Kevin Drum - August 2010

The Wall Street Journal Editorial Page Outdoes Itself

| Mon Aug. 9, 2010 9:55 PM PDT

In the Wall Street Journal today, a guy named Michael Fleischer has an op-ed making the entirely non-original point that when his company pays someone, say, $59,000 per year, that person actually takes home less than that (taxes, you see) while his total compensation costs are higher than that. This, of course, is not news. It's what's known to every HR person in the country as the "burdened cost" of an employee, and it's always higher than the number on the offer letter. As a rule of thumb for middle-income employees, burdened cost is usually about 50% higher than nominal salary.

For some reason, Fleischer was trying to blame his unwillingness to hire new people on all this extra cost, even though there's nothing new about it. He also complained that someone has (apparently) held a gun to his head and forced him to provide health insurance for his employees. And finally, for reasons that are obscure, he blamed next year's increase in his health insurance bill on Barack Obama. "A life in business is filled with uncertainties," he wrote, "but I can be quite sure that every time I hire someone my obligations to the government go up. From where I sit, the government's message is unmistakable: Creating a new job carries a punishing price."

It was all very peculiar, but not really worth commenting on. It's the Journal, after all. What do you expect? But guess what? It turns out that Michael Fleischer isn't just some random small company president. He's Ari Fleischer's brother. You know, the Ari Fleischer who was George Bush's former press secretary. You'd think even the Journal might think that worth pointing out. And there's more! Michael, thanks to his White House connections, was one of the squadron of free market evangelizers who parachuted into Baghdad to privatize Iraqi industry after the war. We all know how well that went, which is probably what qualifies him to write op-eds about creeping Obama-ism for the Wall Street Journal.

But wait! There's even yet more! Via John Cole, here's a comment from a reader over at Outside the Beltway about Fleischer's management prowess at Bogen Communications:

The fact is that if Mr. Fleisher’s company has to buy an extra box of paper clips it will cause them to go belly up. He’s in no position to hire anyone regardless of tax policy.

The reason Mr. Fleischer’s company isn’t hiring has nothing to do with taxes or the policies of any administration. It’s because his business has been in decline for a decade. As the CEO, that decline is his fault. All his complaining about taxes and benefits is just a smokescreen for his own incompetence.

The world changed around them a decade ago and they failed to adapt. In 2000, their annual sales were 66 million dollars with cash on hand of 12 million. By 2003, sales were down to 55 million and cash was down to 6 million. That was before the financial crisis and under the allegedly pro business policies of the previous administration. In 2009, sales were down to 44 million and cash was down to 2 million. They managed to lose 17 million dollars that year and got a carry back refund of some 5 million dollar. Mr. Fleischer should spend less time complaining about taxes and more time thinking about how he can correct 10 years of mismanagement.

Don’t take my word for it, read the balance sheets yourself. http://www.bogen.com/aboutus/financials/#historical

This is quite the trifecta for the Journal. And, yes, it's not nice to be mocking poor Michael. Still, a guy with Bush White House connections who's managed to screw up both privatization in Iraq and management of his own company during the most business friendly administration in recent memory — well, that's the kind of guy I think deserves real estate on the Journal op-ed page. I'm glad the editors agree.

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Converting Digital Photos Into Tea

| Mon Aug. 9, 2010 5:43 PM PDT

Over on the right, Kiera Butler asks "Are email attachments bad for the environment?" That seemed easy: no. Next question?

But Kiera says yes!

According to Matthew Yeager, a data storage expert who works for the UK data storage company Computacenter, emails — especially those with attachments — still use energy and create greenhouse gas emissions, even if you don't print them. Last month, Yeager told the BBC that sending an email attachment of 4.7 megabytes—the equivalent of about 4 photos taken on a point-and-shoot digital camera — creates as much greenhouse gas as boiling your tea kettle 17.5 times. I called Yeager to find out the whole story.

Sadly, Yeager didn't give her the whole story. Over at this blog, however, he credits this figure to a "Life-cycle analysis carried out by [Mark] Mills of Digital Power Group, translated into kettle boilings with help from the Energy Savings Trust [UK]." I tried emailing DPG to get their take on this, but no dice. I haven't heard back.

