• Charts of the Day: Kaiser’s Fascinating Obamacare Data


    The Kaiser Family Foundation does regular polling about the public’s view of healthcare reform, and the results are always interesting. This month’s results, however, are even more interesting than usual. I might write a longer post about some of this later, but for now I just want to briefly highlight a few of the questions that most caught my interest. The full poll results are here. My top five most interesting results are below.

    Overall favorability toward Obamacare has gone down only slightly since last year. But look at the partisan breakdown: Republicans and Independents have stayed rock steady the entire time. The decline has been almost entirely due to waning favorability among Democrats.

    Among those who don’t like Obamacare, nearly half admit that their dislike has nothing much to do with the law itself. They’re just mad at Obama and/or Washington DC.

    Only 37% of the public feels favorably toward Obamacare, but 50% want to keep or expand it. It turns out that many of the unfavorable/don’t know opinions aren’t from people who dislike healthcare reform, they’re from people who don’t think Obamacare went far enough.

    Virtually every specific aspect of Obamacare is viewed favorably by over half the public. The only exception is the individual mandate. Even Republicans, it turns out, like most of the specific provisions of the law.

    A fifth of the public says Obamacare has affected them negatively. But nearly all of this is because people have been convinced that Obamacare has caused their premiums to go up and their benefits to go down. Needless to say, this is nothing more than a fantasy fueled by Fox News.

  • Saudi Arabia Finally Gives Up


    Saudi Arabia has long said that it has loads of untapped reserves and would, within a few years, be on track to increase oil production from 10 million barrels per day to as much as 15 million barrels of oil per day. But Saudi production has stayed stubbornly at 10 million barrels. Last week, the CEO of Saudi Aramco said that global production from tar sands and shale oil now looked so promising that there was no need for more oil from the Kingdom:

    “Rather than supply scarcity, oil supplies remain at comfortable levels, even given rising demand from fast-growing nations like China and India….All that makes spending on aggressive energy programmes unlikely,” he said, adding that abundant affordable hydrocarbon supplies challenged investment in renewable technologies. As a result, Saudi Aramco had no plans to increase its oil production capacity to 15 million barrels per day, Falih said.

    Should you believe this? No, you shouldn’t. Chris Nelder has a nice piece today at SmartPlanet called “Why energy journalism is so bad,” and at the end he provides six pieces of advice for reading press reports about oil and energy more broadly. Here’s one of them:

    2. Discount the sources. If the cited authority represents the oil and gas industry, you should view their forecasts as propaganda, not truth. Particularly when the authority is from an OPEC producer. OPEC (like the IEA) is a fundamentally political organization, and everything they say in public has a political calculus behind it. For example, I read the unconventional oil optimism expressed by the Saudi official cited at the top of this piece as their way of jawboning down peak oil fears, and throwing analysts off the scent of a trail which leads to serious questions about whether Aramco can increase spare production capacity, and whether the world’s most productive oil field, Ghawar, has indeed gone into decline.

    Saudi Arabia has been making excuses for years for their inability to produce more than 10 million barrels of oil per day. This is the latest, and seemingly, the most definitive. They’re publicly stating — for the first time, I think — that they aren’t going to keep up the pretense anymore. Their exploration and drilling program is over, and 10 million barrels is as good as it’s ever going to get.

    The rest of Nelder’s piece is worth reading if you want to understand a bit more about how energy journalism is put together. There really is reason to think that shale oil and fracking (as well as tar sands) will boost production of fossil fuels over the next decade or two. But you should be very, very skeptical of the happy talk about massive new finds and how this means energy independence at last. This stuff is promising, but every field isn’t going to pan out at the most optimistic end of the forecasts, just like conventional oil fields don’t all pan out at the most optimistic end of the forecasts. Caveat emptor.

  • Riding Disaster to Victory


    From Corey O’Brien, a Democratic commissioner in Lackawanna County, Pennsylvania, expressing frustration with President Obama:

    Enough with the soft approach. He’s got to say, “I’m in charge, and I’m going to get it done with or without Congress.” People are furious. Everybody here is petrified they are going to lose their jobs tomorrow, and I mean everybody.

