Over the weekend the Washington Post ran a story about a DC lawyer who enriched herself by taking advantage of a contracting program intended to help poor Alaska natives, even though she isn’t an Alaska native. She won $500 million in federal contracts and paid herself and her family hundreds of thousands of dollars along the way. David Boaz comments:

And so far this impressive story by Robert O'Harrow Jr. has generated 4 comments, 7 tweets, 11 "likes" on Facebook, and only one other blog post that I can find. Are we so jaded that a full-page investigation of self-dealing and corruption involving affirmative action, small business, defense contracting, and complicated financial maneuvers just doesn't get our juices flowing?

Jaded? Maybe that's the right word. More concretely, though, I think the problem is that although the details of this specific case are new, nothing else is. In fact, this scam is almost legendary. The basic program to help Alaska natives was set up back in the 60s, but in the ensuing decades a series of changes were made that allowed it to be widely abused — and these changes were made very deliberately, very ideologically, and with the very determined help of former Alaska Sen. Ted Stevens. Here is Benjamin Wallace-Wells, in the Washington Monthly six years ago, describing how one particular tribe tapped into this latter day gold rush:

Stevens eventually inserted an exemption in the land claims settlement act that allowed native corporations to ignore sole source contracting limits....The senator worked to obtain additional benefits for them — most notably, loopholes in tax law — but by 1992, the corporations were still having a hard time getting their feet on the ground. That's when Chugach, down to 12 employees and in bankruptcy, hired Mike Brown....Brown convinced the SBA to list Alaskan natives as eligible for minority small business loans, and realized, with gathering excitement, that they had unique access to sole-source contracts.

....By law, minority-owned corporations and their subsidiaries are required to actually have a minority as CEO....Stevens soon got his colleagues to pass legislation exempting native companies from the minority CEO rule. Then Chugach grew too big to qualify for programs favoring small businesses; Stevens lobbied for and passed an amendment letting native corporations retain their small business status regardless of how large they become. And when Chugach began to approach the nine-year limit for a single company's participation in the small business program, Stevens won yet another statutory break allowing Alaskan native firms to create endless new subsidiaries so that the parent firm could have indefinite access to contracts.

....Yet another party stood to benefit from native contracting. By 2001, Bush administration officials saw in the sole-source exemption a way to privatize government quickly. That year, a joint venture of two native corporations — Chenega and Arctic Slope — won a no-bid, $2.2 billion deal to operate the Defense Mapping Agency, which uses sophisticated computer modeling to map potential battlefields. The companies didn't have any of the technical experience these contracts demanded, but they did have something else. Unfettered by the need to provide civil service protections to their employees, they cut staff and streamlined operations more aggressively than the federal government itself could have.

[Etc. etc.]

Indian tribes aren't the only ones eager to see the exemption expanded. While some in Washington are uneasy about its costs and corrupting effects, many in the GOP leadership view it as a model for the kind of federal government they would like to see more of. It is a privatized system that circumvents the civil service, enriches politically-connected corporations, provides a trickle of money to the poor, and secures Republican power. For some conservatives, in other words, the Eskimo loophole is not a failed experiment in social engineering. It is the future.

So there you have it: it's basically GOP-friendly privatization run wild, and the rules that allowed the abuse O'Harrow uncovered were no accident. They were all part of the plan.

Here's a Twitter conversation from a few minutes ago:

Now that I've got the MoJo vote locked up, I wonder what other people think about this? I should point out clearly that I'm not saying this was necessarily a deliberate strategy on President Obama's part. Still, it strikes me that if the United States had aggressively endorsed action against Libya from the start, this would have created a tremendous amount of suspicion around the world about our intentions, and that might have been enough to derail global support. It would have been, yet again, America plus a few allies vs. everyone else. As it's played out in real life, however, other countries have taken the lead, which forces them to be truly committed to this operation, and opposition has been muted because the whole thing didn't turn into yet another big power pissing match.

Yes? No? What says the commentariat?

I really don't want to beat the NPR/Ron Schiller affair to death, but I guess I'm going to anyway. I continue to think that Schiller flatly did nothing wrong — at least, nothing wrong in the actionable, firing sense of the word — and I continue to be bugged by the fact that virtually nobody seems to agree with me about this. Even reporters who have finally listened to James O'Keefe's entire sting video, and now understand just how deceptively it was edited, always add a "to be sure" like this one from Time's James Poniewozik:

Whether you agree with [Schiller] or believe he's lumping economic, small-government Tea Partiers with Evangelical Christians, the fact that he's offering this political speech while representing NPR would probably be enough to get him in hot water.

Poniewozik is talking about Schiller's infamous statement that tea partiers tend to be racist and xenophobic. But here's what Schiller said right before that:

Now I'll talk personally, as opposed to wearing my NPR hat....I grew up a Republican, and am proud of that, even though I've voted mostly Democratic lately. I like the Republican Party in terms of fiscal conservatism and the fact that the Republican Party of old really believed that government has no role in personal lives, in family lives, and that government is really about other things.

