Good Policy Ideas From Those Not Interested in Good Policy

Will Wilkinson has some very perceptive things to say about human capital and early-childhood government education interventions:

On the one side are conservatives and libertarians overly attached to genetic explanations of socioeconomic achievement, who therefore see spending on early childhood development as futile. On the other side are liberals overly attached to abstract structural explanations of the reproduction of class, who therefore see a focus on state interventions in early childhood as elitist victim-blaming. I find that I actually side more with the liberal complaint than with the conservative one, though not so much for the reason that it is victim-blaming. Many poor parents are to a large extent to blame for the under-development of their children. There doesn’t seem to be a way around that. But I worry very much about the social control of the poor by elites, which Don mentions. However, I worry about the harms of self-reproducing poverty even more. At this point, I’m not sure where I really stand, though I think I’m tilting in favor of Heckmanesque early childhood programs as part of the liberaltarian package, which also would include wage subsidies and beefed-up unemployment benefits together with a radical deregulation of the labor market and the economy at large.

This is a general policy program - early childhood and governmental intervention to increase human capital and try to stop the intergenerational transmission of poverty combined with deregulation of labor markets - that I totally agree with. The problem is that, politically, those who support the early childhood interventions and those who support the “radical deregulation” are in different parties. And most importantly, with the exception of Reihan Salam and David Brooks, there are few Republicans who really care about those early childhood interventions at all. In fact, the Republican approach to education policy is a schizophrenic mixture of the heavy-handed mandates of NCLB and a Gingrichian desire to localize and balkanize educational policy and administration as much as possible. And so, when Republicans talk about labor market deregulation, or just opening up the economy more generally, there’s absolutely zero committment that they’ll counter those deregulatory moves with helping to improve people’s ability to compete in an open economy. Considering that, it’s better to take the risk of marginally more “scleroticism” with Democrats because at least they have a history of embracing deregulation (Clinton, Carter), while Republicans have no interest in the liberal half of the equation.

Capital Gains Facts

The capital gains tax and the debate around it is one of those issues where the right wing’s obsession with getting rich people as much money as possible has so warped the debate that the public perception of the tax is that it’s burden is shared by a wide cross section of the population and that if it were to be raised, the government would lose a bunch of revenue. A recent post at Tax Vox takes a closer look at the tax.

The reason people like Charlie Gibson are able to say that cuts in the tax can raise revenue is because the activity that gets taxed at the capital gains rate - namely the selling of stock - is much more elastic than other things that get taxed, like how much you work. When the tax is cut, people sell lots of stock that wouldn’t have been worth it at the old, higher rates. Also, just before the tax is raised people will sell a lot to realize the old low rate before the new one comes in. And so, it appears that cutting the rate, or not raising it, will always raise revenue, but that’s only in the short run. Most economists think that capital gains have a real Lafferite distribution, with the sweet spot being somewhere between 25 and 32 percent. The current rate is 15.

But we don’t only consider revenue maximization when we devise tax policy. We also think about marcroeconomic effects of a tax rate as well as the distributional issues. It’s on the former - marcoeconomics - that partisans for a low capital gains rate have the best argument. After all, the activity that a high capital gains rate discourages, investment, is at the heart of economic growth. But it doesn’t look like that further cuts past 15% would do very much to stimulate growth. The CBO estimated that “a cut of the magnitude proposed in 1990 or enacted in 1997 (25 percent to 30 percent) would reduce the tax on corporate capital by only 2.7 percent and would decrease the cost of capital by less than 1 percent.” It seems that as long as the capital rate is below the income rate, the salutary effects of the low(er) rates can still be realized. But as far as the politics go, the most important part of the Tax Vox is the discussion of who exactly pays the tax.