    Republicans have to be chortling at this. It’s exactly the response they’ve been hoping for as we head into election season. Greg Sargent spells it out:

    Mr. O’Brien appears to be suggesting that this is a widespread sentiment among Pennsylvanians, and it’s worth entertaining the possiblity that this is right. In a climate of extreme fear and anger over the economy, people may not care why Obama can’t get his policies through….If the guy in charge can’t deliver it, the risk is that people may conclude he’s well intentioned, but too weak or ineffective to get it done. How Obama handles this problem is going to be a key dynamic to watch, particularly today in this key bellwether region.

    When it comes to domestic policy, there’s virtually nothing the president can do without congressional approval. The American public, however, rather famously seems not to understand this, and Republicans know it perfectly well. With no real knowledge of how public policy works, and without a press willing to make it clear, congressional obstruction is essentially invisible and cost-free. So Republicans have spent the past two years doing everything in their power to make sure the economy doesn’t recover, and now they’re planning to ride that bad economy to victory in November.

    Pretty great strategy, isn’t it?

  • Does Europe No Longer Have a Single Currency?


    I don’t always understand everything Karl Smith says, but I’ve learned to dismiss him at my peril. Here he is yesterday:

    The ECB is no longer controlling the marginal cost of funding and that indeed the cost of such funding is rising much higher than the official 1.25% rate, at least up to 2.25% and perhaps as high as 6–7%. This incredibly contractionary monetary “policy” began sometime earlier this year and is continuing to accelerate. I put policy in scare quotes because there is no policy as such there is simply contraction.

    ….I don’t have it all sorted out but its not clear that there is a fully functioning money market in Europe right now. Well informed opinion suggests that there is literally a shortage of know-how on the ground….It’s really maddening and quite disconcerting.

    And this morning, responding to an Alphaville post by Izabella about a new liquidity program from the Italian Treasury:

    The marginal cost of funds — the key instrument in monetary policy — is diverging between countries and local central banks and governments are having to step in to attempt to solve the mess. Izabella is cautious in her wording and that is a good thing. However, because I was cautious last time this happened — and roundly ignored — I will be loud this time.

    The Eurozone is now a single currency area in name only. Worse, the national central banks do not have the power to control monetary policy. Which means by American or British standards there is no monetary policy in Europe right now. There is regimented chaos.

    And a few hours later on an ECB program to partially backstop sovereign debt in the eurozone:

    Obviously I have long advocated this as the only way to stem the crisis. At this point, however, I am not sure it will work. The ECB may have a larger problem if the marginal cost of cash is diverging across countries.

    ….A credible cap can keep the Eurozone from flying apart, but if short yields maintain their spread that is evidence of different effective monetary policy in different countries and possibly cripplingly tight monetary policy in the periphery. I say that with the full recognition that it is not even clear what it means to say that there is different monetary policy under the same currency. What I mean is that there are differing marginal costs of funding. Some questions:

      1. Does this extend up into the commercial paper markets?
      2. How many firms have access to credit from outside their country?
      3. How many households have access to credit from outside their country?

    Of these questions I would usually consider (1) the most important but the prevalence of small and medium sized business in the periphery may mean that (2) is the most important.

    I won’t pretend to fully understand this, and it may be less important than Karl thinks. Roughly speaking, though, he’s saying that the repo market is now controlling the cost of funds in Europe, not the ECB, and that cost is higher in the periphery than in the core. It’s an inversion of what happened from 2001-07, when the ECB did control monetary policy, and that single monetary policy for the entire continent was a little too tight for Germany but far too loose for the periphery. Now, though, it’s just the opposite and effective monetary policy is far too tight for the periphery.

    The former led to the disaster we see today. The latter is going to make that disaster far worse. The “slow run” on the European periphery appears to be finally turning into a garden variety run, and the next stop is full-scale panic.

    Either that or Karl is wrong.

  • Some Tax Cuts Are More Equal Than Others


    I see that Republicans have finally caved in on the idea of extending the existing payroll tax cut:

    “In all likelihood we will agree to continue the current payroll tax relief for another year,” Senate Republican leader Mitch McConnell said after a closed-door meeting of his colleagues….Trying to get ahead of the game, McConnell proclaimed Republican support for the payroll tax cut extension and told reporters his party would soon propose its own ideas for covering the cost of the tax cut.

