, constituents, and the media, or because they really do care about our long-term finances.

So here's an obvious bill. Let's call it ... The Obvious Bill. It solves the fiscal cliff without creating another cliff simply by ... passing the parts of the grand bargain everybody wants to pass, already. The Obvious Bill would extend tax rates established by Bush and extended by Obama. It would delay cuts to the budget established by the Budget Control Act in 2013. It would also extend current policy on measures like the doc fix. That's it. The fiscal cliff shrinks by hundreds of billions of dollars immediately and lawmakers can keep working on a grand bargain if they like.

I can anticipate two, but by no means all, of the objections. (1) It's not a perfect solution to the fiscal cliff and (2) It destroys leverage on both sides, but especially for the Republicans.

Both valid criticisms. The Obvious Bill isn't the perfect bill. It doesn't leave us with a much more efficient tax code or the best projected 2013 growth. It's also a much worse deal that both sides are hoping for. Republicans want to exchange a tax hike for promises of spending cuts, especially to entitlements; Democrats want to raise taxes by hundreds of billions more over ten years and to extend stimulus.

But here's the thing about the Obvious Bill: There no rule that says it has to be the last budget bill of the season, or even of the month. It's simply the bill that turns the fiscal cliff into a fiscal molehill and gives both sides time to work on a second deal to cut spending and reform entitlements in exchange for more 2013 stimulus and/or higher taxes.

Republicans would be giving up quite a bit by allowing taxes to rise without getting spending cuts in return. But there are two reasons why they might just bite this bullet. The first is the debt ceiling, which still needs to be dealt with. Republicans and Democrats could still make a deal in 2013 where Republicans negotiate for spending cuts and entitlement reform in the future in exchange for a little stimulus and a permanently higher debt ceiling.

Second, taxes are going up no matter what. The question is: By how much? Letting the Bush tax cuts expire for the top rate (a) gives Obama significantly less revenue than he asked for in his opening deal and (b) means Republicans don't have to actually vote to raise taxes or directly violate the language of the Norquist Pledge. The tax hike on income over $250K will simply happen when the Bush/Obama rate expire at the beginning of next year.

The Obvious Bill might not happen. In Washington, the obvious rarely does. But what if?

Citigroup announced that it is cutting 4% of its workforce this morning, in what might be the most remarkable incident of concentrated euphemistic corporate jargon I've ever seen:

"Citigroup today announced a series of repositioning actions that will further reduce expenses and improve efficiency across the company while maintaining Citi's unique capabilities to serve clients, especially in the emerging markets. These actions will result in increased business efficiency, streamlined operations and an optimized consumer footprint across geographies." [Bold phrases are my emphasis]

In other words:

"Citigroup today announced [lay offs]. These actions will [save money]."

The lay offs, which will save $1.1 billion annually in spending, are one of the first moves by new CEO Michael Corbat, who stepped in for outgoing chief executive Vikram Pandit two months ago.

Are sports on TV a good deal? Depends.

If you watch sports, millions of pay-TV households who never click on their ESPN channels are subsidizing your habit. If you don't watch sports, you're one of the suckers paying an extra $100 a year for a product you don't consume.

Out-of-control sports TV costs are receiving a lot of attention these days, and much of the press coverage is misleading, miscalculated, or just plain wrong. Let's divide fact from fiction.

A shocking share of your monthly cable bill goes to sports programming.

TRUE. Here's how your cable bill works. You pay $80-ish each month for cable (just talking TV here, not Internet, which is often included in the bill). About $30 are the programming costs -- the wholesale price of all the channels. ESPN gets about $5 per household per month. MTV gets about $0.39.

Half of your cable-TV bill pays for sports channels.

FALSE. Somehow, this stat, or something like it, made its way into headlines and ledes at the Los Angeles Times and Philadelphia Inquirer and Mother Jones and beyond. It's not true.

