The Politics of Envy

Ezra Klein reprints this chart from David Leonhardt, which shows that there's been no surge in government employment over the past two years (the short blip in 2010 is from temporary census hiring), and makes this comment:

But I also think the chart above speaks to what's driving the events in Wisconsin: a perception that people in the "real" economy have suffered greatly, while public workers have been cosseted by their union contracts, their lobbying might and stimulus dollars. And there's some truth to that. The public sector basically sat out the first year of the recession.

Unfortunately, Ezra is almost certainly right that this perception informs the way a lot of people think about economic downturns. It's an unfortunate example of the way we like to view recessions as morality plays rather than macroeconomic events to be dealt with as efficiently as possible.

Start with the private sector. Why did companies shed so many workers? Answer: not because their workers were slothful layabouts, but because business was bad. If your widget sales decline by 10%, you don't need as many sales people, you don't need to run as many shifts in the factory, and you don't need as many accounts receivable clerks. So you lay them off. You don't really have any choice if you want to stay in business, but it's still unfortunate since people without jobs don't buy widgets, which just makes your situation even worse. If you could manage it, it would be pretty helpful if no one got laid off at all.

Now how about the public sector? It's exactly the opposite because the public sector isn't in the business of selling things. If the economy tanks, that doesn't mean there are fewer fires, less crime, or a smaller number of kids in school. That's why cops, firefighters, and teachers don't get laid off. Not because they're a bunch of cosseted union goons, but because the demand for their services is just as high as it was before the recession. In some cases, in fact, it might be higher. There's actually more demand during recessions for clerks to handle unemployment applications or Medicaid reimbursements than there is during boom times.

And it's a good thing, too, since, as Ezra says, "The worst thing for an unemployed person is another unemployed person. It means more competition for job openings, lower wages and less job security." The best outcome for everyone would be for government to employ more people during recessions and to keep their wages high. This would reduce competition for jobs and help keep consumption from falling, which is why, in a perfect world, the federal government would be running big deficits in order to fund the ability of states to keep the lights on.

But the fact that this makes sense doesn't mean most people see it this way. We're biologically wired to be envious of anyone who has things better than us, and there's never any shortage of demagogues to stoke that envy. So we demand that if we're going to suffer, then everyone has to suffer. And guess what? That's exactly what happens.

Is Wisconsin Really About the Kids?

Mike Konczal points to this as the most interesting passage from Wisconson Gov. Scott Walker's telephone conversation with the fake David Koch:

I had all my cabinet over to the residence for dinner. Talked about what we were going to do, how we were going to do it, we had already kind of doped plans up, but it was kind of a last hurrah, before we dropped the bomb and I stood up and I pulled out a, a picture of Ronald Reagan and I said you know this may seem a little melodramatic but ... when he fired the air traffic controllers and, I said, to me that moment was more important than just for labor relations and or even the federal budget, that was the first crack in the Berlin Wall and the fall of Communism because from that point forward the soviets and the communists knew that Ronald Regan wasn’t a pushover....

Mike comments:

When the true believers get together and talk openly, they don’t talk about this being about the budget, or getting innovative school practices in place, or whatever. It’s about showing their enemies that they mean business and aren’t pushovers. He believes that by smashing one you can smash them all. And he believes he is the first domino to move.

Quite so. Which brings to mind the pro-Walker argument currently making the rounds over at Modeled Behavior: namely that, as Karl Smith puts it, "to the extent public sector unions matter at all, it's because they stand in the way of educational reform." Adam Ozimek expands on this a bit:

Do I really have to run down the litany of bad policies unions have fought to keep, and good policies they’ve fought against in education reform? A clear indicator of how bad they’ve been is that the most anyone will say in their defense on education reform is that “well, some unions are embracing reform now in some places!”

I think I would have been more open to this argument a year or two ago, but I'm less sure now. First, because it's obvious that guys like Walker couldn't care less about ed reforms. As Mike says, in private Walker makes it clear that his union busting efforts are mostly designed to show that he's a tough guy, not to hasten ed reforms that will help Wisconsin's kids. 

More importantly, though, I've simply become less convinced about the value of all the ed reforms that periodically capture the hearts of the Beltway chattering classes. I'm generally in favor of things like charter schools and disciplinary reforms that make it slightly easier to fire bad teachers, but even if they're worthwhile on their own merits there's not an awful lot of evidence that these things actually improve the overall quality of the educational system. It's not that there's no evidence to support these kinds of reforms, just that the evidence is thin and contradictory every time I look at it. Test scores haven't dropped over the past 30 years. Other countries largely haven't leapfrogged us during the same period. High-stakes testing doesn't appear to have a big impact. Charter schools aren't unquestionably superior to equivalent public schools. Merit pay might work but it might not. The presence or absence of teachers unions doesn't seem to have much effect on educational outcomes. For more on this, try reading Joanne Barken's contrarian take on the ed reform community in the winter issue of Dissent.