    ….Among the ways to potentially cover the cost of renewing the payroll tax cuts are: cutting federal farm subsidies, selling some government assets, reducing federal pensions and administrative savings in the Medicare healthcare program for the elderly. All these ideas have been discussed in past budget negotiations.

    When it comes to a modest tax cut that mainly benefits middle-class workers, Republicans had to be dragged kicking and screaming to the table, and even now insist that any extension has to be fully paid for. But when it comes to the Bush tax cuts, which are huge and primarily benefit the well-off, they fight for them passionately and bristle at the very idea of paying for them.
    Funny, that.
    It’s almost as if the only tax cuts they really care about are ones for the rich.

    I’m sure there’s a more innocent explanation, though, and it is only my bitter liberal embrace of endless class warfare that has led me astray here.

  • Breaking: America Still a Huge Importer of Energy


    The Wall Street Journal reports exciting news:

    U.S. exports of gasoline, diesel and other oil-based fuels are soaring, putting the nation on track to be a net exporter of petroleum products in 2011 for the first time in 62 years.

    ….That the U.S. is shipping out more fuel than it brings in is significant because the nation has for decades been a voracious energy consumer. It took in huge quantities of not only crude oil from the Middle East but also refined fuels from Europe, Latin America and elsewhere to help run its factories and cars.

    ….”It looks like a trend that could stay in place for the rest of the decade,” said Dave Ernsberger, global director of oil at Platts, which tracks energy markets. “The conventional wisdom is that U.S. is this giant black hole sucking in energy from around the world. This changes that dynamic.”

    Before you get too excited about this, you should know that it’s completely ridiculous. It’s true that the United States has recently been importing lower volumes of refined petroleum products and exporting higher volumes. It’s even true that shale oil and fracking have increased U.S. production of crude oil and gas in recent years, and that, combined with the Great Recession, means that net imports of all petroleum products have declined sinced 2005. Nonetheless, as the EIA chart below shows, when you add up both crude oil and refined products, the United States continues to import a net of 9.4 million barrels per day. That’s 3.4 billion barrels per year.

    You’d only know this if you read the Journal article pretty carefully (it’s a single sentence in the 7th paragraph) but the United States is still a giant black hole sucking in energy from around the world. What’s more, that dynamic is not going to change anytime soon. Sorry to be such a killjoy.

  • Finally, It’s the Crazies vs. the Noncrazies


    So let’s suppose that Herman Cain pulls out of the presidential race. Right now, RCP has the poll numbers looking like this:

    • Gingrich 23.8 percent
    • Romney: 21.3 percent
    • Cain: 15.5 percent

    The evidence suggests that Cain’s supporters will break to Gingrich by about a 2:1 margin, which would put Gingrich ahead of Romney by roughly 34 to 26 percent. Is that game over for Romney?

    Maybe, but not so fast. At that point, the race finally fulfills its manifest destiny: It becomes the crazies vs. the noncrazies. And then the question is who the 15 percent of undecided voters are going to break for. My guess: about 2:1 for Romney, which puts them in roughly a dead heat again.

    What happens then? My belief all along has been that the noncrazies still outnumber the crazies among the Republican rank and file. Not by a lot, maybe, but by enough. And the noncrazies will carry the day for Romney. However, Intrade suggests this is rapidly becoming a bad bet.

    Of course, I’ve also believed for a long time that eventually European leaders will come to their senses and keep their continent from imploding. That’s not looking like such a good bet either.

    Bottom line: My deep-seated belief in the eventual triumph of noninsanity, which has already taken some big hits lately, is about to be decisively marked to market very soon in two very high profile contests. Tick tick tick.

  • Why Businesses Love Illegal Immigration


    Tod Kelly tells a story about a commercial nursery that hired his firm a few years ago to help get their workers compensation claims under control. After examining the nursery’s operations, they made several recommendations about buying some new equipment and updating their training:

    As we were wrapping up, as an aside, we noted that one of their larger ongoing back injury claimants was an illegal alien. We could close that claim out quickly, we told them, by letting the injured worker know that we would have light duty work for him were he able to legally work for the nursery. Since he wasn’t able, he could be terminated and all future indemnity costs would disappear. As soon as we explained this, the brothers began looking at each other, wide eyed and smiling. I cringed inwardly. I knew we had just made a mistake.

