2011 - %3, January

The GOP's Safety Net Wrecking Crew

| Mon Jan. 24, 2011 7:00 AM EST

The new Republican majority, led by Reps. John Boehner (R-Ohio) and Eric Cantor (R-Va.), rode into the House of Representatives this year promising to slash $100 billion from the federal budget in a year's time. At the start, that promise was woefully short on details. This past week, however, the Republican Study Committee (RSC), a conservative bloc of House lawmakers, shed some light on the GOP's plans when it released a report outlining potential cuts. A fiscal expert at the Center on Budget and Policy Priorities (CBPP) analyzed the RSC's plans—and found some grisly details.

But first, let's start with House Speaker Boehner's plan, which calls for cuts of 21 percent to non-security discretionary programs (meaning defense spending and entitlements like Medicare and Social Security go untouched). Boehner's plan would slice $105 billion off President Obama's $483 billion 2011 budget proposal. As I previously reported, Boehner's proposal, outlined in the GOP's "Pledge to America," would hit social services hard, cutting $8.7 billion from K-12 education, $6.9 billion from local- and state-run housing programs, and $1.6 billion from food stamps for pregnant women, infants, and at-risk children. Or as CBPP budget guru Jim Horney put it, "Boehner’s proposal would represent the deepest annual cut in funding for these programs in recent U.S. history. It would remove substantial purchasing power from a weak economy, thereby costing hundreds of thousands of jobs and raising risks of a double-dip recession."

The RSC's plan, however, cuts far deeper, Horney found. It would slash 42 percent from those same non-security discretionary programs, if applied evenly across all programs. That's double what John Boehner wants. That would mean nearly halving funding for veterans' health care and K-12 education, the Federal Bureau of Investigation and Drug Enforcement Agency, Centers for Disease Control and Prevention and National Institutes of Health, among many more.

Now, that doesn't necessarily mean the same 42-percent cut would be applied to all programs. Funding for certain agencies and programs could be protected entirely, while others could be more or less eviscerated. Nonetheless, it's hard to understate how drastic the RSC's cuts would be. Here is Horney's take:

In essence, the RSC proposal would eviscerate the vital services and benefits that the federal government provides and that improve the living standards and quality of life for millions of Americans from New York to California, Maine to Texas.

During the recent election, many voters supported calls for less government spending. But they were told that policymakers could reach this goal largely by eliminating earmarks and obvious "Waste, fraud, and abuse." I doubt many Americans thought lawmakers would interpret the election as a mandate to cut a vast array of crucial programs by nearly half. I also doubt they would be happy with such an outcome.

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We're Still at War: Photo of the Day for January 24, 2011

Mon Jan. 24, 2011 6:30 AM EST

U.S. Army Chief Warrant Officer 3 Clifford Rakes shuts down his aircraft's systems following a mission near Baghdad, Jan. 12, 2011. Rakes is a Black Hawk pilot assigned to the 1st Infantry Division's Company A, 2nd General Support Aviation Battalion, 1st Aviation Regiment, Enhanced Combat Aviation Brigade. Rakes and other Black Hawk crews transport military and civilian VIPs between U.S. bases around Iraq. U.S. Army photo by Spc. Roland Hale

Is Fake Leather Really More Eco-Friendly Than Real?

| Mon Jan. 24, 2011 6:30 AM EST

I caught an NPR segment a few weeks ago that raised the question of whether it's possible to have "eco-conscious fur." The story centers on a project down in Louisiana where they're turning the pelts of nutria—an invasive, semiaquatic mammal that looks rather rat-like—into high-end fashion pieces. (It's a subject we've covered in a previous Econundrum as well.) The segment got me thinking about whether fur, or for that matter, any other animal-derived material used for clothing, is inherently a bad environmental choice.

I can't say I own many articles of clothing that involve fur, real or fake, but I've been opting for so-called "vegan leather" (or, if you prefer, "pleather") for years, sort of assuming that it was the more conscientious choice. My boots, in addition to involving zero dead animals, were also quite a lot cheaper than the real deal. But you get what you pay for, and at barely a year old, the soles are already detaching from the fabric, and the toe is scuffed irreparably. My cheap knock-offs might not have been a great investment—whereas a good set of real leather boots can last a decade, if not longer (sorry, PETA). My kickers are likely destined for the landfill in the foreseeable future.