I'm not trying to stake out some kind of maximal position here. There is some evidence in favor of some of these reforms, and I support the idea of experimenting to find out what works and what doesn't. I'd also like to see teachers unions lighten up on some of this stuff, so to some extent I agree with Karl and Adam. Still, the overall evidence that teachers unions are our biggest impediment to a nation of young geniuses is pretty weak. If that's your main reason to oppose public sector unions, I think you probably need a better case.

Michael Hastings, the guy who General Stanley McChrystal talked to a little more freely than he should have last year, has another big story in Rolling Stone today. He reports that the officer in charge of psy-ops in Afghanistan was ordered to use his team to spin visiting American dignitaries instead of Afghan tribal leaders:

The orders came from the command of Lt. Gen. William Caldwell, a three-star general in charge of training Afghan troops — the linchpin of U.S. strategy in the war. Over a four-month period last year, a military cell devoted to what is known as "information operations" at Camp Eggers in Kabul was repeatedly pressured to target visiting senators and other VIPs who met with Caldwell. When the unit resisted the order, arguing that it violated U.S. laws prohibiting the use of propaganda against American citizens, it was subjected to a campaign of retaliation.

"My job in psy-ops is to play with people’s heads, to get the enemy to behave the way we want them to behave," says Lt. Colonel Michael Holmes, the leader of the IO unit, who received an official reprimand after bucking orders. "I’m prohibited from doing that to our own people. When you ask me to try to use these skills on senators and congressman, you’re crossing a line."

....What Caldwell was looking for was more than the usual background briefings on senators. According to Holmes, the general wanted the IO team to provide a "deeper analysis of pressure points we could use to leverage the delegation for more funds." The general’s chief of staff also asked Holmes how Caldwell could secretly manipulate the U.S. lawmakers without their knowledge. "How do we get these guys to give us more people?" he demanded. "What do I have to plant inside their heads?"

According to experts on intelligence policy, asking a psy-ops team to direct its expertise against visiting dignitaries would be like the president asking the CIA to put together background dossiers on congressional opponents. Holmes was even expected to sit in on Caldwell’s meetings with the senators and take notes, without divulging his background. "Putting your propaganda people in a room with senators doesn’t look good," says John Pike, a leading military analyst. "It doesn’t pass the smell test. Any decent propaganda operator would tell you that."

....Under duress, Holmes and his team provided Caldwell with background assessments on the visiting senators, and helped prep the general for his high-profile encounters....In March 2010, [Col. Gregory] Breazile issued a written order that "directly tasked" Holmes to conduct an IO campaign against "all DV visits" — short for "distinguished visitor."...On March 23rd, Holmes emailed the JAG lawyer who handled information operations, saying that the order made him "nervous." The lawyer, Capt. John Scott, agreed with Holmes. "The short answer is that IO doesn’t do that," Scott replied in an email. "[Public affairs] works on the hearts and minds of our own citizens and IO works on the hearts and minds of the citizens of other nations. While the twain do occasionally intersect, such intersections, like violent contact during a soccer game, should be unintentional."

It's worth noting that this story is essentially single-sourced to Holmes, who was later investigated and reprimanded for "going off base in civilian clothes without permission, improperly using his position to start a private business, consuming alcohol, using Facebook too much, and having an 'inappropriate' relationship with one of his subordinates." Holmes says the reprimand was retaliation for refusing to break rules, but there's no independent verification of that. There's always the mirror-image possibility that Caldwell did nothing wrong and Holmes is merely trying to get back at him for the reprimand.

That said, Holmes's story sounds pretty plausible. More to come on this, I'm sure.

Healthcare Ping Pong for the Poor

Harold Pollack reports today on an issue with the healthcare reform law that seems trivial at first but turns out to be anything but on closer inspection. The problem is this: a certain number of poor and working class families have highly variable incomes, which means they might be eligible for Medicaid one month but healthcare exchanges the next. So do they ping pong back and forth between the two? Or what?