But the more I thought about, the more sense it made anyway. Here's a wild-ass guess at the arithmetic:

  • Let's figure the average email attachment is sent to ten people and therefore saved ten times. So the total storage used is 47 megabytes, or .047 gigabytes.
  • After surfing around the web, I'd guess that the average power consumption for a storage server is about .2 watts per gigabyte. Big server farms like Google's use less, your home PC uses more. Older systems use more energy than newer systems. But .2 watts/GB probably isn't horribly far off.
  • So the power requirement for .047 GB of attachments is .0094 watts.
  • How long are attachments retained? That's all over the map. Some are deleted instantly, some are saved for a few months, others sit around forever. It all depends on how you (or your corporation) manage email and how it's backed up. At a guess, let's say that attachments end up getting saved an average of 3 years.
  • That's 26,000 hours, so the total energy consumption of our attachments comes to about 247 watt-hours.
  • According to these guys, it takes an electric kettle about 25 watt-hours to boil a cup of water.

So I come up with about 10 kettles, not 17.5. But then again, I didn't take into account the energy it takes to build and ship the storage servers in the first place. What's more, when you're just spitballing like this a difference of 2x isn't bad. Basically, it shows that the energy consumption of a single email with a few attachments really does add up. Thrilling news, isn't it?

And one more thing: one of the best arguments for a carbon tax of some kind is that we could stop doing ridiculous exercises like this. The energy externalities would be automatically included in the cost of everything we buy or do, so we wouldn't have to worry about trying to figure out the most eco-friendly alternative for everything. Wouldn't that be great?

The Bonfire of Public Opinion

| Mon Aug. 9, 2010 11:40 AM PDT

The dream never dies:

Senate Republicans are planning a new push for a balanced budget amendment to the Constitution when lawmakers return to Washington after the August recess.

....“In the last week there’s been a lot of movement in terms of Republican senators saying we need to press this issue,” said a Senate GOP aide. The amendment would bar the federal government from spending more than it collects in revenues each year. It would also require a two-thirds majority vote in each chamber to raise taxes.

Put aside the fact that this is a spectacularly stupid idea that could only be supported by economic illiterates. That hardly matters, because the cosponsors admit they have no chance of passing it anyway. They just want some publicity.

Which is fine. That's what politics is all about. But I've got two questions. First, even if it's a publicity stunt, the press should give it coverage only if the sponsors are willing to propose an actual balanced budget to go along with it. Let's see the cuts, boys. If they aren't willing to go even that far, they should be ignored.

Second, why don't Democrats do this kind of thing more often? Republicans, I think, tend to be so-so at long-term strategy but really good at lobbing short term tactical hand grenades. So we get the New Black Panthers one week, followed by the Ground Zero mosque and Shirley Sherrod and birthright citizenship and Michelle's vacation in France and now a balanced budget amendment. All of these things eat up oxygen and keep Democrats off balance, and aside from the fact that they're really destructive to civil society they're probably pretty good for Republican electoral chances. So how come Democrats don't do more of this kind of thing? It would be nice to think that we just refuse to take the low road the way Republicans do, but I kinda doubt that. Democratic consultants can sling smears and fears with the best of them when they have to.

So what's the deal? Aren't there plenty of bullshit memes available for liberals to throw onto the bonfire of public opinion? Or have I just missed them? What's up?

Marriage Is Not a Zero Sum Game

| Mon Aug. 9, 2010 10:25 AM PDT

Last night I tweeted this:

Willing to bet Ross had to spend hours painfully crafting paragraphs 6 & 7 of this column. http://ow.ly/2mLhS Obviously tortured over this.

And just what are paragraphs six and seven of Ross Douthat's column today? They're an explanation of the "sexual ideal" he believes we're holding up when we ban gay unions and allow only traditional marriage:

This ideal holds up the commitment to lifelong fidelity and support by two sexually different human beings — a commitment that involves the mutual surrender, arguably, of their reproductive self-interest — as a uniquely admirable kind of relationship. It holds up the domestic life that can be created only by such unions, in which children grow up in intimate contact with both of their biological parents, as a uniquely admirable approach to child-rearing. And recognizing the difficulty of achieving these goals, it surrounds wedlock with a distinctive set of rituals, sanctions and taboos.

The point of this ideal is not that other relationships have no value, or that only nuclear families can rear children successfully. Rather, it’s that lifelong heterosexual monogamy at its best can offer something distinctive and remarkable — a microcosm of civilization, and an organic connection between human generations — that makes it worthy of distinctive recognition and support.