A Visit To Quantico

| Sun Jan. 23, 2011 6:06 PM EST

Earlier today Jane Hamsher and David House visited the Quantico Marine Corps Base to visit accused WikiLeaks leaker Bradley Manning and deliver a petition protesting the conditions of his confinement. David House is on Quantico's visitation list, and both he and Jane have been there before. Before today's visit, Jane called the base to let them know she was coming. Apparently that was a mistake. Here are excerpts from her live Twitter feed of the visit:

At Quantico w @DavidMHouse to deliver 42,000 sigs 4 Bradley Maning to brig. Holding us at gate, never happened before

Demanding my social security number before they'll let me on Quantico base, but won't say why. Never happened before.

Quantico guards say I'll be arrested if I go to McDonalds while @davidmhouse visits Manning. "That privilege has been withdrawn."

Now been here at Quantico gate for 30 min. Will not let us leave base, holding us.

Gunny Foster Military Police #1715 writing me ticket for not hving latest insurance card. Sorry to 42,000 people who signed Manning petition

Can't leave base, can't go 2 brig, can't get my driver's license, Gunt Foster threatening 2 arrest us. Haven't done a thing.

The guards absolutely knew we were coming @auerfeld & told to harass us. "This was what I was told to do" said Gunny Foster.

We've been coming 2 Quantico 4 months @chrisvcb, @DavidMHouse has official permission 2 visit Bradley Manning,

Gunny Foster towing my car bc they won't accept my electronic proof of insurance, demanding paper.

Forcing @DavidMHouse 2 go 2 court. Wouldn't give ticket, gave him a summons 2 appear in court.

Military police searching & impounding my car. Won't let @DavidMHouse on 2 see Bradley Manning, won't say why.

It's 28 degrees, forcing us 2 stand outside.

Still holding us, my car on tow truck but Quantico guards still won't let us leave.

For whatever reason, Quantico Marine brass don't want Manning 2 have visitor now. Isolation & enforcement of solitary confinement complete.

Marines now say House can't walk to see [Manning] but can go off base, get a cab & come back on. But visitation over at 3pm.

Tow truck driver says we also have to pay 4 time he had 2 wait for Quantico marines 2 release us: $300.

Quantico Marine brass showed up PERSONALLY 2 make sure @DavidMHouse never got 2 see Manning. Next visiting period: next week.

Quantico top brass made sure we were held until visiting hours were over & impossible 4 @DavidMHouse 2 see Manning. Message clear.

They have let me on Quantico base every time @dtfrannyb, & I went where they told me to & complied w all requests. Never been a problem

A "statement of events" written afterward is here. This doesn't appear to be a shining moment for either our government or our military forces.

Organizing the Middle Class

| Sun Jan. 23, 2011 4:04 PM EST

Matt Yglesias has a complaint:

I think labor-friendly writers sometimes don’t do the best possible job of distinguishing between unions qua social and political institutions and collective bargaining as a labor market institution. Something like EFCA is the only way to revive collective bargaining as a major force in private sector labor markets. But I don’t think it’s correct to see EFCA → union density as the only conceivable form of politically influential mass membership organization. 

Actually, I'm pretty sure that most labor-friendly writers are keenly aware of this distinction. But put that aside. It's obviously true that organized labor isn't the only conceivable form of politically influential mass membership organization. The question is whether it's the only conceivable form of politically influential mass membership organization dedicated to the economic concerns of the middle class. Right now I'd say it is for the simple reason that no one seems able to conceive of an alternative. But I sure wish someone would.

The View From My Picture Frame

| Sun Jan. 23, 2011 2:52 PM EST

Andrew Sullivan has great success getting people to figure out the location of random photos taken around the world, so I'm going to try it too. Except this is a photo of a painting. It's signed by someone named J. Gaston, and pretty obviously seems to be a Paris street scene. But is it? And which street? We're giving this to my sister-in-law in a couple of weeks, and I thought it would be nice if I could tell her what it's a painting of. Anyone know?

UPDATE: It's the Porte Saint Martin on St. Martin Boulevard in Paris. Thanks to Rjerrard and Skeptc for the ID. Pictures here and here.

