Kevin Drum - February 2011

Manufacturing a Crisis

| Fri Feb. 18, 2011 1:23 PM EST

Regardless of what you think about public sector unions, it's important to understand what's really going on in Wisconsin right now. Were they facing an unsustainable, existential budget crisis when Gov. Scott Walker took office earlier this year? No. Are they facing an unsustainable, existential budget crisis now? No. They're facing a genuine budget problem, but it's one that was made even worse by Walker's own actions:

In English: The governor called a special session of the legislature and signed two business tax breaks and a conservative health-care policy experiment that lowers overall tax revenues (among other things). The new legislation was not offset, and it turned a surplus into a deficit. [See update below.] As Brian Beutler writes, "public workers are being asked to pick up the tab for this agenda."

That's from fellow California native Ezra Klein, and this brings back painful memories. In 2003, pissed off at Gov. Gray Davis over an energy crisis that we later learned had been deliberately manufactured by Enron and wasn't his fault at all, we followed Rep. Darrell Issa down a rabbit hole and recalled Davis. He was, famously, replaced by Arnold Schwarzenegger, who campaigned specifically on a promise to "end the crazy deficit spending." So what did he do once he was in office? He reduced the vehicle license fee, costing the state about $4 billion per year, and then made up for it by passing a $15 billion bond issue. Together, those two things produced a hole in the budget of about $7 billion per year once the bond money had been spent and annual payments started up. That hole accounted for a huge chunk of California's later fiscal crisis, and it was neither inherited from his predecessor nor was it the inevitable result of public policy. It was created.

Walker, like Schwarzenegger, has deliberately aggravated a crisis so he could take advantage of it to attack his political enemies:

That's how you keep a crisis from going to waste: You take a complicated problem that requires the apparent need for bold action and use it to achieve a longtime ideological objective. In this case, permanently weakening public-employee unions, a group much-loathed by Republicans in general and by the Republican legislators who have to battle them in elections in particular.

....If all Walker was doing was reforming public employee benefits, I'd have little problem with it....But that's not what Walker is doing. He's attacking the right to bargain collectively — which is to say, he's attacking the very foundation of labor unions, and of worker power — and using an economic crisis unions didn't cause, and a budget reversal that Walker himself helped create, to justify it.

This is, in a way, not unexpected. Republicans hate public sector unions. The Koch brothers and their allies, who contributed mountains of money to Walker and the Wisconsin GOP, hate public sector unions. Of course Walker and his fellow Republicans would like to dismantle public sector unions. But deliberately exacerbating a budget crisis to help them do it? Even by movement conservative standards that's outlandishly reckless and cynical. And yet, that's what's happening.

UPDATE: Actually, Walker's special session tax cuts didn't affect Wisconsin's budget for the current year. They affect the budget over the next two years. More details here.

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Chart of the Day: Sham Budget Cutting

| Fri Feb. 18, 2011 12:10 PM EST

Via one of Ryan Avent's colleagues, here's a chart showing the trajectory of non-defense discretionary spending over the past 50 years. This is basically the spending that's left over after you take out Social Security, Medicare, Medicaid, the Pentagon, and interest on the national debt.

This is the part of the budget that Republicans are trying to slash. It's small, it's decidedly not a long-term problem, and it's focused largely on the neediest people in the country. Going after it is a sham, but it's a sham that the Republican base of old people, rich people, and corporations all support. It's a disgrace.

No More Hospitals, Please

| Fri Feb. 18, 2011 11:42 AM EST

NPR reports on New Hampshire governor John Lynch's call for hospitals to rein in their building boom in his state. The problem, he says, is that all the new construction isn't leading to better care:

Governor Lynch: “Instead of using that excess cash to reduce health care costs, hospitals spend it on advertising, trying to attract market share from each other; on buying physician and laboratory practices across the state and increasing overhead charges to patients.”

....Paul Spiess chairs a legislative study committee on hospital cost containment. He says hospitals have spent close to a billion dollars in the last decade on new facilities and amenities — from fancy lobbies to color MRIs.

Paul Spiess, former chair, Citizens Health Initiative and chair, SB 505 Hospital Cost Containment Commission: “It’s sort of developed into an arms race.”

....Former State Senator Kathy Sgambati: “You will get extra referrals to an MRI machine because it’s there. There are studies at Dartmouth that show when you have more surgeons, the more surgeries will be performed...so more supply means higher health care costs.”