Republicans would have you believe that because we’re turning into a “shareholder society” in which 50% of the population own some amount of stock, it makes sense to not cripple half the country with high capital gains rates. Although the premise is true, the conclusion certainly isn’t. Even if 50% of people own some stock, the wealthiest 10% control about 80% of the stock. And since most of those lower 90% who own stock do so in 401(k) plans, they aren’t realizing capital gains on anything approaching a regular basis and thus are even less likely to be affected by which way the tax moves. The last sentence of the Vox post just about nails down the distributional issues: “In 2005, less than 14 million taxpayers realized taxable capital gains. And the vast majority of these gains are realized by very wealthy individuals—almost 60 percent by individuals with income over $1,000,000.“

Republicans Stand Firmly In Favor Of Paying Women Less (Or At Least Not Doing Anything When It Happens)

OK, so maybe that’s a bit of an overstatement, but the GOP senate minority did prevent cloture on the Lily Ledbetter Fair Pay Act, which would have allowed for women to sue for pay discrimination within 180 days of any discriminatory paycheck, as opposed to 180 days after the first discriminatory payment, thus functionally overturning Ledbetter v Goodyear. Democrats, to their credit, all voted for cloture on the bill (with the exception of Harry Reid, who voted no for procedural reasons). As Josh Patashnik pointed out, Republicans facing re-election fights, with the exception of Ted Stevens, voted for the bill. I can’t help but agree with Mark Kleiman that this could easily turn into a effective attack on McCain, who opposed the bill. That’s because opposition to the bill is tantamount to opposing Title VII of the Civil Rights Act and any substantive action to combat pay discrimination.

McCain and the Republican Senate have claimed that they support equality in the work place and the reason they oppose the bill is because of the lawsuits it could generate. This is a concern that has its place, but when discussing the Ledbetter Act, it’s totally incoherent. That’s because up until Ledbetter v Goodyear , the Equal Employment Opportunity Commission had never interpreted Title VII to mean that a woman had to sue within 180 days of the initial discriminatory paycheck. As the Washington Post editorial supporting the Act said, the majority of the federal courts had gone along with this approach. So when John McCain says “I am all in favor of pay equity for women, but this kind of legislation … opens us up to lawsuits for all kinds of problems”" he’s trying to have it both ways. If he really had a problem with the lawsuits and the government having ‘too big a role’ in employment decisions, then he should just say that he opposes Title VII of the Civil Rights Act; otherwise, he is in the weird spot of supporting the principle of Title VII, while standing idly by as its enforcement mechanism gets gutted. The “problem” of these supposedely frivolous lawsuits was around from 1964 until 2007. Where was McCain then?

So let’s be honest here. Every Republican who voted against cloture for the Ledbetter Act is substantively opposed to women being able to combat pay discrimination, and is by extension, opposed to Title VII of the Civil Rights Act and the principle that pay discrimination is wrong at all

Many Fair Pay Acts

When I wrote my long, meandering post about the history of Fair Pay and comparable worth as concepts and policy programs, I wrote about a bill - called the Fair Pay Act - that had been proposed in April of 2007 that was the closest thing we have to a modern comparable worth proposal. Although it doesn’t mandate the beaurcatization of the labor market based on governmental evaluations of how much each occupation is “worth,”  it would still allow class action lawsuits against employers who were accused of “pay discrimination” based on gender, sex, national origin or ethnicity between occupations. So if employees in  predominately female line of work, say nursing assistants in a hospital, were being paid less than plumbers in that same hospital, the nursing assistants could file a class action suit alleges pay discrimination.

What got me confused was the recent flurry of attention surrounding a new Fair Pay Act. This Fair Pay Act, originally called the Lily Ledbetter Fair Pay Act, is much more limited in scope. It merely seeks to clarify Title VII of the Civil Rights Act to say that everytime a “discriminatory paycheck” is issued, it gives grounds for an employee to sue her employer for pay discrimination. In Ledbetter v Goodyear, the court ruled that Lily Ledbetter should have sued Goodyear Tires within 180 days of the initial paycheck that reflected discrimination. But because a) employees tend not to talk about their compensation and b) because, in Ledbetter’s case, the discrimination only became obvious when a pattern of not getting raises or promotions emerged over many years, the extremely narrow time horizon for filing a suit makes no sense, if you actually want to do anything about pay discrimination.

So let me be very clear: I support the bill that is up for a vote ( and will likely fail) in the Senate today. I do not support the original Fair Pay Act. Since they’re both called the “Fair Pay Act,” I will refer to the more recent one as the Lily Ledbetter Fair Pay Act, or the Ledbetter Act for short.

Can I Call It Ambivalence About Fair Pay Day?

Via Feministing, I see that today is Blog For Fair Pay Day. And since I haven’t written about Fair Pay in a while, I feel now is a good time to rehash my thoughts at some length.