    The updated equipment was never purchased, of course. And taking the time to train or stretch was seen as a waste of the company’s time and money. The claims continued to flood in, but now with each claim came notification from the employer that they had “reason to suspect” the claimant was an illegal worker, along with a request to send the light-duty letter so we could avoid making indemnity payments. Over the course of the next year the number of employee injuries increased 20%. But without indemnity costs their annual claims cost decreased 55% — and their insurance premiums went down as a result. They were able to terminate our services the next year with a glowing letter of recommendation.

    Today they have moved from being one of a top-100 nursery to being a top-15, and by all accounts are going strong.

    If this reminds you a lot of The Jungle, you aren’t the only one. The rest of the piece is worth a read too.

  • The Shadow Banking System and the Hearts of Men


    Conventional wisdom watch, bond market edition:

    James Carville on the bond market, circa 1993: “I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.”

    Karl Smith on the bond market, circa 2011: “I used to think if there was reincarnation, I wanted to come back as the bond market. But now I want to come back as the repo market. The repo market even intimidates the bond market.”

    Karl didn’t actually say that, of course. But acting as his PR agent, I’m making his view a little more user friendly. In any case, he’s right. Sovereign bonds are the backbone of the repo market, and the repo market is the backbone of the shadow banking system. So when sovereign bonds fail, the shadow banking system fails and there’s a run. And as we all know, there’s no FDIC insurance for the shadow banking system.

    At a guess, the shadow banking system makes up about half of the entire banking system these days, and right now the shadow banking system is looking distinctly wobbly in Europe. Somebody needs to prop it up to stop a run, and that somebody is the European Central Bank. So far, though, they aren’t stepping up to the plate. The best case scenario is that Noah Millman is right, and they’re just playing a very high-stakes game of chicken in order to advance German interests:

    One way of looking at the sequence of events is to say that the ECB was willing to permit contagion in order to wring out inflation. I think a better way of looking at it is to say that the ECB was willing to threaten Italy with insolvency in order to give Germany more formal control over Italy’s finances. That’s incredibly hard-ball politics, but if you are not accountable to anybody (which the ECB, basically, is not) then you can play really, really hard-ball politics.

    When somebody eventually makes a movie about this, perhaps it will be called Seven Days in December. I hope it has as happy an ending as the original.

  • Healthcare’s Unlucky Duckies


    Via Stephanie Mencimer, Christopher Conover at the conservative American Enterprise Institute recently highlighted a well-known fact: in any given year, 1% of the population accounts for a fifth of all healthcare spending and 5% accounts for nearly half of all spending:

    We have become so accustomed to health coverage that functions as prepaid healthcare rather than as insurance against unknown risks that this distinction escapes many people (including policymakers). In a perfect world, we would have universal coverage against the risk of landing in the health spending 1 percent. Most people would gladly pay $1,161 to avoid facing bills of $116,000. But not everyone can afford to do so. …[This is] why one Republican presidential candidate observed, a half decade ago, that “Health is about 30 times more difficult than national security.” Perhaps it’s worth having a Republican presidential candidate debate on this issue alone.

    Yes, perhaps it is.

  • Tuesday’s Headlines


    Here are the headlines that have greeted me in my first few minutes of consciousness this morning:

    American Airlines files for bankruptcy as losses mount

    States face a crushing economic outlook, fiscal survey says

    Home Prices Decline

    Businesses Scramble as Credit Tightens Across Europe

    ‘I fear German power less than I am beginning to fear German inactivity’

    Militants Turn to Death Squads in Afghanistan

    Radiation covers 8pc of Japan

    On the bright side, Facebook seems to believe that it’s worth $100 billion. That’s good news for about 500 shareholders, anyway.

    I shall now go to the breakfast table and see if I can do something about my blood sugar level. Maybe things won’t all seem so bad when I get back.