So here's my question: why is nobody outraged about this? An NPR executive was caught on video saying that he admires the Republican Party's fiscal conservatism! He's obviously taking sides here and implicitly criticizing Democrats for fiscal profligacy. Is that allowable behavior?

Look: it's either a fireable offense for an NPR executive to take a political position in a private conversation or it's not. This isn't a question of whether Schiller was right or wrong. As it happens, I think he's wrong on both counts: I don't think racism is a primary motivating force behind the tea party movement, and I obviously don't believe the Republican Party is even remotely fiscally prudent. Still, there's plenty of survey evidence suggesting that tea partiers, as Jon Chait puts it, "hold distinctly reactionary views on racial issues," just as there's an argument to be made that Republicans are more fiscally prudent than Democrats. Neither view is outrageous enough to get you banned from polite society, nor should they be.

So again: it's not really a matter of the context of Schiller's remarks (though his caveat about taking off his "NPR hat" is obviously relevant). Nor is it a matter of whether it's politically counterproductive to say the things Schiller did (it probably is). Rather, it's a matter of whether an NPR fundraising executive is allowed to express provocative but widely held political opinions in a private conversation. If he's not, then we should be just as outraged about his admiration of the GOP's fiscal conservatism as we are about his belief that tea partiers are xenophobic.

It looks like we're going to get a no-fly zone over Libya after all. The UN Security Council plans to vote on one tonight, and the resolution is expected to pass:

Ambassadors met in the early part of the day to go over the draft resolution written by Lebanon, France and Britain that aims to establish the No-Fly Zone requested by the Arab League. Diplomats said some changes were made, but language authorizing states to take "all necessary measures" to enforce the ban on flights remained. Those measures could include targeted air strikes on Libyan military defenses. But the text excludes the possibility of an "occupation force”"

But there's more:

A source at UN headquarters in New York said military forces could be deployed "within hours" of a new security council resolution calling for states to protect civilians by halting attacks by Muammar Gaddafi's forces by air, land and sea.

The resolution would impose a no-fly zone over Libya — but a no-fly zone was no longer enough, the source said. "The resolution authorises air strikes against tank columns advancing on Benghazi or engaging naval ships bombarding Benghazi," he said.

That sounds an awful lot like a declaration of war against Libya, doesn't it? I sure hope this works.

The New York Times announced today that it will put up a paywall at the end of March. Felix Salmon points out that the pricing is kind of weird:

$15 per four-week period gives you access to the website and also its smartphone app, while $20 gives you access to the website also its iPad app. But if you want to read the NYT on both your smartphone and your iPad, you’ll need to buy both digital subscriptions separately, and pay an eye-popping $35 every four weeks. That’s $455 a year.

....The pricing structure is also a strong disincentive to use the iPad app at all, of course. If you’re already paying $15 every four weeks to have full access to the website, why on earth would you pay extra just to be able to read the paper on its own dedicated app rather than in Safari? I, for one, prefer the experience of reading nytimes.com on the web on my iPad, rather than reading an iPad app which has no search, no links, no archives, no social recommendations, etc etc. If the NYT wanted to kill any incentive to read and develop its iPad app, it’s going about it the right way.

Maybe so. Or maybe the Times plans to improve their iPad app to make it worth the extra money? Beats me.

Overall, Felix is pretty down on the paywall, but then, he's down on most paywalls. I'm a little happier about it than he is. Overall, the Times seems to have struck a decent balance here: you get 20 views free per month before the paywall kicks in, and you can follow links from other sites (blogs, Facebook, etc.) free. This will generate a bit of revenue from serious readers who routinely read the Times heavily, but keeps the Times widely available to casual users and also keeps them front and center among the kinds of sites that refer lots of traffic and drive online conversation. That works for me pretty well. I don't like linking to pieces that my readers can't get to (sorry about that, New Republic), but the Times paywall doesn't interfere with that. I'll have to subscribe myself, of course, but that's OK. I'm a heavy user, and there's no reason not to ask heavy users to pay for online content.

It's true, as Felix says, that a rough calculation suggests that the paywall won't initially generate a ton of revenue for the Times. Still, I really don't see a business model going forward in which companies like the Times continue to lose print subscribers as they give away their product online. One way or another, news readers have to get used to paying for content that they use heavily, and they might as well start getting used to it now. After all, if the Times, which is easily the best general purpose news outlet in the country, can't convince people to pay for their stuff, then who can?

