Kevin Drum

Unions and Inequality

| Tue Apr. 14, 2009 11:12 AM EDT

The Employee Free Choice Act would make it easier for workers to organize new unions.  This would probably increase unionization in the United States, and unsurprisingly, corporate America is fighting EFCA like a pack of crazed weasels.  But today Lane Kenworthy points out something that's also been in the back of my mind during this whole debate: just how big a deal is EFCA, anyway?  Why the full court press against it?  Right now, private sector union density in the United States is around 8%, and if I had to guess I'd say that EFCA might — might! — increase that to 10% or so.  Maybe even 11%.  Is that really worth going nuclear over?

Kenworthy's own skepticism is mainly based on the chart on the right.  Sure, America has uniquely unfriendly labor laws these days, but outside of Scandinavia, where union membership is required to remain eligible for unemployment benefits, unionization has been dropping like a stone practically everywhere.  So just how much impact do different regulatory regimes have, anyway?

Not too much, probably, and Kenworthy suggests that the bigger issue isn't unionization per se, but laws that extend union wage agreements throughout an entire industry, even to firms that aren't unionized.  This practice is widespread in Europe but practically unknown here.  Kenworthy:

I would like to see EFCA become law. The ability of workers to bargain with management collectively rather than individually is, in my view, an important element of a just society, and these days the playing field is too heavily tilted in management’s favor. But I doubt EFCA will get us very far in reducing income inequality. Extension of union-management wage settlements would likely have a bigger impact, but at the moment that isn’t even part of the discussion.

And not likely to be, either.  We have a long way to go.

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The Los Angeles Times

| Tue Apr. 14, 2009 10:48 AM EDT

We were chatting about the LA Times during dinner on Sunday, and it turns out that pretty much everyone in my family wonders how much longer we're going to read it.  The conversation got started when I mentioned that I used to link to LAT stories fairly frequently on the blog, but that I find myself doing this very rarely anymore.  I deal almost exclusively with national and international news here, and in the past the Times frequently covered different stories, or had different takes on the same story, that provided a perspective the other national outlets didn't.  Today, not so much.  It's mostly just routine coverage of the standard set of major events.  You can read the whole paper in a few minutes.  And the op-ed page is so consistently dull that I barely even skim it these days.

What's more, our subscription costs $42 per month.  Marian pays the bills around here, so I hadn't seen a LAT bill for ages, and I was surprised the cost had gotten so high.  I've been reading the Times since I was five, but now I'm beginning to wonder how much longer I'm going to bother paying $500 per year for a paper that's such a shadow of its former self.

There's nothing new here, of course.  It's just part of the decline of American newspapers generally.  But suddenly it feels an awful lot more real around here.

Quote of the Day - 4.14.09

| Tue Apr. 14, 2009 9:59 AM EDT

From conservative Bernard Goldberg, talking to Sean Hannity about the right's obsessive effort to find fault with Barack Obama's handling of the Somali pirate affair:

"I'm sorry, Sean....but we have to stop going out of our way to find fault with every single thing he does.... If something bad happened here, and thank God it didn't, but if something bad happened here, I guarantee you, I'll tell you who would have been leading the crusade against him: you."

Jeez, even Bernard Goldberg sees this?  Wingers take notice.

Coleman's Appeal

| Mon Apr. 13, 2009 7:08 PM EDT

From USA Today:

A Minnesota court court has confirmed that Democrat Al Franken won the most votes in his 2008 Senate race against Republican Norm Coleman, The Associated Press reports.

But, as the saying goes, it ain't over til it's over. Coleman already had said he would appeal such a decision to the state Supreme Court. He has 10 days to file.

So here's something to watch for: how long will it take Coleman to file his appeal?  He's known this decision was coming for a long time.  His legal team almost certainly knew the grounds on which he was going to lose.  They've had plenty of time to prepare their argument.  They could probably file it tomorrow if they wanted to.

But do they want to?  If they're genuinely trying to win a Senate seat, they'll file quickly.  After all, the faster they file, the faster Coleman can win the case and return in triumph to Washington.  But if they don't think they can win — if they're merely trying to stretch out a losing argument as long as possible in order to deny Franken his seat — then they'll wait the ten full days.  Which do you think it will be?

The Power of Lobbying

| Mon Apr. 13, 2009 12:19 PM EDT

The Washington Post reports on a new study about the fantastic efficiency of K Street lobbying:

In a remarkable illustration of the power of lobbying in Washington, a study released last week found that a single tax break in 2004 earned companies $220 for every dollar they spent on the issue — a 22,000 percent rate of return on their investment.

The study by researchers at the University of Kansas underscores the central reason that lobbying has become a $3 billion-a-year industry in Washington: It pays. The $787 billion stimulus act and major spending proposals have ratcheted up the lobbying frenzy further this year, even as President Obama and public-interest groups press for sharper restrictions on the practice.

The paper by three Kansas professors examined the impact of a one-time tax break approved by Congress in 2004 that allowed multinational corporations to "repatriate" profits earned overseas....The researchers calculated an average rate of return of 22,000 percent for those companies that helped lobby for the tax break. Eli Lilly, for example, reported in disclosure documents that it spent $8.5 million in 2003 and 2004 to lobby for the provision — and eventually gained tax savings of more than $2 billion.

Not bad!  But Eli Lilly is a piker.  Pfizer saved a cool $11 billion.  Here's the Top Ten:

Honesty compels me to to point out that this research overstates the value of lobbying by choosing only a single, particularly lucrative tax break to examine.  The overall return on lobbying investment for business interests is probably no more than, oh, three or four thousand percent.  Hardly worth getting in a lather about, really.  Please go about your business, citizens.