The first question of Fair Pay is what does it mean. At its most basic, it means equal pay for equal work. In simple terms, the implication is that a man and a woman, doing the same job, should get roughly equal compensation. And so discriminating hiring practices, discriminating promotion practices, firing women because they’re pregnant and so and so forth are violations of this principle. And, fortunately, this principle is enshrined in the law. This doesn’t mean that it isn’t under fire. The Supreme Court, in Ledbetter v Goodyear, made it much more difficult for women to file pay-discrimination suits. The Court did, however, open the door to Congress making the statute more amenable to women suing under it. So despite the Court’s horribly reactionary decision, Title VII and the Equal Pay Act, which protect women from pay discrimination for the same work, are still on the books and can be strengthened by Congress, and probably will be if a Democratic president is elected.

But the principle of Equal Pay, notwithstanding the Court, is not what today is all about. Instead, it’s about Fair Pay. What Fair Pay aims at is not explicit pay discrimination, but the actual pay gap between men and women. And the pay gap is real. According to the Bureau of Labor Statistics in 2006, women earned 81 cents for every dollar men earned. To give some historical perspective, in 1979, women were earning 63 cents on the male dollar. So the question becomes, is this gender gap ipso facto unfair, and if so, what are we to do about it?

Most advocates for Fair Pay say that the gap is the result of two trends. One is that women are paid less because of their tendency to drop out the workforce due to pregnancy and motherhood. This means that more women drop out of the labor force in their most productive years or go to part time, which drives their hourly and total wages down. Because women tend to flock to careers that allow them to have more flexible schedules - teaching and nursing are good examples - the wages in those jobs tend to be low. There’s also the fact that women “pick” certain career paths. For example, men make up a huge majority of the highest paying college majors, while women are predominate in the liberal arts. Adding up these three factors – fewer hours, fewer years in the work force and different career paths - June O’Neil found that 97.5% of the wage gap could be attributed to their aggregate effect.

The second factor that Fair Pay advocates point to is systemic sexism in how society values certain occupations. They see the fact that nurses, teachers and receptionists get paid less not as evidence that, due to the productivity of their work as well as the supply and demand of labor, they get paid less than plumbers, but instead of a deep institutional injustice directed against women. The principle is no longer “equal pay for the same work” but “equal pay for equivalent work.” They remedy for this in the 1970s, when the concept of fair pay first emerged, was that the government would measure the “worth” of each profession, and declare which ones would be equal. So if nurses and plumbers in a hospital were doing “equivalent” work, then they would have to be paid the same. Only this way could we correct the societal prejudice that makes women financially inferior to men.

The problems with this old-school, Comparable Worth approach are obvious. We know from Hayek, as well as from the historical failure of central planning, that government is not very good at determining market imputs, to make them fair or to achieve any other goal. There is simply too much that goes into a payment decision, that the government couldn’t possibly say what’s fair for a specific job. This bureaucratization of the labor market would inevitably distort it, making it harder for women to get jobs in specifically female professions like teaching and nursing because the wages were at above a market equilibrium level. When wages are artificially forced too high, employers hire fewer people. There could also be the problem of the wages for certain productive or societally useful work getting “equalized down” so that its wages could be “fair” compared to “equivalent” woman’s work. If doctors were mandated to get paid less, or oil rig workers, we would have fewer people entering these professions. It’s been very rare where the market hasn’t, on average, done the best at determining aggregate utility.

Because of the myriad practical and political problems with Comparable Worth proposals, as they were called, Fair Pay advocates have come up with new ideas. The most widely supported Fair Pay proposal these days is the Fair Pay Act. The Act, which was co-sponsored by Barack Obama, would be based around class action suits which would claim that women were getting underpaid for equivalent work, within the same company. For example, under the Fair Pay Act, social workers could sue to get equal pay with Parole Officers, or nursing assistants would be equal pay with plumbers in a hospital. The Act would ask courts to evaluate whether jobs’ “composite of skill, effort, responsibility, and working conditions are equivalent in value” and then rule that a company would be engaging in sex discrimination by paying the majority female workers less. The Act also would prohibit lowering the pay of one class of workers to make the pay equal.