At first this might not seem like a big deal. How many of these kinds of families can there be? The answer, it turns out, is a lot. Nearly a third of all families have incomes less than 200% of the federal poverty level, and Benjamin Sommers and Sara Rosenbaum, using longitudinal survey data, conclude that a whole lot of them have highly variable incomes:

We estimate that within six months, more than 35 percent of all adults with family incomes below 200 percent of the federal poverty level will experience a shift in eligibility from Medicaid to an insurance exchange, or the reverse; within a year, 50 percent, or 28 million, will.

Harold comments:

States need to account for this in their design health insurance exchanges, and to allow a more permeable boundary between the new exchanges and Medicaid. Sommers and Rosenbaum provide some pretty sensible policy suggestions. I’ll let you read their take and decide for yourself.

The Affordable Care Act is pretty silent about how these issues should be handled. For all the juvenile criticisms of passing a many-paged bill, a few-thousand pages provides only a basic structure and roadmap for health reform. Much of the hard work resides in the yet-to-be-written administrative and regulatory Midrash that goes along with it.

The policy suggestions Harold alludes to are behind a paywall, so I can't comment on them at the moment. But I don't doubt that they're pretty sensible. Hopefully state-level administrators will start thinking about this, even if their political masters are busy covering their ears, shouting "la la la," and trying to pretend that the healthcare reform law doesn't exist and will never go into effect. It will, and this is a problem every state will need to address.

Cutting the Fat in Healthcare

Matt Yglesias is basically right about the overall shape of the river when it comes to healthcare spending:

I think there’s a lot of waste in our health care sector. That said, I think discussion of health care costs sometimes ignore the fact that something has to go up as a share of GDP. Americans are getting richer, agriculture is becoming more efficient, apparel is increasingly made by Bangladeshis or robots, etc. At the same time, computers and other electronic gadgets are getting cheaper in real terms. And if some things shrink as a share of our income, other things need to grow. The biggest of those things has been health care. And that makes perfect sense.

As GDP goes up, and we have more collective income to spend on things other than the basics, we're going to spend that extra income on whatever we most value. And for a lot of us, that something is healthcare. Put simply, as GDP per capita goes up, we'd expect healthcare spending not just to go up, but to go up even as a percentage of GDP.

However, there's evidence that the U.S. is an outlier even when you take this into account. You'd expect America to spend a higher percentage of GDP of healthcare than most countries because America is richer than most countries. But if McKinsey Consulting is to be believed, that number probably ought to be about $5,000 per person, not the $7,000 per person we actually spend. Put another way, you'd expect a country as rich as the U.S. to spend 13-14% of GDP on healthcare, but in reality we spend more like 17-18%. You can read the McKinsey conclusions here, or you can read Aaron Carroll's multipart blog series explaining it here. (Note that these are 2006 numbers. They've gone up a bit since then.)

Why do we spend so much? Some is pure waste, some is because our system is so inefficient, and some is because the healthcare industry is far more profitable in the U.S. than in most other countries. Somebody has to pay for those country club memberships, after all.

But keep in mind that this is actually good news if you look at things from a certain point of view. If our healthcare sector were super efficient, there wouldn't be much scope for reducing its size. But if there's lots of fat in it, there is. It won't be easy, since one man's fat is another man's dividend check, but at least there's fat to cut.

Down the Drain With the Tea Party

Here's the latest from those well-known socialists at 85 Broad Street:

Spending cuts approved by House Republicans would act as a drag on the U.S. economy, according to a Wall Street analysis that put new pressure on the political debate in Washington. The report by the investment firm Goldman Sachs said the cuts would reduce the growth in gross domestic product by up to 2 percentage points this year, essentially cutting in half the nation's projected economic growth for 2011.

....A spokesman for House Speaker John A. Boehner of Ohio said the Goldman Sachs report represented "the same outdated Washington mind-set," comparing it to the thinking behind the 2009 Recovery Act that released federal funds to counter the effects of the recession.

I don't know about Goldman, but Boehner sure seems to have the traditional GOP mindset down pat: if inconvenient evidence is at hand, pretend it doesn't exist.

In fairness, I have to say that two percentage points seems pretty high to me for $100 billion in budget cuts. Still, even Douglas Holtz-Eakin, who sold his soul for the cause years ago, agrees that the tea party-inspired cuts in the House bill would cut 0.2 percentage points off of GDP growth. That's probably too low, but it almost doesn't matter: if even Republican house economists agree that the cuts would slow economic growth at all, tell me again why Republicans are insisting on them?

Quote of the Day: Shutting Down the Government

From Jamelle Bouie, writing about the possibility of a tea party-inspired government shutdown next month:

Compared to 1995, today's GOP is far more anti-government and far more ideological than it was under Gingrich.

