Kevin Drum - May 2011

Your Dental Hygienist Questions Answered!

| Thu May. 26, 2011 11:31 AM PDT

Earlier this morning we considered the burning question of whether regulation of dental hygienists has contibuted to an increase in income inequality. Before I staked out a position on this I wanted to know if hygienist regulation had increased over time, but sadly, uncredentialed proles like me are denied access to the relevant academic paper unless we fork over $5, thus transferring wealth from me to the economics profession and increasing income inequality along the way. Luckily, reader JR bravely defied the relevant IP laws and sent me a copy. So now I have an answer for you.

The specific question at hand is whether hygienists are increasingly being required to work for dentists, which would decrease their earning power and increase the profits of dental practices owned by wealthy dentists. The answer is no. From the paper:

Until 1988, when Colorado first allowed hygienists to practice without the direct supervision of a dentist, hygienists have been required to work for or be under the direction of a dentist. Since that time, seven states have allowed hygienists to be self-employed without the direct oversight of a dentist.

....In order to show the growth in hygienists’ autonomy over time, in Figure 1 we develop and show a box-and-whisker graphic analysis of state regulation, which gives the mean and spread of the regulation of hygienists over the period 2001–2007. Panel A shows the overall ranking of dental hygienists’ professional practice environment that is allowed by statute or legal rulings.

This is followed by lots of Greek letter math that no sane person would try to understand. However, charts are easy to understand, so I've helpfully reproduced Panel A on the right, adding a bright red arrow showing the increase in hygienist autonomy over the past decade. The basic shape of things is clear: despite pushback from the dental profession, over the past couple of decades hygienists have been allowed to perform more and more tasks and have been unshackled entirely from the dental profession in seven states. This is (probably) a triumph of improved public policy and a counterweight to growing income inequality. So now you know.

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Chart of the Day: Initial Unemployment Claims

| Thu May. 26, 2011 11:02 AM PDT

Initial unemployment claims, which have been dropping since 2009, have recently spiked a bit. Mark Thoma:

Every time claims go up we hear about holidays falling at unusual times, seasonal adjustment problems, weather related problems —- there seems to be no shortage of reasons to dismiss weakness in labor markets. So I'll be interested to see what excuse policymakers come up with this time to ignore the unemployment crisis.

As the attached chart shows, this is hardly the first time there's been a short spike during an economic expansion. You can see big ones in 1977, 1992, and 2006 and smaller ones in several other years. If this one only lasts a month or two, it's no big deal. But if it lasts longer, the excuses are going to start to wear pretty thin.

Gated Academic Papers Are Inefficient

| Thu May. 26, 2011 10:00 AM PDT

Matt Yglesias notes that, compared to states where dental hygienists are required to work in a dentist's office, dental hygienists earn about 10% more in states where they're allowed to work independently. Likewise, dentists in those states earn less and have slower employment growth. The obvious conclusion is that in states where hygienists are required to work for dentists, dentists capture some of their earnings:

There’s been a lot of interest over the past ten years among progressives in the subject of the political origins of growing income inequality. But I find there’s been less interest in trying to explore specifically what those origins might be. It’s not all overregulation of dental hygenists (obviously) but it’s also not all Bush tax cuts and Commodity Futures Modernization Act either.

This is interesting stuff, but it lacks one thing: a time function. Occupational licensing like this might transfer income upward in some cases (though the hygienist example is sort of unique in the way it works), but it would only contribute to growing income inequality if this particular type of hygienist regulation has increased over the years. Unfortunately, the paper Matt cites would cost me $5 to read, so I'll probably never know if it has.

UPDATE: Now I've read it! All your questions are answered here.

The GOP State of Play

| Thu May. 26, 2011 8:56 AM PDT

I can't believe I'm writing a post about a Gallup poll on the GOP primary race in May 2011. I made a firm rule years ago not to engage in nonsense like this. But rules are meant to be broken, and today is a slow news day, so here it is.