It will be interesting to see how this plays out. The issue of supply creating its own demand is a real one, but politically it just has to be dangerous to be against having the latest and greatest toys in every hospital. After all, as we're told over and over and over, America has the best healthcare in the world, and we often convince ourselves of that by pointing to the number of MRI machines we have. This should be an interesting showdown.

Targeting Social Security

| Fri Feb. 18, 2011 10:59 AM EST

Republicans want to slash a billion dollars out of Social Security's administrative budget? Seriously? Whatever you happen to think of Social Security as a program, even conservatives have always acknowledged that it's a very efficient bit of bureaucracy with extremely low administrative costs. But not anymore, I guess:

Democrats warn this will lead to furloughs and other service interruptions that could delay checks and prevent new retirees from enrolling....In a statement, Rep. Xavier Becerra (D-CA), who chairs the Social Security subcommittee under Levin, says, "[T]his Republican plan would close down Social Security offices for an entire month this year. That means half a million American seniors, disabled workers and surviving family members--working people who have earned their Social Security benefits--will find themselves placed into a backlog of unprocessed claims. It means phones going unanswered, claims going unprocessed and a ripple effect of backlogged cases that will continue well beyond this year."

Republicans are really skating on thin ice here. If they don't rein in their famous freshman class soon, they're going to end up pretty quickly as the most hated party in American political history.

Our Warmer, Wetter, Wilder World

| Fri Feb. 18, 2011 6:00 AM EST

My friend the geophysicist emailed the other day to tell me his house in Connecticut was still snowed in. "The main hypotheses for why we have so much snow," he explained, "involve heat coming out of the now-open Arctic ocean in early winter. Once the ice cap freezes over temporarily, the wild weather calms down."

In other words, it's caused by global warming. Not global warming next year. Not global warming 50 years from now. Global warming today. And according to a new study published in Nature, the entire continent of North America is affected:

"Human influence on the climate system has the effect of intensifying precipitation extremes," said Francis Zwiers, a climate researcher at Environment Canada in Toronto and lead researcher on the first study....The study found that observed increase in deluges "cannot be explained by natural internal fluctuations of the climate system alone," said Zwiers. In other words, only the addition of greenhouse gases to the atmosphere explains why the United States and Canada have experienced a dramatic increase in heavy downpours.

....The explanation is simple physics: Warmer air holds more water vapor. That means when rainfall gets triggered, the air contributing to the storm is holding more water than it did in the cooler pre-industrial world.

And it's not just North America. Another new study looked at the epic floods in England and Wales in 2000 and concluded that they likely resulted from a warmer world:

In nine out of ten cases our model results indicate that twentieth-century anthropogenic greenhouse gas emissions increased the risk of floods occurring in England and Wales in autumn 2000 by more than 20%, and in two out of three cases by more than 90%.

And the even scarier part? These studies only go through the year 2000, so they miss the entire last decade, which was the warmest on record. And needless to say, England and North America are far from being the areas worst affected by climate change. What we're seeing here is just a small taste of what's to come in the future and in other parts of the globe. Buckle up.

Front page illustration by Celine Nadeau.

Shrinking Government to a Bathtub

| Thu Feb. 17, 2011 6:10 PM EST

Internet sales continue to rise:

The rapid growth in internet sales is great for online retailers. But it’s not such good news for state and local governments. The Commerce Department reported Thursday that e-commerce retail sales totaled $44 billion in the fourth quarter last year, up from $38 billion a year earlier. E-commerce sales now account for 4.3% of total retail sales.

....Many of those online purchases didn’t have any sales tax attached to them. Long before the Internet was on anybody’s radar, the Supreme Court ruled that states couldn’t require that retailers without a physical presence in a state, like mail-order companies, charge sales tax on their behalf.

This is a good example of what Jacob Hacker and Paul Pierson call "policy drift" in Winner Take All Politics. As long as non-store retail was mostly just mail-order houses, the tax issue wasn't too big a deal because mail order never accounted for more than about 3% of total retail sales. But e-commerce already accounts for more than 4% of retail sales and it's obviously poised to get larger and larger over time. As that happens, state and local tax revenues will decline not because of any active change in public policy, but because Congress has chosen to sit idly by. Conservatives will succeed in starving government simply by doing nothing to respond to a technological change.