Your pay-TV bill is $80. Programming costs are $30. Sports programming costs (all of the sports networks combined) are $12, or more if you live in Southern California, as the graph above from the LA Times shows. Twelve dollars divided by $80 isn't 50% of your bill. It's 15%.

How did the newspapers get it wrong? First, they mistook programming costs for the entire cable bill. Big mistake. Second, they relied on analysis by Craig Moffett, who in September calculated that if you include the high costs of sports rights from TNT, USA, NBC, CBS, and ABC, it's clear that "sports easily accounts for more than half of the cost of a Pay TV subscription." But those are networks that practically every pay-TV customer watches, whether or not he/she likes sports. You could say that TNT "Law and Order" fans are subsidizing TNT basketball fans. But it's also the case that TNT basketball fans are keeping the lights on for TNT original dramas. In short: Channels are bundles, too.

It's all cable's fault.

FALSE. When we get mad at the price of a cable bill, we tend to blame the company name at the top of the bill. It's not that simple. Cable companies make deals to carry channels. Channels make deals to carry sports. Big sports leagues, understanding their unique position in a fragmented media market to be a major audience driver, force channels to pay through the nose for new contracts. 

Here are two examples. In September ESPN agreed to pay the NFL 70% more per game to carry Monday Night Football through 2021. Last week, the LA Times reported a possible deal between the Dodgers and Fox that would be worth 20-times more -- twenty! -- than the current contract. Expensive new contracts means higher costs for channels, who pass the costs to the cable providers, who pass the costs to you. That's why deals like these make sports programming a leading source of your steadily rising cable bill, whether or not you watch sports.

Television's bundling model allows runaway price inflation in sports. 

TRUE. If you pay for cable and hate sports, then ... well, gosh, I'm just really sorry. Actually a better word would be grateful. You're subsidizing my ESPN addiction. Thanks.

Seriously, though, you have the worst of two worlds. Channels competing over sports rights bid up the price of programming. The bundle pricing model means you have no choice but to pay what amounts to a mandatory sports tax. Media companies' all-or-nothing deal with cable providers means you have no choice but to pay at least $100 per year for sports you don't plan to watch.

Some awesome tech company will come along and fix everything.

FALSE. Hopefully you see at this point why there is little that Google, or Apple, or Microsoft, or whoever, can do to make watching TV much cheaper. Google can't force ESPN to pay less for the NFL, or force Fox to pay less for the Dodgers. If tried to compete nation-wide with Comcast and Time Warner Cable, it would stuck with the same programming cost inflation crisis that scares TWC ... plus! It would have to spend an extra $200 billion to build a nationwide infrastructure to move live video.

The evolution of TV is probably going to be much more boring. Maybe DISH will decide it won't pay the high costs that ESPN and regional sports networks demand and will become synonymous will "cable for people who hate sports." That way, households in an area served by DISH and Comcast can choose between sports and not-sports, and if more people choose not-sports, then sports networks will necessarily slow their inflation rate to keep from upsetting sports fans who suddenly get stuck with a higher bill. For now, maybe nothing changes. Time Warner Cable has offered cable packages without ESPN and other expensive sports networks to subscribers in the New York area. According to their press office, most of the people who started with cable-lite eventually upgraded to the full cable package, egregious sports programming and all.

The only thing we love more than complaining about the cable bundle is ... the cable bundle.

Ah, December, time for my favorite Gallup survey of the year: Ranking the most- and least-honest professions. Here they are:

There is no such thing as a Universal Theme of Vocational Trust, but there is something at play here, which you might call The Twilight of (Some) Elites. To over-generalize: Un-elected positions of authority dominate the top of the list, especially in medicine. Elected officials and salespeople dominate the second half.

There are a couple ways to read this. First, we trust people we have no choice but to trust. Nurses and doctors and engineers and professors and priests and psychologists aren't merely professionals, they're experts in fields where expertise comes at a high price. Most of those jobs require significant post-secondary education in something the average person doesn't know much about. We trust their honesty partly because we're rarely in a position to prove them wrong.