But while the content of the Fair Pay Act is quite different from past comparable worth proposals, it still rests on the same assumption - that gaps in pay are not the result of the free functioning of the labor market, but instead is the result of the variety of sexist factors. For example, the concept of a “family wage”, whereby women in traditionally female jobs are paid less because it’s assumed they have husbands who are also working. The Act’s advocates also claim that women are steered into lower paying jobs because women are more likely to take time off for pregnancy and childrearing.

There are certain pay-gap facts that are undeniable, the most obvious being the existence of it. So what are we to do? The Fair Pay Act, despite its vast improvements over Comparable Worth, still retains some basic flaws. If the pay patterns that result in women earning less are the results of society wide problems such as women being more likely to take responsibility for raising children, then intervening at such a late stage is probably only going to distort the labor market. If employers are worried that if they hire nurses, they will have to pay them at an above market wage, they’ll hire fewer nurses. And if the factors that drive women into nursing are still present, then Fair Pay won’t accomplish much at all.

But the wage gap is still a problem, so what are we to do? In my view, we keep doing the same things that we have been trying to do for decades. The first thing we must do is eliminate, or alleviate, the motherhood penalty. Since much of the gap can be attributed to fewer hours, fewer years in the work force and different job choices among women, it’s unclear if trying to intervene so late in the game will do much, especially considering the distortions it brings. But what all those three factors have in common is motherhood. So we ought to be doing all we can to make it so mothers can participate in the work force. This means more paid maternity leave, more paternity leave, more child care, more pre-K and doing the slow, hard work of trying to change social norms so that more men will stay at home. This also means that, a la Linda Hirshman, more women ought to work full-time and insist that society and family life adjust to their preferences. As far as getting more women into higher paying jobs goes, there need to be more grassroots efforts for woman to get interested in the sciences and math. The evidence that inherit aptitude is responsible for the dearth of female engineering majors is weak, especially compared to the role that assumptions about women’s ability and the intimidating atmosphere that competitive, functionally all-male academic programs can provide.

I guess what I’m trying to say is that Fair Pay isn’t easy, and that no one-off law or amendment will ensure that they pay gap goes away. But that doesn’t mean we should stop trying.

Better Choices

I think Will Wilkinson is getting a bit too excited in his criticism of Cass Sunstein and Richard Thaler’s libertarian paternalism.  He points out that while neutral choice architecture - framing people’s options in a way so as not to favor, or “nudge” them to any one option - is impossible, using it as a tool to get more people to make public polify more effective from the perspective of a policy maker can create social norms that may not be especially coercive, but aren’t particularly liberty maximizing either:

For example, I would object if President John McCain implemented a policy of opt-out national service because such a policy would communicate all-too-clearly that individuals need some kind of special justification or rationale not to serve the state. The default rule itself contains meaningful content. If allowed to stand, such a policy could shape norms and individual preferences in a direction antagonistic to the value of autonomy. Soon enough we might find ourselves asking, “Why should you be able to opt out at all?” The paternalistic nudge may “leave the choice open” but accepting the legitimacy of the certain nudges may imperil liberty.

Wilkinson is clearly right that, in the hands of John McCain, choice architecture can be a scary thing.  But the problem with Will’s full-on criticism of using choice architecture in the political and policy realm is that his two main criticms - well designed choice architecture can imperil liberty and that politicians could use choice architecture “to aim at producing a population with different political preferences, so that they will vote for the things that we, the choice architects, know will make them better off - are both speculative and assume an expansive implementation of libertarian paternalistic policies.  The reason why I’m all for implementing Sunstein’s ideas - with the knowledge that it could, in fact, meanignfully degrade liberty - is because the utility gains from them are very real, at least compared to the harm they could cause.

Let’s take two classic Sunstein examples.  The first is 401(k)s.  This is from a Susntein-Thaler paper published five years ago:

  Under the alternative of automatic enrollment, employees receive the same information but are told that unless they opt out, they will be enrolled in the plan (with some default options for savings rates and asset allocation). In com- panies that offer a “match” (the employer matches the employee’s contributions accord- ing to some formula, often a 50-percent match up to some cap), most employees eventually do join the plan, but enrollments occur much sooner under automatic enrollment. For example, Brigitte Madrian and Dennis Shea (2001) found that initial enrollments jumped from 49 percent to 86 percent, and Choi et al. (2002) find similar results for other companies.