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Screwing the Poor

| Thu Feb. 17, 2011 2:42 PM EST

It should come as no surprise that Republican budget cutting fever focuses pretty heavily on programs for poor people. Republicans don't care much about poor people, after all, and Exhibit 1 is their preferred set of targets for cost cutting in the healthcare arena. Suzy Khimm reports on this, for example:

Leading Republicans in Washington and in the states have set their sights on the federal health care program for the poor, aiming to slash funding and roll back Medicaid, just as Democrats are preparing to expand it to millions more Americans...."I'm sure that's what [Republicans] are going to do," said Sen. Mary Landrieu (D-La), "and they won't be the first group that, when first the sign of trouble appears, they want to gut programs for the sick, the elderly and the children."

Medicare is for old people, and old people vote Republican. Medicaid is for poor people, and poor people don't vote Republican. So naturally Medicaid is in the crosshairs. And Jon Cohn has this:

Republicans are also proposing a more immediate reduction in spending [...] for the health clinics known as "federally qualified community health centers." And it's a change that would take effect in the very near future, since it's part of the House Republican proposal for financing government operations through the end of this fiscal year....How big is the cut? On paper, House Republicans propose to reduce clinic funding from current levels by $1 billion, or roughly a third of their total federal funding.

....Well, but maybe this program has a lot of waste in it? I don't think so. Having visited literally dozens of these clinics around the country, I can tell you that the people who run these clinics not only do the lord's work. They also do it efficiently. Precisely because the need for their services always exceeds the resources at their disposals, they know how to squeeze the most health care value out of every dollar, all while providing the kind of support services that their low-income communities need. 

....If the case for funding these clinics seems a bit too bleeding heart for your sensibilities, consider that uninsured people who don't get primary care tend to end up in the emergency room, contributing to overcrowding and generating bills that hospitals eventually pass onto everybody else. That's one reason community clinics have traditionally enjoyed bipartisan support. In fact, it was the one health care program for low-income Americans that the Bush Administration endorsed consistently and enthusiastically, with dollars as well as words: "This is a really good use of taxpayers' money," Bush said at one point. "It makes a lot of sense to have Community Health Centers so that we can cut down on unnecessary visits to the emergency rooms. Health centers help lower the cost of health care for everyone.”

This is, of course, a classic case of going after weak claimants rather than weak claims. After all, both Medicaid and community health centers serve a population that needs health services desperately and they do it more cheaply than any other healthcare program you can name. There's really no excuse for trying to cut either one, and there's certainly no excuse while low-hanging fruit like crop subsidies and giveaways to oil and gas firms are still on the books.

Drum Smackdown Watch: Public Funding for the Arts

| Thu Feb. 17, 2011 1:53 PM EST

Last week I wrote a quick post suggesting that government support for the arts wasn't exactly on my Top Ten list of great ways to spend public money. I received a scorched-earth response via email from Michael O'Hare, along with some recommended reading material, though in the end the scholarly articles didn't especially change my mind. But I decided not to blog about it again regardless. Disagreements about public arts policy are deeply rooted in a personal view of the value of certain kinds of high art, and I simply lack a strong enough version of the art gene to talk about this with any vigor or nuance.

Nonetheless, Isaac Butler wants to persuade me that I'm wrong, and he's writing a three-part blog post to do it. Here's an excerpt from part two:

Drum's not saying that art isn't important which is the common argument that we end up arguing against. What he's saying is that the market is doing a good enough job of supporting the arts and therefore, government intervention is not needed....In order to support his point about a market breadown, he lumps together broadcasting, "art" (by which I believe he means studio/visual arts) and entertainment. These, he believes, are doing okay, and therefore don't need government support.

What he leaves out are things like Jazz, "Classical" Music, Theatre, Dance etc. In other words, it may in fact be true that some art forms are supported well by the market. But others are not. Theatre, the one I happen to know the best, is suffering an insane level of market breakdown. It is simply too expensive to make (most) theater to be able to price it accurately. Even now, thanks to lack of support, it is still overpriced in most major markets.

There's something to this. But since part three is still being incubated, here's the question I'd like to see answered: how do you know that the market for this kind of art has broken down? The fact that something is expensive and losing popularity doesn't, by itself, indicate a market breakdown. Just the opposite, in fact: we usually think of market breakdowns in areas where there's a lot of demand but, for some reason, the market isn't meeting it.