From David Roberts, who continues to have trouble generating the proper amount of cynicism in his daily life, on power industry opposition to new rules designed to reduce mercury emissions:

What is surprising — what continually surprises me, even as cynical as I've gotten — is how seriously polluters are taken in each successive episode of air pollution regulation. By now the script is numbingly predictable: industry commissions rigged studies showing that compliance will threaten power reliability and jack up costs; independent reports show otherwise; politicians from coal states uncritically echo the industry perspective; the media he-said she-saids; and finally, years later, the regs turn out to be cheaper and easier to comply with than anyone guessed. Every. Damn. Time.

It is, truly, amazing. When it comes to the cost of environmental rules, industry scaremongering is virtually always wrong. And not just a little wrong. A lot wrong. Yet serious people continue to stroke their chins and take their pseudo-studies seriously.

Anyway, read the whole thing. Mercury is a huge health hazard, the new EPA rules have been in the works for decades, and mitigation technology is available that works pretty well at a reasonable cost. The power industry really doesn't have a leg to stand on here.

By the way, this is an example of what I was talking about the other day: if the nuclear industry ever hopes to be competitive with coal and gas-fired plants, then coal and gas-fired plants need to be forced to pay for their actual cost of operation, not just the part that doesn't include killing thousands of people a year. These new rules are a good start.

Paul Ryan has taken to asking if President Obama is "an Erskine Bowles Democrat or a Nancy Pelosi Democrat?" Well, if this is the best that Bowles can do, I guess it makes Obama's choice a lot easier:

Mr. Bowles's tone on the call was grim. "The problem is real," he said. "The solutions are all painful. There is no easy way out." At one point, he said if the country doesn't do anything to tackle the debt, "we're going to have one hell of a crisis."

....Mr. Bowles had harsh words for fellow Democrats. He dismissed the idea that raising taxes alone might help erase the deficit, saying "raising taxes doesn't do a dern thing" to address health care costs that are projected to be a big driver of future fiscal problems.

If there's anything that could be called a wonkish consensus on the left, it's this: we should eliminate the Bush tax cuts in a couple of years when the economy has recovered, and we need to rein in the long-term growth of healthcare costs. It's true that taxes don't address healthcare costs,1 but it's just sophistry on Bowles' part to put it like that. Taxes do address the medium-term deficit, and that's important. Quite separately, PPACA makes a start on holding down healthcare costs and thus addressing the long-term deficit, and I hardly know anyone on the left who doesn't agree that more needs to be done.

But I doubt that I need to tell Bowles that there are no common sense ideas along these lines actually on the table, and that's not because of his fellow Democrats. It's because of congressional Republicans, who flatly refuse to consider tax increases under any circumstances whatsoever and who have no serious ideas for addressing rising healthcare costs.

Jon Chait has more on this, including a more detailed takedown of Bowles' own proposals for healthcare, which are almost laughably inadequate.

1I'm talking about the Bush tax cuts here. As Matt Yglesias and Brian Beutler point out on Twitter, excise taxes aimed at healthcare plans can indeed slow the growth of healthcare outlays.

The Next Big One

If there's a bright side to the recent earthquake in Japan, it's the fact that it was a truly monster event. The damage has been appalling, but it's not something we should expect to see very frequently. In fact, there were only 11 of this class of "megathrust" earthquakes during the entire 20th century.

However, there have been five megathrust earthquakes in just the past five years, and Yale geophysicist Jeffrey Park says this kind of clustering is far from unprecedented. So we might be in store for a few more. And for Japan in particular, the news is even worse:

[Several years ago] Ross Stein and his USGS colleagues discovered that the stress increments of past large earthquakes were good predictors of where the next large earthquake would occur. Long after the aftershocks subsided — months, years, or decades after — another earthquake of similar size often broke within the next segment of the fault zone.

....An irregular series of large, damaging earthquakes shook the North Anatolian Fault in the twentieth century from east toward the west across modern-day Turkey, reaching the Sea of Marmara in 1999 with the Izmit earthquake....More germane to Japan, the 9.3 Sumatra-Andaman megathrust earthquake in December 2004 loaded the next subduction-zone segment to the south, and this segment generated an 8.6 megathrust event only three months later in March 2005.

No prediction can be made today for Japan, but it is safe to project a sharply increased probability for a major earthquake on the broad, simple subduction-zone segments both north and south of the Tohoku rupture zone. The segment to the south lies offshore the Tokyo metropolitan area.

I don't really have anything to say about this. It's just plain bad news. More at the link.

Ezra Klein reviews Winner-Take-All Politics in Democracy this month and provides an excellent summary of its core thesis, namely that income inequality isn't a result only of economic trends, it's also a result of deliberate political decisions. But I thought this criticism was odd:

The problem for Hacker and Pierson, in other words, is that just as the economists aren’t very convincing on the politics, they’re not sufficiently convincing on the economics. It’s true that the political system has shifted toward emphasizing the interests of the rich, and it’s true that that’s probably had a significant impact on both the rich and everyone else. But how much of an impact? And what would have happened if the distribution of political power had remained frozen at 1973 levels? That’s harder to say.