Is there anything interesting here? Not really. Sarah Palin is in second place at 15%, but that's a lot worse than it seems. She's basically in Ron Paul territory: tons of name recognition and the benefit of a small band of dedicated fanatics. Everyone knows there's a sizeable group of Palinistas out there who would vote for her even if she ran the entire race dressed up in a Mickey Mouse costume, and now Gallup has confirmed this. Big deal.

Newt Gingrich? He's in big trouble. He's been around forever, he has fantastic name recognition, he's on TV constantly, and he still can't pull more than 9%? He's doomed.

Herman Cain?  There's always a blowhard who knows nothing and just loudly spouts lots of "common sense" during the early debates in order to attract attention. This year that's Cain. His bubble will burst soon enough.

As for the rest, Michele Bachmann is just a Sarah Palin wannabe, Huntsman is running for 2016, and Johnson and Santorum are vanity candidates. Basically, it still looks to me like a race between Romney and Pawlenty, with lots of spoilers to make things interesting. I just don't see a path open for any of the others to win.

How Much is the Internet Worth to You?

| Thu May. 26, 2011 7:49 AM PDT

I'm always a little unsure whether McKinsey reports are just nicely formatted collections of bollocks or genuine sources of useful information. I guess it probably depends on the report. In any case, Tyler Cowen points us today to a new McKinsey report that says the internet accounts for 3.4% of GDP in a group of countries that it recently studied (nine rich countries plus the BRICs). Sweden is highest at 6.3% because — well, who knows? They really, really like Angry Birds in Sweden? They lead the globe in hosting pirate sites? I'm not sure. The United States is about average for rich countries at 3.8%.

However, we value the internet pretty highly here. As this chart shows, the internet generates consumer surplus in the U.S. of about 19 euros per month per person, or a little over $300 per year. But that's just the average. If you're reading this blog, you probably value it quite a bit higher:

In general, this surplus is generated from the exceptional value users place on Internet services such as e-mail, social networks, search facilities, and online reservation services, among many others. This value far outweighs the costs, both actual costs such as access and subscription fees and annoyances such as spam, excessive advertising, and the need to disclose personal data for some services. In the United States, for example, research conducted with the Interactive Advertising Board 13 found that consumers placed a value of almost €61 billion on the services they got from the Internet, while they would pay about €15 billion to get rid of the annoyances, suggesting a net consumer surplus of about €46 billion.

So there you have it: Value of internet – cost of internet – annoyances of internet = €46 billion. But I wonder if they also accounted for the stupendous amount of time we all spend trying to fix the internet when it breaks? More comments from Tyler here.

New Mileage Labels!

| Wed May. 25, 2011 9:00 PM PDT

Me, in 2008, offering a bright idea for getting people to pay more attention to auto mileage:

Require stickers to list the estimated cost of fuel consumption over a five year period. The estimate doesn't have to be perfect, just close enough to make it clear to consumers how much more one car costs than another over its life. Upside: it's free. Downsides: none that I can think of.

From the Los Angeles Times today:

Federal regulators unveiled new fuel economy labels that could make it easier for new-car buyers to compare fuel-efficient vehicles and gas-guzzlers. In addition to the miles per gallon, the labels will show [...] the expected cost of fuel over the next five years compared with the average new vehicle.

Clearly the federal government stole this idea from me and now refuses to give me credit. Bastards.

Oh wait. They actually did this back in 2006. But that label redesign only showed the expected cost of fuel over one year. Clearly the idea to extend this to five years was mine. I think they should name the new sticker after me.

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In Which I Swallow Hard and Defend Mitt Romney

| Wed May. 25, 2011 4:18 PM PDT

(See update below.)

Mitt Romney is getting a lot grief today over his flip-flopping on the Detroit bailout. Talking about the Obama plan to rescue GM and Chrysler, his spokesman said, "Mitt Romney had the idea first. You have to acknowledge that. He was advocating for a course of action that eventually the Obama administration adopted." The only problem? A 2008 New York Times op-ed titled "Let Detroit Go Bankrupt."