Now, I, Kevin Drum, happen to like classical music but not jazz. I like film but don't really get much of a kick out of theater. I love novels but have never developed an appreciation of poetry. Etc. etc. If it turned out that my tastes were broadly shared, would that mean there's a market breakdown in jazz, theater, and poetry? Or would it mean that public tastes have changed over time and artists ought to change with it? If great playwrights are producing scripts for HBO movies instead of scripts for regional theaters, does that mean the market is working or failing? If serious modern composers produce music that the public has to be bribed to listen to (usually with a post-intermission performance of a popular old warhorse), does that mean there's a breakdown in the market for serious modern music? Or does it mean that serious modern composers ought to rethink the kind of music they write? How do you know?

In any case, I look forward to part three. I view the decline of live theater with equanimity because I think that modern film, video, and multimedia performances are better than live theater on virtually every level. Obviously Isaac disagrees, and that's fine. The question is, why should the federal government adjudicate our disagreement?

Defunding the Democratic Party

| Thu Feb. 17, 2011 12:22 PM EST
Protesters filled the rotunda of Wisconsin's capitol building in Madison this week to register their opposition to Gov. Scott Walker's plan to strip public employees of union bargaining rights.

Wisconsin, the birthplace of public sector unions, is now ground zero for the Republican jihad to destroy them, with a GOP-sponsored bill to strip Wisconsin's public unions of their collective bargaining rights now seemingly certain to pass. The cynicism of the bill might not be entirely clear until you hear the details:

[The bill] would require most public workers to pay half their pension costs — typically 5.8% of pay for state workers — and at least 12% of their health care costs. It applies to most state and local employees but does not apply to police, firefighters and state troopers, who would continue to bargain for their benefits.

Except for police, firefighters and troopers, raises would be limited to inflation unless a bigger increase was approved in a referendum. The non-law enforcement unions would lose their rights to bargain over anything but wages, would have to hold annual elections to keep their organizations intact and would lose the ability to have union dues deducted from state paychecks.

Now why would this be? Is it because collective bargaining is somehow less of a problem for public safety employees than for teachers? Because strikes by cops are less hazardous than strikes by teachers? Because public safety employees tend not to be hard bargainers anyway? Because public safety employees are poorly paid? 

Or is it because teachers tend to vote pretty reliably for Democrats and public safety employees don't? Bingo.

The irony here is that when you hear those cherry-picked horror stories of vastly overpaid civil servants (usually the result of overtime abuse of some kind), nine times out of ten it involves a public safety employee. It's not teachers who get to retire at age 50 and it's not teachers who end up padding their hours in their last year of work and retiring on 120% of their usual income. Most of the time, it's police, firefighters, and state troopers.

But they're the ones exempt from the Wisconsin GOP's union bashing drive. Go figure.

The Other Secret Weapon of the Rich

| Thu Feb. 17, 2011 11:18 AM EST

In my post last night about Martin Gilens' research showing that politicians don't really pay any attention to the opinions of anyone but the well off, I quoted Gilens' concluding guess that "the most obvious source of influence over policy that distinguishes high-income Americans is money." Matt Yglesias isn't sure this is right:

I would say the most obvious mechanism here is socialization. The president, the senior White House staff, the cabinet secretaries, the senators, the House members, the senior congressional staff, and the lobbyists, association heads, business executives, governors, mayors, foreign officials, and media celebrities who they interact with are all personally pretty high income. You get into the top decile of the US income distribution with a household income of $138,000, so the entire congress is in the top ten percent. What’s more, political elites tend to have college roommates, siblings, in-laws, etc. who are also prosperous.

Obviously the fact that rich people have money to spend on politics doesn’t hurt either. But I would never underestimate the human desire to believe that one is doing the right thing, and thus the importance of socialization to determining bias. Nobody in Washington seems to know that the public is clamoring for higher Social Security benefits and more federal spending on health and education largely, I think, because this isn’t what the people they know personally are clamoring for.

Full confession: I think there's a lot to this, though I'd emphasize the raw power of money a bit more than Matt. It's just that I liked that quote so much that I felt obligated to share it with everyone. But whatever the reason, here's the takeaway: if you don't have a six-figure income, Congress doesn't much care about you. Sad but true.