  • Chart of the Day: Synchronized Cliff Diving


    Last week I blogged about a new paper suggesting that the European and the U.S. economies are more interconnected than most people think. The basic story had to do with credit conditions: Starting around 1999, European banks began to supply (or recycle) a lot of America’s credit, and this means that when European banks start deleveraging it’s likely to produce a severe credit contraction in the U.S. as well.

    That conclusion was a little speculative, but you may recall that last week I also posted a chart showing that industrial orders had plunged 6.4% in the eurozone in September. Today, Tim Duy overlays U.S. industrial orders on the same chart and produces some sobering news:

    Not a perfect match, but enough to suggest the idea of substantial decoupling looks like more myth than reality, especially in the face of a severe recession….Bottom Line: Don’t take US resilience for granted this time around — Europe is getting ugly, and it is far too late to prevent severe recession. The best policymakers can hope for at this point is too avoid a depression.

    Correlation is not causation. But whatever the reason, it sure looks as if the U.S. and European economies really are linked closely in some fundamental ways — which shouldn’t be too surprising since Europe is our biggest trading partner and their banks are pretty tightly joined to the U.S. market. If Europe tumbles — and it sure looks likely that it will — we’re likely to tumble too.

  • The Peculiar Story of Mitt Romney’s Peculiar Temper


    A friend points me to a TNR article subtitled “The peculiar anger of Mitt Romney,” and it’s peculiar all right. There’s a lot of theorizing about where Romney’s anger comes from, but there’s not much evidence of this supposed anger in the first place. Despite his long and public career, the piece is only able to dredge up four examples of Romney losing his temper over the course of 30 years. In fairness, three of those examples are from the past decade, which suggests that maybe he loses his temper once every two or three years.

    Something tells me this isn’t something to worry about too much. Let’s get back to talking about his hair and his flip-flopping, OK?

  • Mitt Romney vs. the DNC


    For the last month or so, Team Obama has been pummeling Mitt Romney. The DNC’s latest is on the right, and Andrew Sullivan has a shorter version here. He also links to J.P. Green, who says:

    I gather the strategy behind the ad is that Mitt Romney is the GOP’s most formidable opponent for President Obama, and weakening him now could help one of the more vulnerable Republican candidates get the GOP nod, thereby improving Obama’s reelection prospects. The strategy is a bit risky in any case. The GOP has other candidates who are electable in a declining economy, despite the clown show of recent months.

    I confess that I’m a little curious about this. Are they really trying to rough up Romney enough that a patsy like Gingrich ends up with the nomination? Or are they doing it because they want to run against Romney and they know that attacks from Obama make him more credible in the eyes of the tea party? Or maybe because they think Romney is going to win the nomination regardless and they just want to set the narrative early?

    This is mostly just idle curiosity on my part. I don’t really care all that much, and the big picture is pretty simple: modern campaigns simply attack earlier and earlier every cycle. Still, I do wonder what the real strategy is here.

  • How 2008 Radicalized Me


    Now that Bloomberg has peeled another layer off the Federal Reserve onion, we know a bit more about just how much money they spent rescuing the banking system in 2008. Matt Yglesias sums up his reaction, and I think he gets it exactly right:

    NOT SCANDALOUS—Lending vast sums in a banking panic.

    DUBIOUS—These weren’t penalty rates.

    DEFENSIBLE—Erring on the side of activism.

    THE REAL SCANDAL—Abandoning activism for the rest of us: If I had fully understood what the Fed was doing in the fall of 2008 and the winter of 2008-2009, the truth is that I would have defended it all…The real scandal has only emerged with clarity in the subsequent years. Having ensured the basic stability of the banking system, monetary policymakers in America proceeded to forget all about their go-getter attitude and ability to reach deep into the practical and legal toolkit in order to get what they want. We’re heading into the winter of 2011, with three years of mass unemployment under our belt and no end in sight. That’s not happening because the Fed was too generous with the free money for banks at the height of the crisis. It’s because once the acute phase of the banking crisis ended, suddenly we returned to small thinking and small-c conservatism. But it can’t be both. If in a time of crisis, the right thing to do is to get “crazy” then there’s plenty more crazy stuff the Fed could be doing to boost overall spending in the American economy. Or if the right thing to do is to stay orthodox and ignore the human consequences, then there was no reason not to stay orthodox three years ago and refuse to lend at anything other than a penalty rate.