What their theory explains, in the end, is not so much why median wages stagnated and income inequality skyrocketed, but why the political system has been so feckless and haphazard about responding. A political system where unions held more clout and politicians weren’t so addicted to the money provided by rich donors would be a political system that would likely have taken some of these problems much more seriously.

Italics mine. Unless I'm reading something wrong, this isn't a criticism of Hacker and Pierson at all. Rather, it's exactly what they themselves say in the book. I don't think they claim that economic fundamentals have nothing at all to do with rising income inequality and wage stagnation, merely that politics is also involved and its influence is routinely underestimated. What's more, their "drift" theory, which Ezra describes earlier in the review, argues that a lot of this political impact on wage stagnation comes precisely from doing nothing in the face of changing economic norms. So everyone is on pretty much the same page here.

In any case, this reminds of another small point about this stuff that I've never made before. So I'll do it here. My piece about the decline of union power in the current issue of MoJo probably left the impression that I think union decline is responsible for most of the recent stagnation of middle-class wages. But that's not really the case. It just happened to be the piece of the puzzle I wanted to highlight.

Here's how I think about this. Income inequality and wage stagnation have roots in both economics and politics. For the sake of discussion, let's say that it's caused half by economic factors and half by political factors. So how big is the influence of unions here? On the economic side, a decent guess is that unions are responsible for perhaps 15-20% of rising income inequality, and since economic factors are half of the total, that comes to about 7-10% or so. But they also have an impact on the political side of things, and here I'd put their influence at more like 40-50% or so. In other words, 20-25% of the total.

Add up both their economic and political effects and union decline might be responsible for around 30% of rising income inequality.1 And the bulk of that — though not all of it — is because of their indirect effect on the political process. That's a fair amount, and well worth talking about, but it's still much less than half and it leaves lots of room for other factors. This is simply not an issue with a single simple answer.

1Obviously you can noodle around with these numbers and come up with a different total. Maybe it's really more like 20%. Or maybe 40%. I don't know. But I think this is a useful framework for thinking about this stuff.

Have you heard about the bus driver in Madison who made $160,000 last year? Since he's now the poster child for public sector largesse in the state of Wisconsin, it's hard not to have heard of him. So what's up? Greg Sargent checked into this and found that the driver, John Nelson, actually earns about $50,000 in base pay. But:

Nelson was able to earn $160,000 in 2009 not because of his annual salary, but because he worked a huge amount of overtime hours. He was able to do this because of previous rules, negotiated by Teamsters local 695, that allowed drivers with most seniority — and the highest salaries — to rack up large amounts of overtime.

....But wait, it gets better. It turns out that pointing to Nelson as an example of what’s wrong with public employee unions is thoroughly bogus in another way. According to Rusch, the city of Madison went to the bus drivers union last year and told them the rules allowing the highest-paid bus drivers to snap up the most overtime were a major problem for them. Turns out the union agreed, and renegotiated a deal to limit overtime in a way that has left Metro Transit happy. And guess what: That deal was negotiated through collective bargaining.

It's possible that Nelson is just a guy who doesn't have much of a social life and likes to work. And after all, if he didn't work the overtime, someone else would. But there's also this, from a report last year on the ongoing contract negotiations:

[City officials] declined comment on current contract negotiations, which are in binding arbitration. In May, Teamsters rank and file rejected a tentative agreement between the city and union leaders that would have changed rules that let senior drivers make tens of thousands in extra pay.

....The rules don't always mean more net overtime costs but concentrate extra pay in fewer hands. The extra pay also lets those employees boost their state retirement income, which is based on an average of the three highest earning years.

Italics mine. The whole story, then, is a familiar one. Bus drivers in Madison aren't, in general, living a cushy life. Starting drivers earn about $35,000 and Nelson, who's been on the job for 36 years, earns about $50,000. There's nothing outrageous about that.

But the rules are deliberately set up so that veteran drivers can goose their earnings for a few years at the exact time that their earnings are highest. It's no surprise that the union rank-and-file initially voted down a proposal to reform this system, since the rank-and-file understand that eventually they'll all have their own chance to goose their earnings just before retirement, thus providing them with a lavish pension. Only after arbitration and a lengthy public outcry did they finally accept changes to rein in this practice.

Not everyone takes advantage of the overtime rules to the extent Nelson has, but it's nonetheless a widely used gambit to boost retirement earnings far beyond what's fair. I don't begrudge the bus drivers their pay or their benefits or their retirement plans, but I do begrudge them this time-honored scam for putting taxpayers on the hook for excessive pensions. Nelson isn't a poster boy for overpaid bus drivers — that charge really is bogus — but he is a poster boy for this kind of pension abuse. It should stop.