I think you can sometimes tell if someone really believes something by how easily the arguments come, and these paragraphs pretty obviously didn't come easily. Why are hetero marriages "uniquely admirable"? Why is the hetero version of domestic life superior? Why is lifelong heterosexual monogamy a microcosm of civilization? These questions aren't answered because, really, they can't be answered. Ross obviously wants to construct a secular argument here, and he doesn't want to pretend that gays are evil, or destructive, or unable to create good families. So what's left? A tortured attempt to pick and choose words that seem to say something but really don't.

We can recognize and honor same-sex marriages without changing even slightly the recognition and honor we give to hetero marriages. This is not a zero sum game. We all end up better off when we allow everyone to form stable, lifelong marriages that are honored and cherished. This is, quite simply, a very, very positive sum game on a whole bunch of different levels. Conservatives have no trouble understanding this when the human system under discussion is the free market. So why so much trouble when the human system under discussion is the structure of family life?

Pensions and the Public

| Mon Aug. 9, 2010 9:59 AM PDT

One of the conservative causes du jour is the parlous state of public employee pensions these days. And there's no question that this really is a problem. Thanks to years of overoptimistic economic projections and the habit of politicians to prefer future cost increases to current cost increases, public pension funds are pretty seriously underfunded right now. That means taxpayers are going to have to come up with many billions of additional dollars to fund pensions at the levels that have been promised to public workers.

Now, there are a few things to say about this. First, the really sky high pensions you hear horror stories about tend to be limited to public safety workers: police, fire, sheriff's deputies, etc. (Here in California, the really egregious salary/pension issue is with state prison guards, for reasons I won't bore you with, but for the most part we're talking about police and fire workers.) The reason this matters isn't that money spent on public safety "doesn't count," but that most people — including most conservatives — are OK with paying generously in order to maintain high public safety standards. So it's worth keeping in mind that this is largely what we're talking about.

Other public workers often get good but not great pensions. But even at that, they mostly get these pensions in lieu of Social Security, and they get them to make up for generally lower pay than in the private sector. There's some question about whether public workers continue to be paid less than comparable private sector workers, but in the past, when these pension funds were set up, there's not much question that they were.

Beyond that, though, Jon Cohn raises a key point about the role of public sector unions in bargaining for decent pensions for its workers:

To what extent is the problem that the retirement benefits for unionized public sector workers have become too generous? And to what extent is the problem that retirement benefits for everybody else have become too stingy?

I would suggest it's more the latter than the former. The promise of stable retirement — one not overly dependent on the ups and downs of the stock market — used to be part of the social contract. If you got an education and worked a steady job, then you got to live out the rest of your life comfortably. You might not be rich, but you wouldn't be poor, either.

Unions, whatever their flaws, have delivered on that for their members. (In theory, retirement was supposed to rest on a "three-legged stool" of Social Security, pensions, and private benefits.) But unions have not been able to secure similar benefits for everybody else. That's why the gap exists, although perhaps not for long.

I should confess here that I'm not a big fan of public employee unions. On my own personal scale of sympathy, I strongly support private sector service unions, I moderately support private sector industrial unions, and I only barely support public sector unions. So no one should expect me to go to the mattresses for public sector benefits. Still, Jon is right: one of the favorite tactics of conservatives is to set the middle class at war with itself. It's sort of the mirror image of corporate compensation committees, which keep CEO pay forever rising because no one wants their CEO to be paid less than average. With middle-income workers, by contrast, the CEO class exploits jealousy toward better compensated unionized workers in order to ratchet things down. The grocery clerks don't want to accept an insurance copay? Well, I have an insurance copay, so why shouldn't they? The truckers don't want to switch their pensions to a 401(k)? Well, I have a 401(k), so why shouldn't they? Etc., etc., ever more disheartening etc.

This is a tactic that works pretty well. As union density has shriveled in the private sector, workers don't really aspire anymore to getting a "good union job," as they often did in the past. It's not even on their radar. Instead, they see a small and privileged group of workers who are better off than them even though they don't work any harder, and instead of wondering why their own pay and benefits are so low, they simply become resentful of this coddled class.

Private sector union density has gotten so low that it's not clear how much they can do about this attitude — and the odds of increasing union density more than a point or two seem cosmically slim. So now it's going to be a war of taxpayers against unionized public employees. It won't be hard, especially in lousy economic times, to convince envious clerks and factory workers that these guys need to be brought down a peg or two. It's just human nature. But wouldn't it be better if all these envious clerks and factory workers were instead asking why their pay and benefits haven't kept up with overall economic growth — which, after all, is all that public sector workers have accomplished? I don't know what the future of unions is in America, but for now they're really the only ones who are asking that question and putting some muscle behind it. Until someone else starts doing a better job of it, we still need them.