But as much as it pains me to say this, I'm not really sure Romney is all that wrong here. After dismissing the original bailout requests from GM and Chrysler as too charitable, here are the relevant recommendations from Romney's op-ed:

First, [GM and Chrysler's] huge disadvantage in costs relative to foreign brands must be eliminated. That means new labor agreements to align pay and benefits to match those of workers at competitors like BMW, Honda, Nissan and Toyota. Furthermore, retiree benefits must be reduced so that the total burden per auto for domestic makers is not higher than that of foreign producers.

....Second, management as is must go.

....Investments must be made for the future. No more focus on quarterly earnings or the kind of short-term stock appreciation that means quick riches for executives with options. Manage with an eye on cash flow, balance sheets and long-term appreciation. 

....Don’t ask Washington to give shareholders and bondholders a free pass — they bet on management and they lost....A managed bankruptcy may be the only path to the fundamental restructuring the industry needs....The federal government should provide guarantees for post-bankruptcy financing and assure car buyers that their warranties are not at risk.

So what happened? Taking Romney's points in order: First, Obama rejected the automakers' original bailout requests as too charitable and sent them back to the table. Second, his auto task force forced the UAW to accept reductions in both worker compensation and retiree health care. Third, they fired GM CEO Rick Wagoner and handed management of Chrysler to Fiat. Fourth, they fundamentally restructured GM's finances, killed off a bunch of brands, and shut down a thousand dealerships. Fifth, they put both companies through a prepackaged brankruptcy that wiped out shareholders, forced bondholders to take a substantial haircut, and provided guarantees for post-bankruptcy financing. Sixth, Obama put a government guarantee behind GM and Chrysler warranties.

None of this is precisely what Romney called for. He criticized Obama's plan for not being done earlier. He undoubtedly would have preferred more concessions from the UAW. He wanted the government's stake in GM to be immediately distributed to taxpayers instead of being held for later sale. He said the Detroit bailout had "not been well-played" by either Bush or Obama.

Still, his op-ed really isn't all that far off from what eventually happened. As for the two gotcha quotes currently being distributed around the intertubes, "Let Detroit Go Bankrupt" was the headline the Times put on Romney's op-ed, not something he wrote himself. His piece makes it clear that he favors a managed bankruptcy, which is what eventually happened. And Romney didn't say that Obama’s plans for rescuing the auto industry were “tragic” and “a very sad circumstance for this country.” He said, "This is a very sad circumstance for this country, and it represents bad decisions by management, overreaching by the UAW. It's really tragic in a lot of ways." He was obviously referring to Detroit's troubles in general here, not specifically talking about Obama's plan.

Is Romney trying to take more credit than he deserves here? Sure. But it strikes me as being garden variety political puffery, not third-degree hypocrisy. Unless someone can turn up some other quotes, that is.

UPDATE: Hmmm. On April 29, 2009, after the outlines of the Obama plan were fairly clear and GM produced a proposal meant to address its requirements, Romney trashed it in pretty strong terms. "What is proposed is even worse than bankruptcy," he said. "It would make GM the living dead." And a correspondent says that Romney consistently opposed the infusion of any government money into the bankruptcy process, which is pretty far afield from the "course of action that eventually the Obama administration adopted." If this is true, it makes the flip-flopping case stronger. Still not a killer case, maybe, but a little stronger.

Quote of the Day: Paul Ryan's Big Mistake

| Wed May. 25, 2011 1:49 PM PDT

From Paul Ryan, talking backstage to Bill Clinton at the 2011 Fiscal Summit about his Medicare plan:

You know the math. It's just, I mean, we knew we were putting ourselves out there. You gotta start this. You gotta get out there. You gotta get this thing moving.

No. You don't just "gotta get this thing moving." You need to get the policy right. You need to actually care about controlling healthcare costs. You need to actually care about delivery systems. You need to actually care about what works and what doesn't. You need to actually care about the details.