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The Problem With Damage Caps

| Sun Jan. 23, 2011 2:19 PM EST

Few things demonstrate the deliberate bad faith of conservative arguments for tort reform more than their support of damage caps in medical malpractice suits. Their claim is that caps reduce "frivolous lawsuits," but of course they do nothing of the sort. Almost by definition, frivolous lawsuits are those filed for small dollar claims in hopes that insurance companies will figure it's cheaper to settle than to fight. Big dollar lawsuits that exceed damage caps are the exclusive domain of serious injury — the precise opposite of frivolous.

The LA Times has a good piece today about the problem with medmal caps in California, which were set at $250,000 for non-economic damages in 1975 and haven't been changed since. This means that in 1975 dollars, today's caps are set at about $60,000. The problem is that this number is so low that lawyers are reluctant to take anything but the most slam dunk cases. And in the case of Olivia Cull, who died due to an "incident" at Mattel Children's Hospital UCLA two years ago, that turned into an insurmountable obstacle because a lawsuit was the only way for her parents to find out what really happened:

Distraught, the Culls sought answers from their daughter's doctors....When they demanded answers from hospital officials, the Culls said, they were told to review the records and, if they found a problem, to contact a lawyer.....As they sifted through records, they wondered how others in similar situations made sense of it all. "It's confusing," Joy Cull said...To get more information, the Culls decided to sue the hospital. But like others, they had trouble finding a lawyer willing to take the case. Given the state cap on damages, they said, many lawyers did not consider their case worth pursuing.

....In July 2009, weeks after first seeking counsel, the Culls filed a wrongful death lawsuit after lawyer Jin Lew at Los Angeles-based Michels & Watkins agreed to take the case pro bono....The lawyers found that Olivia's medical records were incomplete, the Culls said, and filed more requests until the hospital supplied hundreds of additional pages.

In addition to the lawsuit, the Culls filed a complaint with Los Angeles County health officials that triggered an investigation by the state Department of Public Health. In February, state investigators reported that a postdoctoral fellow who treated Olivia removed her catheters without a doctor's supervision. Investigators also found that a second fellow who treated Olivia had not been cleared to treat patients.

Imagine that. The records were incomplete until a lawyer forced the hospital to cough up the whole file. A pro bono lawyer, because a case with maximum damages of $250,000 simply isn't worth the number of hours it takes to pursue it.

Medical malpractice cases are complex and expensive. Hospitals won't voluntarily admit to mistakes, and they won't voluntarily make their full records available unless they're forced to. They'll especially not do this if they know perfectly well that damage caps make it vanishingly unlikely that they'll have to deal with anyone but distraught family members who have no idea how to work the system.

A $250,000 cap is plenty high for storefront lawyers filing frivolous lawsuits. The only things it prevents are real lawsuits over serious malpractice, like the one in the Culls' case. In the end, they got their $250,000 settlement, which they're using to fund scholarships in their daughter's memory, and the hospital agreed to change its procedures. But it almost didn't happen thanks to California's antiquated damage cap law.

POSTSCRIPT: And just to address the obvious questions: No, there's been no explosion in medical malpractice suits over the past 20 years. Nor has there been an explosion in payouts. Nor are medical malpractice suits a major component of rising healthcare costs. Medmal reform is a good idea, but mainly to make it fairer. A reformed system that actually worked properly would cut down on frivolous lawsuits but would probably increase the number of legitimate complaints that never see the light of day under current rules. More here.

Chart of the Day: Financial Assets

| Sun Jan. 23, 2011 1:22 AM EST

The Wall Street Journal reports:

Over the two years ending September 2010, Americans withdrew a net $311 billion — or about 1.4% of their disposable income — from their savings and investment accounts, according to the Federal Reserve. That’s a sharp divergence from the previous 57 years, during which they never made a net quarterly withdrawal. Rather, they added an average of 12% of disposable income to their holdings of financial assets — including bank accounts, money-market funds, stocks, bonds and other investments — each year.

There were no net withdrawals during the 2001 recession. Nor the 1991 recession or the 1981 recession. Nor during the oil shock recessions of the 70s. Not during any recessions until now. It's just another way in which the the 2008-09 recession has been the most damaging to household finances since World War II.