Iran Sanctions Not Working

| Mon Aug. 9, 2010 8:41 AM PDT

When the UN passed a weak set of sanctions against Iran a couple of months ago, the party line was that what really mattered wasn't the UN sanctions themselves, but the fact that they gave the green light to the U.S. and Europe to impose even tougher sanctions of their own. But Paul Richter of the LA Times reports that these sanctions aren't having much effect either:

Efforts by the United States and its European allies to build a united front to halt Iran's nuclear program are facing increasingly bold resistance from China, Russia, India and Turkey, which are rushing to boost their economies by seizing investment opportunities in defiance of sanctions imposed by the West.

....The U.S. sanctions prohibit petroleum-related sales to Iran, yet China and Turkey have sold huge cargoes of gasoline to Tehran, and Russian officials say they will begin shipping gasoline as well later this month, according to industry officials. The four countries also have signed deals or opened talks on investments worth billions of dollars in Iran's oil and gas fields, petrochemical plants and pipelines.

....Although China's economic ties with Iran have been growing for 15 years, the recent expansion of its business "has been amazing," said a senior European official, who asked to remain unidentified because of the diplomatic sensitivity of the issue.

This is typical of the history of sanctions: they only work if you can get virtually everybody on board with them. And most of the time you can't. Unfortunately, unless you're willing to countenance military strikes, there's not much more we can do. I suppose we can try to fine foreign companies that violate the US/EU sanctions regime, but that's a difficult game on a whole bunch of levels. There are just very few options left that have even a minuscule chance of changing Iran's behavior.

Unless peace suddenly breaks out in the Middle East, of course. I guess there's always that to hope for.

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Plenty of Jobs, Not Enough Workers?

| Sun Aug. 8, 2010 9:33 PM PDT

The Wall Street Journal reports that even with unemployment at 9.5%, employers are having trouble finding workers:

In Bloomington, Ill., machine shop Mechanical Devices can't find the workers it needs to handle a sharp jump in business. Job fairs run by airline Emirates attract fewer applicants in the U.S. than in other countries. Truck-stop operator Pilot Flying J says job postings don't elicit many more applicants than they did when the unemployment rate was below 5%.

Sounds puzzling. Unless you read the rest of the story. The truck stop job, it turns out, pays minimum wage. The airline job requires you to move to Dubai. And the machine shop company pays only $13/hour but requires people with very specific skills. When they set up a ten-week training course of their own, they got plenty of applicants and 16 out of 24 graduated. But apparently we've gotten to the point where blue collar employers are barely willing to invest even ten weeks in training new workers for high-skill entry level positions.

There seems to be a common disconnect in stories like this. On the one hand, as the Journal notes, there really is some evidence that employers are having difficulty finding workers:

Since the economy bottomed out in mid-2009, the number of job openings has risen more than twice as fast as actual hires, a gap that didn't appear until much later in the last recovery....If the job market were working normally — that is, if openings were getting filled as they usually do — the U.S. should have about five million more gainfully employed people than it does, estimates David Altig, research director at the Federal Reserve Bank of Atlanta. That would correspond to an unemployment rate of 6.8%, instead of 9.5%.

....Researchers at the Federal Reserve have estimated that [unemployment] benefits could account for between 0.4 and 1.7 percentage points of the unemployment rate. That doesn't cover the 2.7-percentage-point gap between the current jobless rate and what Mr. Altig's analysis of job openings suggests the rate should be.

But on the other hand, the examples they come up with are pretty lame. So what's up? Even if there's a shortage of high-skill workers, that's a long-term problem, not something caused by the recession. In fact, as the chart accompanying the story shows, the number of high-skill job openings has declined since 2008. At the very least, then, companies should be having an easier time — slightly easier, anyway — filling their open positions unless either (a) they've lowered their wages or (b) high-skill workers are literally retiring en masse. Whatever it is, something doesn't quite add up here.

Quote of the Day: The Future of Schools

| Sun Aug. 8, 2010 9:39 AM PDT

From Berkeley professor Michael O'Hare, promoting the value of online pedagogy:

All the research I’ve seen indicates lectures are really lame devices for retention or any real learning. If the ego boost for the prof of having a roomful of students listening to him for ninety minutes twice a week is important, let’s find a cheaper way to deliver it, maybe with medals or parking spaces.

