Shrinking Government to a Bathtub

Internet sales continue to rise:

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

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

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

Screwing the Poor

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Defunding the Democratic Party

Protesters filled the rotunda of Wisconsin's capitol building in Madison this week to register their opposition to Gov. Scott Walker's plan to strip public employees of union bargaining rights.

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

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

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

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

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

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

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

The Other Secret Weapon of the Rich

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

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

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

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

The Secret Weapon of the Rich: Money

I've written before about Larry Bartels' research showing that politicians basically don't care about the views of low and medium-income individuals. The non-rich simply have no impact on their voting behavior at all. But I know you want more evidence. So here it is.

The charts below come from a 2005 paper by Martin Gilens (a revised 2007 version is here). His study is based on a dataset of polling questions about public policy issues between 1981 and 2002 (raising the minimum wage, sending U.S. troops to Haiti, requiring employers to provide health insurance, allowing gays to serve in the military, etc.) in which the responses differed significantly between the rich and the poor. On the left, you can see the impact that support from low-income voters had: when 10% of them supported a position, there was about a 32% probability of that change becoming law. When 90% supported a position, there was a....33% probability. The chart on the right shows the same for median income voters. They did slightly better, but not much.

Rich voters, on the other hand, had a much better chance of getting their way, as the steep solid line in both charts shows. Why? Gilens' guess is that "the most obvious source of influence over policy that distinguishes high-income Americans is money." This sounds like a pretty good guess to me.

No Unemployed Need Apply

Here's the latest news on the long-term unemployment front:

There's a growing trend of employers refusing to consider the unemployed for job openings, according to a number of people who testified before the U.S. Equal Employment Opportunity Commission on Wednesday. They say that employers are barring the unemployed from job openings, which is particularly unfair to older workers and African Americans because more of them are unemployed.

Several examples of discriminatory help-wanted ads were offered: a Texas electronics company said online that it would "not consider/review anyone NOT currently employed regardless of the reason"; an ad for a restaurant manager position in New Jersey said applicants must be employed; a phone manufacturer's job announcement said "No Unemployed Candidates Will Be Considered At All," according to Helen Norton, associate professor at the University of Colorado School of Law.

Obviously the solution to this problem is to reduce the federal deficit.

Waiting for 2013

It's beating a dead horse to point out that the American public, which supposedly wants federal spending slashed to the bone, wants no such thing when you ask them about cuts to actual programs. But Bruce Bartlett points out something interesting today: not only are Americans reluctant to support major cuts in actual programs, they're even more reluctant than they were 30 years ago when Ronald Reagan took office. This suggests a lesson:

Considering how little spending actually got cut in 1981, this suggests that Republicans may have a lot less political capital to play with than they imagine. It also suggests that their strategy of front-loading spending cuts in the fiscal year 2011 is very ill-conceived. They are using up all the political capital they have for cutting spending in a way that is highly unlikely to be successful and that will not yield long-term savings. By the time they get around to doing something about entitlements, they may find that budget cutting exhaustion and frustration has set in and there is no support left for big budget cuts. It may be that they have one bite at the budget-cutting apple and they are squandering it.

Parties always come to power thinking they have more political capital than they do. Reagan couldn't cut the budget much, Clinton couldn't enact healthcare, and Gingrich couldn't pass his Contract With America. Americans might throw the bums out with regularity, but that doesn't mean they've suddenly done a U-turn on their political beliefs. At most they've shifted in their seats slightly.

I'm not a huge deficit hawk, but I do think the long-term deficit is a problem that we'd do well to address. But above all else, this means tax increases and slower growth in healthcare spending, and we're plainly in no shape to do either of those things right now.

Here's my guess: the best time to do this is in 2013. The Republican Party needs to get the tea party out of its system and wait for guys like Glenn Beck to outlive their 15 minutes of fame. They need to get over the idea that another two years of lunacy will allow them to win back the White House. Barack Obama needs to win reelection without promising to extend the Bush tax cuts. And the rest of us need to let the economy recover so we're dealing with the deficit from a position of realism, not panic.