Millionaire Journalists

| Mon Apr. 13, 2009 11:47 AM EDT

Bob Somerby has an assignment for some enterprising reporter:

Yesterday, Parade magazine offered a regular feature: “What People Earn: Our Annual Report.” Out on the cover and inside the magazine, Parade let us see how much people earn in all the various occupations.

Well — in all the various occupations but one. By our count, Parade offered head shots, with annual earnings, for 71 different people. There was a teacher, a pilot, a CEO and a realtor — two singers, a rapper and a big famous film star. But one occupation was oddly missing. No journalist could be found in the mix!

How much are major journalists paid? Major journalists rarely discuss that.

....Next year, could this feature include the earnings of some big major journalists? How much is Maureen Dowd paid, for example? Why can’t she and Rich grace Parade’s famous cover? We have literally never seen an estimate of Dowd’s yearly swag. We’re also curious how much she paid for JFK’s pad — how she managed to land such a pad even before she became a big columnist. Big journalists ask questions like that about everyone — except about other big journalists.

Well, maybe there were no big journalists, but in the online version they did include sports blogger Josh Bacott, who makes $10,700.  And TV news reporter John Dougherty, who makes $25,500.  So they're trying!  But sadly, no Dowd.  Maybe next year.

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Big Banks

| Mon Apr. 13, 2009 10:55 AM EDT

Ezra Klein writes that big banks are bad for small depositors:

They're about the pros rather than the amateurs. Which may be why they're so cavalier about exacting fees and penalties on individual depositors at levels they'd never consider applying to professional markets. Indeed, pretty good research suggests that as banks get bigger — which tends to mean more competitive on the global financial market — they begin charging consumers more.

This seems to be true.  Take a look at the chart on the right from today's Wall Street Journal.  It shows that banks receiving bailout funds have increased fees at a far higher rate than banks that haven't.

Does this show that banks receiving federal assistance are more likely to raise their fees and penalties?  Of course not.  This trend is nine years old.  However, it's big banks that have received most of the TARP money, so you can pretty much replace "Banks receiving TARP funds" with "Big banks."  So what the chart shows is that big banks have increased their fee and penalty structure far more than small banks.

Why?  Because they can.  And in the past they've wielded enough political power to prevent Congress from doing anything about it.  If there's any justice — and needless to say, that's still an open question — those days are finally gone.

Obama and the Pirates

| Mon Apr. 13, 2009 10:16 AM EDT

The Washington Post reports on the rescue of the captain of the Maersk Alabama from Somali pirates:

The result — a dramatic and successful rescue operation by U.S. Special Operations forces — left Obama with an early victory that could help build confidence in his ability to direct military actions abroad.

....The operation pales in scope and complexity to the wars underway in Iraq and Afghanistan....Nonetheless, it may help to quell criticism leveled at Obama that he came to office as a Democratic antiwar candidate who could prove unwilling or unable to harness military might when necessary.

You know, normally I'd say this was kind of ridiculous.  The Navy Seals who led the operation deserve tons of credit, but it really doesn't say very much about the president.

But I'll make an exception this time.  The right-wing criticism of Obama during the incident got so over-the-top that at times you'd have thought Obama was ready to invite the Somali pirates over for tea.  That was ridiculous.  So if this shuts them up for a few moments, it will be a well-deserved few moments of silence for Obama.

Friday Cat Blogging - 10 April 2009

| Fri Apr. 10, 2009 2:02 PM EDT

Today we have rare footage of Inkblot and Domino sleeping.  Together, that is.  Look: their feet are almost touching!  Isn't that exciting?

Well, it passes for excitement around here, anyway.  May your weekend be equally exciting.

Boring is Good

| Fri Apr. 10, 2009 1:43 PM EDT

Paul Krugman wants banking and finance to become boring again:

The banking industry that emerged [in the 1930s] was tightly regulated, far less colorful than it had been before the Depression, and far less lucrative for those who ran it. Banking became boring, partly because bankers were so conservative about lending: Household debt, which had fallen sharply as a percentage of G.D.P. during the Depression and World War II, stayed far below pre-1930s levels.

Strange to say, this era of boring banking was also an era of spectacular economic progress for most Americans. After 1980, however, as the political winds shifted, many of the regulations on banks were lifted — and banking became exciting again....And the meltdown came.

....But my sense is that policy makers are still thinking mainly about rearranging the boxes on the bank supervisory organization chart. They’re not at all ready to do what needs to be done — which is to make banking boring again.

Part of the problem is that boring banking would mean poorer bankers, and the financial industry still has a lot of friends in high places. But it’s also a matter of ideology: Despite everything that has happened, most people in positions of power still associate fancy finance with economic progress.

This is right on target.  High finance is always going to be more exciting than, say, running a regulated electric utility, but it shouldn't be a lot more exciting.

I've had the same thought on a narrower scale too.  There's a real sense in which credit derivatives and structured finance — things like credit default swaps and CDOs — are genuinely useful.  They shouldn't be outlawed.  But if they're done properly, the spreads on these instruments ought to be pretty thin.  Selling CDS ought to be about as exciting as selling property insurance and selling CDOs ought to be about as exciting as running a mutual fund.  But when you get to a point where merely packaging a bunch of securities and then rearranging them makes them suddenly far more lucrative — a blatant violation of the Law of One Price — you should know immediately that something is badly wrong.  These things should be reliable money spinners, but not much more.

So what's the best way of shrinking the financial industry and making it more boring?  This is plainly the key to any future regulatory reform.  Trying to cap pay, or even trying to reform how pay is established, is a hopeless task as long as the industry itself is huge and swimming in money.  But if you shrink the industry, pay takes care of itself.