    Yes, we aimed a big bazooka full of money at the banksters in 2008. That’s galling, and there’s a good case to be made that we should have done it differently. Maybe more executives should have been fired, maybe the Department of Justice should have tossed more Wall Street traders in jail, and maybe a couple of big money center banks should have been placed in temporary receivership. But even conceding all that, the Fed and Congress (kicking and screaming, but eventually doing the right thing) saved the banking system, and that had to be done. There’s a certain amount of unfairness that’s inherent in any banking rescue, and I can live with that when the alternative is a second Great Depression.

    But hoo boy, what a contrast with how the rest of us were treated. Things like principal write-downs, second waves of stimulus, aid to states, and mortgage cramdown all got a bit of idle chatter but were then left to die. For some reason, it would have been unfair to hand out money to profligate homeowners, state and local workers, and the millions who have been unemployed for more than a year.

    And yes, in some cosmic sense, perhaps it would have been unfair. Massive financial crashes always produce some inherent unfairness. For some reason, though, we were willing to overlook that unfairness when it was Wall Street that came begging but became obsessed with it when all the rest of us came begging.

    This is how 2008 radicalized me. It’s one thing to know that the rich and powerful basically control things. That’s the nature of being rich and powerful, after all. But in 2008 and the years since, they’ve really rubbed our noses in it. It’s frankly hard to think of America as much of a true democracy these days.

    Front page image: Jacob Anikulapo/Flickr

  • Fat Kids, Skinny Kids


    If you take populations as a whole, you find that they become fatter as they become more developed. That’s because they have more money, their lifestyles are more sedentary, and they eat more processed food that’s high in fat and sugar.

    But what about individuals? What explains why some kids are overweight and others aren’t? Sarah Kliff gives us a tutorial:

    Studies have found that, of the many home-environment factors at play, maternal obesity is the best predictor of childhood obesity, even more so than low family income or less cognitive stimulation.

    But more recent research, particularly a highly cited study in the American Journal of Clinical Nutrition, suggested that was more a question of genes than habits. The study, which followed 5,092 pairs of British twins ages 8 to 11, found that the most influence parents have on obesity is actually genetic, a factor of inheritance, rather than the environment. “Contrary to widespread assumptions about the influence of the family environment, living in the same home in childhood appears to confer little similarity in adult BMI [body mass index],” authors Jane Wardle, Susan Carnell, Claire Haworth and Robert Plomin write.

    ….“Although contemporary environments have made today’s children fatter than were children 20 years ago, the primary explanation for variations within the population, then and now, is genetic differences between individual children,” they write.

    This hardly absolves parents from trying to instill good eating practices in their kids or the food industry from assaulting the airwaves with fat-laden crap. But it does suggest that maybe we should ease up on all the brickbats aimed at bad parenting. In many cases, the modern food industry is knocking on an open door.

  • Chart of the Day: What a Central Bank Does


    The chart above is from Bloomberg, and it’s an example of how much liquidity the Fed pumped into the banking system during the height of the financial crisis in 2008. Felix Salmon explains what it means:

    Ladies and Gentlemen, this is what a lender of last resort looks like….On September 16, 2008, Morgan Stanley owed $21.5 billion to the Fed. The next day, that number doubled, to $40.5 billion. And eight working days later, on the 29th, the bank’s total borrowings from the Fed reached $107 billion. The Fed didn’t blink: it kept on lending, as much as it could, to any bank which needed the money, because, in a crisis, that’s its job.

    Why is this relevant today? Because the European banking system has gone from bad to worse in just the last few days and Europe desperately needs a lender of last resort now. Unfortunately, it doesn’t have one because the European Central Bank is either unable or unwilling to take on the role. Here is Wolfgang Münchau:

    In virtually all the debates about the eurozone I have been engaged in, someone usually makes the point that it is only when things get bad enough, the politicians finally act — eurobond, debt monetisation, quantitative easing, whatever. I am not so sure….With the spectacular flop of the German bond auction and the alarming rise in short-term rates in Spain and Italy, the government bond market across the eurozone has ceased to function.