On the other hand, in professions where consumers or patients are more likely to have strong opinions -- or feel a real sense of agency -- it seems we're more likely to distrust supposed experts. We choose what cars to buy, what ads to look at, what politicians to elect, what stocks to buy, what insurance policy to purchase ... and choosing between competing options forces us to distrust or disparage the choice we don't make. In particular, we don't trust people trying to sell us something because we know that their objective isn't to provide a service, but to make a sale. More broadly, we don't trust people whose job is to compete with other people for our attention and money. Not sure if that says more about us or them.

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The second trend is the "sharing economy" of links on the Web. To a degree that might be unappreciated for people who don't work in journalism, traffic for the vast majority of sites is overwhelmingly dependent on readers sharing our stories: on Facebook; on Twitter; on editorial communities like Reddit and LinkedIn and Hacker News; and on email/chat/dark social. Unless you are one of a handful of destination sites -- the New York Times, the Huffington Post, Yahoo News -- with homepages that push traffic like fire hydrants push water, this social web is your most important source of clicks.

With the advantage of hindsight, it seems The Daily made two fundamental, conceptual errors. First, it built an expensive, subscriber-only newspaper that cost $30 million a year in a weak U.S. economy, in a weak publishing industry, in a troubled News Corp company that is taking its best cross-subsidy for expensive journalism -- its booming TV/movie/video-entertainment business -- and turning it into a separate company, called Fox Group.

The second error is more subtle: The Daily doubled down on the mobile trend to the expense of the sharing trend. The social web is on the Web. The Daily isn't. You can create a web page for a Daily article, but it's cumbersome and renders somewhat awkwardly and isn't ideal for frictionless sharing (i.e.: on most sites, you press a Facebook button and your work is done). News Corp built a populist newspaper away from where the people are. They're on the Web.

Many critiques of The Daily today are saying it failed to carve out a niche and locate an audience. Perhaps. When I subscribed, I found it a good newspaper, with great editors and journalists, that broke interesting stories, and built cool infographics. The trouble is, I didn't want to read it, not because of what it was, but because of where it was: Trapped inside an iPad. Building a $30 million newspaper without significant subsidies is hard to do, no matter where you put it. But it's certainly impossible when you lock it in the app world when traffic on the Internet is all about sharing.

Since 1980, total tax rates have fallen for each income group -- rich, poor, and everybody in the middle. But who got the biggest break?

This fabulous series of charts from the New York Times offers one answer -- and it exactly the group you're expecting. Total tax rates -- that's federal income + payroll + corporate + state/local -- have gone down for poor and rich alike since 1980.

So, we all get a break. But who got the biggest?

Divide the first by the 2010 rate by the 1980 rate, and you get an answer. Taxes fell 5% for the poorest households. They fell about 7% for the typical household. And they fell 14% for the richest households. It is fair to say that between President Carter and President Obama, taxes have fallen by twice as much for the richest families as for the median family.

When it comes to taxes, "fair" is a four-letter word, and one that splits liberals and conservatives. I'd encourage anybody on either side of the debate to go back and study these New York Times graphs to see three points: (1) the richest households pay a growing share of our taxes, because (2) they earn a growing share of national income and (3) the tax code is largely progressive, except for the tippy-top.

______________

*This is true for the mass, mass majority of tax payers. But at the very tippy-top of the income pyramid, it becomes less true. The richest households earn most of their money from capital gains, which are taxed at a lower rate than earned income. In 2009, for example, the average salary of the 400 richest U.S. households was $22 million. Their average capital gains income? $92 million. So that's why the tax code bends back toward regressivity at the very top: We've decided to give investment income a tax break, and the rich happen to earn most of their money from investments.

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Anybody see a trend?

GRAPH: 19 of the 20 fastest-growing cities in 2012 were in China; 19 of the 20 slowest-growing cities were in Europe

If you want to see what economists are talking about when they talk about a "two-speed" world, just look at this graph above, from today's Brookings Global MetroMonitor, which ranks the world's 300 biggest cities by GDP and job growth.