Everyone agrees that more people should be enrolled in 401(k) plans, and the reason people don’t is often not because of some better investment strategy they have or some committment to liberty, but because they’re either lazy or uninformed. So, when you make enrollment automatic and allow people to opt-out (instead of requiring them to specifically sign up for the program), enrollment jumps some 36 percent.  With some intelligent choice architecture, we have people making much better choices, and it was achieved with just a little nudge - not a lot of coercion.  The second example Thaler and Sunstein use is presumed consent for organ donors.  This is a bit more dodgy than 401(k)’s because there is something admittedly creepy about just presuming that society at large has a right to your body and your internal organs unless you specifically say otherwise.  But on the other hand, there are huge gains from such a policy.  Namely, thousands of lives of people who die waiting on organ donation lists.  And that gets to heart of why I find Will’s worries so unpersuasive.

The amount of illiberality caused by non-coercive, or at least marginally not particularly coercive, choice architecture is relatively small, and the impact on liberty isn’t guaranteed to happen (basically, the trade-off is hardly inevitable), while the good things about such policies are essentially certain.  It ultimately becomes a question of what one thinks is more important: effective, utility maximizing public policy  or a nebulous decreases in liberty.

It’s Supercapitalism, Lubricated By Oil

The reason why I liked Robert Reich’s Supercapitalism more than any of the big liberal political economy books that have come out recently (namely Conscience of a Liberal or Squandering of America) is that it recognized what is the central liberal dilemma about the changes in the economy since the 60s.  Namely, that while corporate profits and power have soared, inequality has increased and the median wage has stagnated, our lives as consumers have gotten much, much better. Most people can now buy more and better stuff for less money than in any time in history.   Companies are more efficient than ever (though the recent shenanigans in the financial industry cast some doubt on that hypothesis) and workers have gotten more productive.

In Reich’s view, it doesn’t make sense to go after corporations are particularly nefarious in producing this state of things, they’re just doing their job.  The responsibility for creating a more just political economy instead comes from citizens  working in a public role to do things like increase income taxes on the wealthy, establish a national health care system, improve education and so on and so forth.  So we shouldn’t look for “corporate social responsibility” or for corporations to take on governmental responsibilities, like providing health care.  Corporations aren’t governments, they’re lean, mean money-making machines.  So where am I going with all this.  Because, once again, the fact that high prices for a commodity are leading to massive profits for those that extract and sell said commodity is causing some commotion in Congress:

 — Top executives of the five biggest U.S. oil companies were pressed Tuesday to explain the soaring fuel prices amid huge industry profits and why they weren’t investing more to develop renewable energy source such as wind and solar.

The executives, peppered with questions from skeptical lawmakers, said they understood that high energy costs are hurting consumers, but deflected blame, arguing that their profits — $123 billion last year — were in line with other industries.

“On April Fool’s Day, the biggest joke of all is being played on American families by Big Oil,” Rep. Edward Markey, D-Mass., said as his committee began hearing from the oil company executives.

With motorists paying a national average of $3.29 a gallon at the pump and global oil prices remaining above $100 a barrel, the executives were hard pressed by lawmakers to defend their profits.

Seeing outright demagoguery like this is annoying on two levels.  The first level is that it’s just pointless.  Oil companies have one, and only one purpose, that is to increase the value for their shareholders.  And that’s what they do, and they do it very well. I would be more concerned if oil companies weren’t making money with oil prices at such a high level, because their shareholders would be getting totally screwed.  But it’s more important on a second level.

Markey and the congressmen needlessly grilling oil company CEOs are right about something - we need more investment in alternative energy.  But we shouldn’t expect oil companies to do so, we should expect the government, the polity, the collective to do so.  Because ultimately, it’s a political/societal decision how much oil we consume and how much CO2 we spew into the air. It’s also a societal decision whether or not we want to invest in alternative energy. Wouldn’t Ed Markey and Jane Harman be better off trying to build support in congress for a carbon tax or cap-and-trade instead that could actually raise revenue for alternative energy investment instead of demagoguery directed at oil companies?