    The banking sector, too, is broken. Important parts of the eurozone economy are cut off from credit. The eurozone is now subject to a run by global investors, and a quiet bank run among its citizens….Technically, one can solve the problem even now, but the options are becoming more limited. The eurozone needs to take three decisions very shortly, with very little potential for the usual fudges. First, the European Central Bank must agree a backstop of some kind….

    Like Münchau, I’ve long been a member of the “when things get bad enough” school, but my faith is being sorely tested. This is likely to be a very, very bad week in Europe.

  • Skilled Jobs Go Begging? Not Quite.


    The Wall Street Journal has a piece up this weekend about the difficulty that many companies are having hiring skilled workers in certain areas. I don’t doubt that this is true. For a variety of reasons, I imagine that the number of people willing to invest the time it takes to learn these kinds of jobs has declined in recent years. But there’s more to this story than meets the eye. Here’s a description of some skilled job openings at Union Pacific railroad:

    When the railroad had openings for diesel electricians earlier this year, it took [Ferrie] Bailey 10 hiring sessions to fill 24 jobs….Known as “installation technicians,” the workers are responsible for putting in and maintaining a sprawling network of cable, microwave relays and related equipment that enables the railroad to monitor 850 trains running daily along its 32,000 miles of track.

    This doesn’t require a bachelor’s degree but demands technical skills gained either through an associates’ degree or four years of experience in electronics. And it is grueling work. Technicians have to climb 50-foot communications towers, clamber up utility poles and work outdoors through Wyoming winters and Kansas summers. They put in 10-hour days, in clusters of eight or ten days, and are routinely away from home more than half of each month.

    ….Standing at the front of the room, Ms. Bailey described the deal. As installation technicians, they would earn $21.64 an hour, or close to $48,000 a year for the railroad’s regular work schedule.

    Then there’s this:

    After a website job posting, Ms. Bailey initially drew 58 applicants. Of them, she deemed about two dozen sufficiently qualified so that she invited them to take a $25 aptitude test, at their own expense.

    Let me get this straight. Union Pacific is supposedly desperate for candidates and can barely fill all their open positions. And yet, when they identify 24 qualified applicants, they aren’t even willing to maximize their hiring pool by ponying up $600 to make sure they all take the aptitude test. Then, later in the story, there’s this:

    Ms. Bailey faced more stiff competition at a job fair the next day, because then she was up against several other employers looking for the same sort skilled people as she was. “Make $70,000 – $80,000 the first year with FULL BENEFITS,” read a sign at a booth right across from Ms. Bailey’s at the job fair, put on by the U.S. Army in Fort Carson, Colo., largely to help departing soldiers ease back to civilian life.

    So here’s the story. Union Pacific is offering $48,000 per year for skilled, highly specialized, journeyman work that’s physically grueling and requires workers to be away from home about half of each month. The competition is offering 50% more, but not only is UP not willing to increase their starting wage, they’re so certain they can fill all their positions that they make qualified candidates pay for their own aptitude test. And despite all this, they filled all 24 of their positions in ten hiring sessions.

    It doesn’t sound to me like there’s a huge shortage of qualified workers here. It sounds to me like Union Pacific is whining about the fact that it took them all of ten hiring sessions to fill their quota even though this is a really tough job and they aren’t paying market rates for workers. It’s as if they think that actually having to make a modest effort to attract job candidates is an inversion of the natural order or something. Speaking for myself, I think I’ll hold off on breaking out the violins.

  • Can Unions Be Saved By Making Them Weaker?


    Reihan Salam directs us to an essay about labor unions by Alan Haus, an IP and employment law attorney in San Francisco. Haus thinks that conservatives ought to be more supportive of the power of labor unions in promoting higher wages:

    There is much that could be said about the economic effects of promoting higher wages. For Republicans, the disadvantages should be trumped not only by the advantages but also by a vital consideration of political philosophy: the society of limited government to which most Republicans aspire will only come about in the real world if most Americans earn enough money to save for retirements and college educations, and provide for their long-term healthcare through substantially private markets. Achieving this requires some measure of support for a high wage economy.