The top 50 fastest-growing cities, by GDP per capita, are practically all in the developing Asian world. The top 18 are in China. The rest are in China, Indonesia (Jakarta), India (Chennai), and Australia (Perth).

Of the world's fastest-shrinking cities, 42 of the bottom 50 were in the EU. The others included Dubai, Adelaide, Australia, and Albuquerque.

Entering next year, both the fastest growing and fastest shrinking cities in the world are in countries with big question marks. China's iffy transition from investment economy to consumption economy has some worried about the regions growth and the global commodity boom that supports resource-rich economies like Australia and Peru. Meanwhile, Europe has managed to prevent a depression by enforcing a managed recession on the entire EU. There is no expectation that Europe will grow more than 0.0% in 2013; meanwhile India's growth has returned to its 2007 lows.

But, as the graph at the top suggests, world markets rely on world-leading Chinese growth, and a clear deceleration in its economy -- even if it turns out to be good for wages, workers, and the China's necessary evolution into a modern consumer economy -- would result in hundreds of slower-growing cities around the world in 2013.

To play you out, here are the top ten/bottom ten cities, according to Brookings (every metro in the top chart is in China) ...

The debt ceiling isn't a weapon of legislative restraint. It's a just another cliff -- a Financial Cliff -- that warps Washington into behaving even more foolishly than normal.

There are countless ways to criticize the debt ceiling -- it's a tax on the majority party; a high-stakes yes-or-yes question; a weird, mandatory hostage crisis -- but they all arrive at the same conclusion, which is that it's a really dumb idea.

The case for the debt ceiling might go something like this. Just as cars need brakes, and Ulysses needed a mast, governments need restraints. The U.S. government's ability to borrow debt has no actual limit. We will probably run deficits, large and small, for every year in the life of the republic, just as we have in our two-and-a-half-century history. But we have installed a ceiling for the purpose of forcing lawmakers to reflect on our debt and consider the tradeoffs of borrowing.

In theory, restraint is a nice idea. In practice, here's how it works out.

The minority party votes against the debt limit, stealing the moment to abuse the majority about its policies -- that's why it's a tax on the majority. Then, the party in power votes in unison to raise the limit, because doing otherwise would scare international markets half to death -- that's why it's a high-stakes yes-or-yes question. And then, a few years later, the roles switch, and the abused party because the abuser -- thus re-staging our weird, mandatory hostage crisis once again.

You can think of the debt ceiling as a Financial Cliff. Without a vote, the U.S. automatically defaults on its debt, sending world markets into ... well, actually we don't know. It's never happened. And it never should. But it almost did last year.

In 2011, a peculiarly intransigent Republican Party demanded major concessions in exchange for not destroying the country, which is a clever move, if you can play it. They played it. And the "solution" to the debt ceiling, a Financial Cliff, was to create a Fiscal Cliff at the end of 2012, which we are now debating replacing with an Entitlement Cliff, or perhaps some other Cliff, to force Congress to make more undesirable decisions, at a later date.

If you're thinking this sounds awfully silly, even for Congress, you're right.

The best solution would be to abolish the debt ceiling forever. The second best idea comes from Tim Geithner, who proposed a cure for this madness in his opening fiscal cliff offer. First, he said, give the president the power to raise the debt ceiling. Second, give a two-thirds majority in Congress the power to override the president's decision.

"This almost completely prevents a debt ceiling crisis ever again, while keeping the ceremonial aspect that people like," Joe Weisenthal writes. "There would still be votes, but they'll mainly serve as a way to let politicians play politics, without putting anything at risk."

Exactly right. Lawmakers love talking restraints and responsibilities and prudence. But the debt ceiling doesn't make Congress look like a mast-bound Ulysses. It makes them look like fools. The debt ceiling is bad Washington theater. Let's make a law that treats it as nothing more.