Paul Ryan doesn't. He's a right-wing ideologue with a single right-wing solution for everything. But he's sociable and friendly, not a fire breather, so everyone figures he's not one of the tea party nutjobs. This is a serious mistake.

Why Not Let the Dead Pay for Medicare?

| Wed May. 25, 2011 12:03 PM PDT

So here's an idea: why not reform Medicare by means testing it? Conservatives should love this idea.

Here's how it works. Basically, we leave Medicare alone. Oh, we can still go ahead with some of the obvious reforms. Comparative effectiveness research is a no-brainer for anyone who's not part of the Republican leadership. Ditto for some of the delivery reforms on the table. Or allowing Medicare to negotiate for lower prices. It would be great if that stuff works. But if it doesn't, then people will need to pay more for their care. So why not have dead people pay? They don't need the money any more, after all.

So Medicare stays roughly the same, but every time you receive medical care you also get a bill. You don't have to pay it, though. It's just there for accounting purposes. When you die, the bill gets paid out of your estate. If your estate is small or nonexistent, you've gotten lots of free medical care. If it's large, you'll pay for it all. If you're somewhere in between, you'll end up paying for part of the care you've received.

Obviously this gives people incentives to spend all their money before they die. That's fine. I suspect they wouldn't end up spending as much as you'd think. What it does mean, though, is that Medicare has first claim on their estate, not their kids. But that seems fair, doesn't it?

Do you want to make sure to credit estates with all the Medicare taxes that have been paid over the years? Fine. Do you want to exempt a certain smallish amount to account for genuine family heirlooms? Fine. Do you want to pass laws making sure that estates can't be transferred to other people or trusts in order to evade this rule? Or regulate the use of reverse mortgages? Or make special rules for heirs who are minors? Fine, fine, and fine. Whatever.

But I'll bet this would raise a fair amount of money. What's more, that Medicare bill, with its continuously increasing grand total, would give people a pretty good sense of just how much medical care they're really getting. And it wouldn't impoverish the elderly with means testing while they were living. It would come solely from dead people, who have taken advantage of Medicare while they were alive and have no use for their money after they're dead. So what's not to like?

The Problem With Medical Testing

| Wed May. 25, 2011 10:29 AM PDT

Ezra Klein responds to a Robin Hanson post suggesting that a lot of cancer screening is basically useless:

I think Hanson goes a bit far in the conclusions he draws, for reasons that some of his readers articulate in the comments. But “a bit far” isn’t the same as “wrong.” So if you’re anything like me, take a moment to think about how much you don’t want to believe that lung-cancer screenings or breast-cancer screenings may not actually work. And then think about trying to convince yourself they don’t work when your doctor is strongly urging you to get screened.

Actually, it's even worse than that. A couple of months ago I got examined by a urologist and he recommended that I get a prostate biopsy to check out a lump he felt. So I made the appointment, and a few weeks ago I went in. But my second appointment was with a different doctor who wanted to check things out for himself. He proceeded to do an extremely thorough DRE1 and concluded that most likely my lump was just a bit of calcification. But he was ready to do the biopsy if I wanted it. Did I?

Well, here's the thing. Even though my PSA test had been negative and I have no family history of cancer whatsoever; even though a prostate biopsy is a fairly unpleasant experience; even though prostate biopsies also have unpleasant lingering side effects; even though I'm philosophically opposed to overuse of medical tests; and even though I had a doctor standing right there telling me I probably didn't need the test

Even still, I almost went ahead and had him do it anyway. I mean, I was right there. It would only take ten minutes. Better safe than sorry, right?

Basically, everything you can think of was in place to turn down this test. But I almost didn't. If even one little thing had suggested I should do it — maybe because the test was quick and painless, or perhaps because I had an uncle who had once had prostate cancer — I would have done it. And if that second doctor had told me to do it, regardless of whether it was in strong terms or not? Then I wouldn't even have hesitated for a moment.

So that's what we're up against.

UPDATE: Aaron Carroll says I'm still underestimating the problem. His take here.

1DRE = digital rectal examination, and yes, this is exactly what you think it is.