For anyone who live through that era, this is hard to believe. But it's true. It's also true, as Jamelle says, that a shutdown would pretty quickly lead to real consequences for real people: "This was damaging enough in 1995, when the economy was in the middle of an unprecedented expansion. Today, with slow growth and double-digit unemployment, it would be catastrophic." Yes it would. See David Leonhardt about the austerity programs in Germany and Britain for more about that.

James Galbraith on Countervailing Powers

My magazine piece on the decline of labor was all about labor's role as a countervailing power against the corporate community. The concept of countervailing powers is, of course, the brainchild of John Kenneth Galbraith, and today Ezra Klein talks to his son, James Galbraith, about how this applies to the world today:

What if labor never gets off the mat, and initiatives like the one in Wisconsin succeed? Are there any other actors in the economy who can play the countervailing role that labor has traditionally played?

There are certainly other organizations in the system. Voluntary associations and churches and so forth. But there’s nothing able to play the role as effectively on economic issues as an organization based on economic roles. Everything else is divided up into particular concerns — many of which are very important, like civil rights and environmental issues. But what has faded out is an organization with a clear and coherent focus on the economic position on the working population. And not the working population composed of manufacturing workers, but the mass of service sector jobs and others who are not organized.

This is a very good way of putting it, and it's similar to a few paragraphs I wrote for an early draft of my article. The left still has plenty of interest groups, and they play important roles. But most of the best funded groups don't really focus strongly on economic issues, and most of the groups that focus on economic issues aren't well funded. As I put it in the article, we lack a countervailing power "as big, crude, and uncompromising as organized labor used to be." Somehow we need to figure out how to get that back.

Obama Reverses Course on DOMA

The Obama administration has decided to stop defending Section 3 of the Defense of Marriage Act, which defines marriage for federal purposes as only between a man and a woman. This is from the Dept. of Justice statement:

After careful consideration, including a review of my recommendation, the President has concluded that [...] classifications based on sexual orientation should be subject to a more heightened standard of scrutiny. The President has also concluded that Section 3 of DOMA, as applied to legally married same-sex couples, fails to meet that standard and is therefore unconstitutional. Given that conclusion, the President has instructed the Department not to defend the statute in such cases. I fully concur with the President’s determination.

Consequently, the Department will not defend the constitutionality of Section 3 of DOMA as applied to same-sex married couples in the two cases filed in the Second Circuit.

This, by the way, is a good example why I've never joined in the general condemnation of conservatives for "reigniting the culture wars" whenever they introduce an abortion bill or somesuch. I'm on the opposite side of these conservative efforts, of course, but the fact is that liberals started the culture wars in the 60s and it's something we should be proud of. So while I oppose the conservative side of the culture wars, I approve of the culture wars in general, and I applaud Obama and Holder for reigniting it last year when Congress repealed Don't Ask Don't Tell and for reigniting it in the case of DOMA today. Blacks, Hispanics, gays, women, the disabled and millions of others have benefited tremendously from the culture wars, and I'm happy to see it continue until there's no more war to fight.

The Worm Turns in Wisconsin

What's the endgame in Wisconsin? Andy Kroll rounds up the possibilities today, and outcome #1 is that eventually the union busting bill passes. This has seemed the most likely outcome to me from the start. Gov. Scott Walker has run a very disciplined operation so far, he has a lot of leverage and doesn't seem afraid to use it, he's taking on an unpopular target, and Democrats can't hide out in Illinois forever.

But I've been a little surprised at how things have turned out so far. Democrats might not be able to hide forever, but it turns out they can hide for a good long time. Even more important, it turns out that Walker's position may not be as popular as I thought. A national Gallup poll yesterday showed that 61% of Americans don't favor taking away collective bargaining rights from public sector unions. This doesn't mean teachers unions are suddenly everyone's heroes, but it does mean that a sizeable number of people think that busting unions entirely is a step too far.

And then there are Walker's fellow Republicans. One of the big questions swirling around the situation in Wisconsin is the notion that it's a bellwether: if Walker wins, will other Republican governors follow suit? There's still no telling, but just yesterday both Indiana's Mitch Daniels and Florida's Rick Scott have spoken out against the idea of eliminating collective bargaining rights. Their statements were mild, but they still take a bit of momentum out of Walker's anti-union crusade.

Even if unions lose the battle in Wisconsin, one benefit of their protest is to show other Republican governors that they're in for a pretty serious war if they try to do the same thing. That's worth a lot all by itself.