Or jetpacks. Weren't we supposed to have jetpacks by the time all this primitive face-to-face learning stuff became obsolete?

Is Paul Ryan a Flimflam Man?

| Sat Aug. 7, 2010 4:42 PM PDT

Paul Krugman says Rep. Paul Ryan is a flimflam man because he claims his Roadmap would cut the federal deficit. The problem is that although the CBO scored his spending cuts, they didn't score his tax plan, and when the Tax Policy Center took a look at it they concluded that his plan would reduce taxes a whole bunch, thus creating a considerably larger deficit than Ryan says. Megan McArdle pushes back, explaining that it's the JCT that scores tax plans, not the CBO:

As a matter of fact, Paul Ryan is willing to work on the revenue side. And he has explained this — on his web site, in February, when these complaints were first aired.

....My recollection is also that Paul Ryan couldn't get the JCT committee staff time anyway because they were a wee bit busy doing all the forecasts for health care reform....At any rate, the answer to Paul Krugman's question "Why didn't he ask" is that "He did, and they said no."

While I remain skeptical that anything like the Roadmap is politically possible, Paul Ryan is doing exactly what any sensible congressional sponsor with limited access to CBO time does; he's saying "Well, when this is getting close to being an actual bill, we'll work with the CBO and the JCT to tweak the tax rates in order to provide the amount of revenue we need." This is entirely normal.

Well....OK. Up to a point. But look: Ryan surely has some responsibility to make the tax side of his plan as realistic as possible, especially given his chosen role as toughminded truthteller. And the Tax Policy Center made it pretty clear months ago that he wasn't even close to his revenue goal. It's easy to wave this off as requiring mere "tweaks" to the tax rates, but those tweaks are exactly the place where anyone would quite reasonably be most suspicious of Ryan's willingness to play fair. After all, two or three points of GDP is a lot of money, and a tax skeptic like Ryan is going to have a very hard time making the changes necessary to come up with that kind of dough.

Ryan's Roadmap is 70 pages long and obviously the result of a lot of work. So why not put in a little more work and bring the tax side of the plan into the realm of reason? Is it really that cynical to think it's because he's trying to get credit for being a deficit fighter without having to give up the dramatic tax cuts for the rich he so obviously has his heart set on?

The Latest on Bell

| Sat Aug. 7, 2010 11:42 AM PDT

I've been remiss in keeping you up to speed on the almost comically egregious self-dealing at the city of Bell. The city manager (salary: $800K), asst. city manager (salary: $400K) and police chief (salary: $500K) are gone, but it turns out there's more!

The city's director of administrative services, Lourdes Garcia, was earning $422,707, and the director of general services, Eric Eggena, earned $421,402, officials said. Those amounts include salary, deferred compensation and some benefits, which city officials did not fully detail. In addition, Bell's director of community services, Annette Peretz, earned $273,542, a deputy city engineer earned $247,573, the business development coordinator earned $295,627, a police captain earned $238,075 and a police lieutenant earned $229,992. Their names were not immediately released.

This was all in the midst of rising taxes because, you know, the city was hurting for cash. And what were all these high-paid geniuses doing? Check it out:

The small and cash-strapped city of Bell is on the hook for a $35-million bond debt that voters didn't approve — and that the city can't afford to pay off, The Times has learned.

The debt, which Bell took on three years ago to buy land near the 710 Freeway, is more than twice the size of Bell's annual operating budget. Come November, the city could lose the land to foreclosure. The city's hope to profit from the purchase fell apart in 2008 after city officials failed to conduct basic environmental reviews.

....In October 2007, East Yard Communities for Environmental Justice, a citizens group that tries to blunt the effect of industrial pollution on the 710 corridor, filed suit against the city and the railroad....In July 2008, Los Angeles County Superior Court Judge James C. Chalfant agreed; he scolded Bell officials for ignoring their obligations under the California Environmental Quality Act. "The whole idea of CEQA is that you are supposed to prepare your environmental review before you enter into the lease with the railroad," the judge said. The law "is supposed to be followed for a project. They didn't do anything."

Nice work, overpaid officials! I know the DA is looking into whether the law was broken when the city council and the city managers all agreed to raise each other's salaries to the moon, but if it turns out there's no applicable law I'd be willing to just make one up.