Housekeeping Note

| Sat Jan. 22, 2011 10:56 PM EST

Just to clear up a couple of things from the previous post:

  • No, I don't think private sector unions are going to make a comeback. I'm not delusional.
  • No, I don't think the middle class wage stagnation of the past few decades is due solely to the demise of unions. I do, however, think that economists underrate this because they focus too much of their attention on the pure effect of unions on wages and too little on the broader influence of (a) unions on politics, (b) politics on economic and financial institutions, and (c) economic and financial institutions on the distribution of wages (and everything else, for that matter).

That is all. 

Power, Baby, Power

| Sat Jan. 22, 2011 8:34 PM EST

Tim Lee says that American liberalism has incorporated libertarian critiques at a striking rate over the past few decades:

Libertarians have had a pretty impressive winning streak in recent decades, especially on economic policy. Income tax rates are way down. Numerous industries have been deregulated. Most price controls have been abandoned. Competitive labor markets have steadily displaced top-down collective bargaining. Trade has been steadily liberalized....This isn’t to say there are no longer disagreements about economic policy; clearly there are. But what’s striking is that the left’s smartest intellectuals and policy advocates now largely make their arguments from libertarians’ intellectual turf.

He's right! And there are both benefits and drawbacks to this. Still, Will Wilkinson points out that liberals and libertarians remain pretty far apart. So far apart, he says, that most liberals won't even accept this third-best not-even-very-libertarian proposition:

It’s best to just maximize growth rates, pre-tax distribution be damned, and then fund wicked-good social insurance with huge revenues from an optimal tax scheme.

Will is right too! I don't accept this. I think there are two big problems here.

First, it contains an implicit conviction that libertarian notions of tax and regulatory structures will maximize growth rates. This is practically an article of faith on the right, but there's virtually no empirical evidence to support it. As it happens, I'd argue that my preferred brand of the modern mixed economy is, on the whole, probably more efficient than a stripped down libertarian state, even one that includes lots of centrally-directed income redistribution. But not by much. Personally, I'd be pretty happy if both sides accepted the notion that within a fairly wide range of modern capitalist systems — from Sweden to the U.S., say — overall growth rates change very little. For the most part, we're really arguing about other things.

Second, I suspect there's no feasible path to Will's state of the world. The problem is that a system that generates enormous income inequality also generates enormous power inequality — and if corporations and the rich are allowed to amass huge amounts of economic power, they'll always use that power to keep their own tax rates low. It's nearly impossible to create a high-tax/high-service state if your starting point is a near oligarchy where the rich control the levers of political power.

I am, fundamentally, old fashioned about this stuff: I think of the world as largely a set of competing power centers. Economics matters, but power matters at least as much, and I think that students of political economy these days spend way too much time on the economy and way too little time on the political. This explains, for example, why I regret the demise of private sector labor unions. It's not because I don't recognize their many pathologies, or even the fact that sometimes they stand in the way of economic efficiency. I'm all in favor of trying to regulate the worst aspects of this. But large corporations have their pathologies too, and those pathologies are far worse because there's no longer any effective countervailing power to fight them. Unions used to provide that power. Today nobody does.

So when Tim Lee writes that "Competitive labor markets have steadily displaced top-down collective bargaining," I just have to shake my head. Competitive for whom? For the upper middle class, labor markets are fairly competitive, but then, they always have been. They never needed collective bargaining to begin with. For everyone else, though, employers have been steadily gaining at their expense for decades. Your average middle class worker has very little real bargaining power anymore, and this isn't due to chance or to fundamental changes in the economy. (You can organize the service sector just as effectively as the manufacturing sector as long as the law gives you the power to organize effectively in the first place.) Rather, it's due to a long series of deliberate policy choices that we've made over the past 40 years.

It's worth noting, by the way, that corporations and the rich know this perfectly well, even if lots of liberals have forgotten it. They know exactly what the biggest threat to their wealth is, and it's not high tax rates. This is why the steady erosion of labor rights has been, by far, their single biggest obsession since the end of World War II. Not taxes, unions. If, right now, you were to offer corporations and the rich a choice between (a) passage of EFCA or (b) a return to Clinton-era tax rates on high incomes, they wouldn't even blink. If you put a gun to their head and they had to choose between one or the other, they'd pay the higher taxes without a peep. That's because, on the level of raw power, they know how the world works.