At that point, with Obama back in office and Republicans chastened, it's possible — barely — that we can come up with some kind of one-time bargain that raises taxes, cuts Social Security slightly, reins in Medicare, and makes some cuts to the defense budget. The odds aren't good, but they'll be a lot better than zero, which is what they are now. Bruce is right: this is the kind of thing where you get one big shot, and it's foolish to waste it right now.

Zinc, Glorious Zinc

I've always wondered whether zinc really helps cure colds. I was never the zinc addict that Jon Chait is, but I've used it in the past and it seemed to help. So I was happy to see yesterday that a new metastudy suggests that it really does have an effect. But there are side effects, and Aaron Carroll remains unconvinced:

Yes, there is now statistically significant evidence (whose strength is debatable) that zinc may help. But if you’re asking me if I will be taking zinc if I get a cold, the answer is no.

My problem with zinc is that the lozenges taste so terrible that I could never keep up the habit even for the few days of a cold. So I switched to the nasal spray, but then I was told that nasal zinc could kill your sense of smell. So I stopped using it. But the lozenges are really grim stuff. So now I just suffer through colds zinc free. Besides, it turns out that the better the study, the weaker the results:

An examination of only the most scientifically rigorous of the zinc studies shows it probably doesn't shorten colds, said Dr. Terence M. Davidson, the director of the UC San Diego Nasal Dysfunction Clinic. "The more rigorously scientific studies, where you took a group of people and gave half of them zinc and half a placebo and inoculated their nose with a cold virus, found there were no differences," Davidson said. "I think enough research has been done to show if there is some benefit, it's not going to be very significant."

Maybe so. But significant is in the eye of the beholder. One less day of misery might be well worth it. So tell me: how does the syrup taste? Is it as bad as the lozenges? It can't possibly be, can it?

Is the Deficit a Crisis?

OK, so why does everyone think the deficit is out of control and a threat to the existence of the republic? Good question. It's probably way too late to pull us out of the rabbit hole we've collectively dived into, but anyone reporting on this really owes it to their readers to explain the basic political dynamics at work. So why do Republicans and Democrats both think the deficit is a problem?

Answer for Republicans: They don't think the deficit is a problem. If they did, they'd favor tax increases, Pentagon cuts, and Medicare cuts, since even the most dimwitted among them knows that cutting domestic discretionary spending won't make a dent in the deficit. But they favor none of these things.

Rather, they think federal spending on liberal social programs is a problem, and yammering about the deficit is a good way to force cuts to these programs. And there's nothing wrong with this. It's good politics. Why waste a crisis, after all? But anyone reporting on this issue really needs to be honest about what's going on. Republicans want to cut social spending. The deficit is just a handy cudgel to make this happen.

Answer for Democrats: I'm actually a little stumped here. I think most Democrats understand that the short-term deficit really isn't a problem, and they also understand (I hope) that allowing the Bush tax cuts to expire and letting the economy recover will get us very close to eliminating the primary deficit (i.e., the deficit minus interest payments). If we do that, then publicly held debt as a percent of GDP stabilizes and the deficit problem becomes pretty manageable. The chart on the right from CBPP shows this graphically.

In the longer term, Medicare growth is a problem — which is just another way of saying that healthcare spending in general is a problem. This needs to be addressed, but it needs to be addressed for its own sake, not just because it affects the federal deficit.

So why have Democrats joined the deficit chorus? I'm not sure, really. I'd guess it's mainly just fear that they've been outflanked on the issue, and if they want to stay in office they have to yammer about it. But that's just a guess.

In any case, Republicans are wrong: we don't have a spending problem, we have an aging problem. As America ages, Social Security and Medicare are going to cost more, and unless you want to start killing off old people Soylent Green style there's no way to avoid this even if we do get a handle on rising healthcare costs. This in turn means we're going to need more revenue to care for the elderly. As Jon Cohn says today, "It's ridiculous to have a conversation about balancing the budget that won't even contemplate higher taxes."

A perpetually growing deficit will eventually drive up interest rates and slow economic growth, so it's something we should take seriously. But slashing social programs is exactly the opposite of taking it seriously. We need to let the Bush tax cuts expire, get out of Iraq and Afghanistan, keep working hard on reining in healthcare costs, and accept the fact that we're going to need to fund an aging population whether we like it or not. Do that, and all we'll need is modest discipline in the rest of the budget. The long-term deficit is a problem, but it's not a crisis.