    But Haus is a lot less enthralled with every other aspect of organized labor:

    ….The central problem with private sector unions is that under current labor relations regimes they stifle economic innovation….[This] starts with the litany of subjects on which collective bargaining is not only permitted, but in many cases mandatory. The only mandatory subject of bargaining in the 21st century should be employee compensation.

    Radically different employee associations that don’t suffocate both their companies and their members need to be created….Congress should authorize employee associations that are easier to form than current unions, but which do not have the power to interfere with managerial prerogatives (which is pretty much every subject other than employee compensation as determined by a collectively bargained contract).

    The idea here, I guess, is that there would be two distinct kinds of labor unions authorized and protected by law. The first kind would be the ones we have now, which are extremely difficult to create. The second kind would be restricted to bargaining over wages and benefits, but would be much easier to create. With this kind of “Union Lite” available as an option, perhaps Wal-Mart could finally be successfully organized?

    I’m surprisingly sympathetic to this notion, though it’s obviously pie in the sky. As Haus mentions elsewhere, existing labor unions would oppose it and therefore Democrats would oppose it too. Likewise, although perhaps corporations and rich people should be in favor of organizations that promote higher wages for the working and middle classes, they aren’t. Therefore Republicans would also oppose this idea.

    Beyond this, there are obvious problems with wage-only unions. I’ve long supported organized labor because it’s the only large-scale countervailing power that promotes the economic interests of the middle class against the interests of the corporate community. At the same time, I’ve long recognized that telephone-book size contracts stuffed with endless picayune work rules are genuinely corrosive. But where do you draw the line? I agree that unions would be far more acceptable to management, and far more useful to their members, if they spent less time fighting for rigid job classifications and money-wasting featherbedding clauses. But what about safety regs? I’d love to think that we could just trust MSHA to enforce safe practices in coal mines, but that would be naive. It’s the UMW that’s been mostly responsible for progress on that front.

    Still, this is an interesting suggestion. Whatever you think of them, unions in their existing form are dying, and there’s little reason to think that’s going to change. I acknowledged this when I wrote about unions earlier this year (“Why Screwing Unions Screws the Entire Middle Class”) and argued that we needed something to replace them, “a countervailing power as big, crude, and uncompromising as organized labor used to be.” Haus’s proposal won’t be adopted anytime soon, but at least it’s a useful idea: a new union movement that trades a bit of power in one area (work rules) for more power in another (much greater density in the private sector). It’s something to think about.

  • Hollywood vs. the NFL


    I’ve been trying to figure out why my interest in pro sports has waned in recent years, and today’s announcement of a possible agreement between NBA owners and players to end their lockout gives me an excuse to toss out a theory. I’m not sure I even really believe this, but I’m sort of wondering if it resonates with anyone else.

    The theory is about money, of course. That part probably comes as no surprise. Basically, my problem is that pro sports franchises these days are so obviously mere businesses that it’s hard to convince myself I should care about them as teams anymore. From strikes to lockouts to luxury boxes to free agency to government handouts for lavish stadium projects, the P&L permeates everything.

    But here’s what interests me: For some reason, I don’t feel this way about Hollywood even though it’s gone down exactly the same route. The studios are all corporate subsidiaries these days, stars are paid astronomical amounts, production companies routinely extort subsidies from states and cities, writers and others have gone on strike repeatedly, and newspapers sometimes seem to pay more attention to weekend grosses than they do to the movies themselves.

    So why is it that the corporate nature of pro sports seems so obvious and so alienating to me, but Hollywood has, somehow, managed to embrace it in a way that doesn’t bother me as much?

    Note that I use the word “embraced” deliberately. My sense is that I dislike pro sports because at the same time that it’s all become so obviously corporate, their marketing machine is based increasingly on the pretense that everyone is just playing for the love of the game and that’s how fans should engage with their product. Hollywood, conversely, seems more honestly avaricious. It’s all about money, but they celebrate it instead of pretending that we should engage with their product solely as art. It’s not that they don’t talk about their craft. They do. But it feels like they acknowledge the business side of things more openly and more boisterously, usually with a wink toward the audience. It’s all part of the game.

    I dunno. Have I just been traumatized by a decade of Frank McCourt and NFL mendacity in Los Angeles? Or does this actually make any sense?