Annoymous Contributions, Campaign Donation Vouchers

Dylan Matthews very much approves of Bruce Ackerman and Ian Ayres proposal to, among other things, make campaign contributions anonymous.  This, as opposed to most other reforms, doesn’t try to run up against the inevitability of money in campaigns.  It also wouldn’t obviously be ruled unconstitutional and wouldn’t discourage a genuinely salutary development in our democracy: the prevalence and importance small donors.  (In fact, Ackerman and Ayres plan would give every citizen a 50 dolalr voucher to contribute). The 50 dollar voucher would create a 6 billion dollar pool of public money, and since the voucher would expire on election day, there would be great incentive to spend it.  This would greatly democratize the fundraising process and change the system so that for any candidate to get off the ground, they wouldn’t have to corral the support of influential rich people.

But Ackerman and Ayres aren’t so naive to think that giving every voter $50 will take money out of politics.  The plan (profiled in Salon) would increase the maximum donation to $100,000, but would also mandate that all checks be written to the FEC and that they be delivered in random increments according to a secret algorithm.  Trading money for favors becomes much more difficult because, after all, you can’t trust anyone who has said that they’ve donated to your campaign.

Of course, good ideas like this are bound to not be implemented(does any serious policy analyst support agricultural subsides?).  The thing about serious campaign finance reform is that it’s clear where the divisions lie - the ones in power support the status quo while the insurgents and challengers want change.  Why would any politician want to seriously change the system that got him or her into power?  There is one candidate, however, for whom such a proposal would seem ideal.  That candidate is, of course, Barack Obama.

Obama already is campaigning on something approximating the Ackerman-Ayres model - lots of small contributions and then some big ones from rich people who don’t appear to trying to curry favors or influence (unlike many of Clinton’s rich supporters) but really seem to believe in Obama (for those of you who doubt me, I know these wealthy Obama fundraisers, and they aren’t trying to buy influence, they love the guy).  But the Obama campaign could easily benefit from such a plan. I am someone who, because he doesn’t have a credit card and doesn’t really want to hit up my parents to give money to campaigns, would be someone who would instantly spend the 25$ alloted for presidential candidates on Obama.  Many of my friends who are at least nominal Obama supporters would do the same.  Considering that much of Obama’s support base, young people, don’t necessarily have a ton of dough to splurge, this voucher would be perfect for campaigns like his.  But of course, Obama also has a lot of rich people supporting him.  Those people would be able to give more money to his campaign than they do now and they could still probably get the social boost from giving, because they they would still be able to fundraise and announce their donations.  And while Obama wouldn’t be able to trust them, people in their peer group probably still would.

But most importantly for Obama, this plan really encapsulates a lot of his major themes.  He talks about energizing voters, bringing out new ones (which he has been able to do) and more broadly, trying to “re-involve the American populace in the process of self-governance.  Ackerman-Ayres would, if I may think hopefully here, would really empower people to be actively involved in their own government.  A big problem with how campaigns are funded, and ultimately directed, is that a shadowy, unknowable group of well connected bigwigs are funding and directing campaigns, leaving the actual voters out.  Dean’s campaign and now Obama’s are breaks in this trend, but the democratization of billion dollar presidential campaigns is still hardly the norm and probably far off.  While Obama is showing the feasibility of a small-donor model, it’s hardly replicable , after all, very few candidates are as appealing and captivating as Barack. What Ackerman and Ayres plan would do, hopefully, is incentivize  all candidates to base their campaigns on trying to capture that 3 billion dollar pool of public money.

If Obama were to be elected, he would have quite the coup if he prosposed this plan for the 2012 election.  Also, it would be nice if Lawrence Lessig looked into this, as this plan is a more feasible one than just trying to wish away lobbyist money.

One final note.  I’ve been aware of the anonymous donations idea for years.  My older brother either thought it up or told me about it some time around 2002-2003 (Ackerman’s book was released in 2004). So it should now be called the Ackerman-Ayres-Zeitlin reform.

The End of Coal

Kate Sheppard’s inaugural post kicking off some sort of series for TAPPED about coal and environmental policy is very good.  There are a few bits of it, however, that I want to take issue with.  She says that since many investment banks think that some sort of cap on carbon emissions is inevitable, coal’s future is limited.  While she’s right the Energy Department pulled funding for liquefied coal, it’s not guarantee that a cap on emissions is coming soon.  For instance, if McCain wins (not a trivial possibility) and enacts some sort of weak cap-and-trade scheme in which many of the permits are just given away, will anyone be shocked if coal companies are able to fineagle a good number of them.

The problem with coal, and why I think it will stick around absent some agressive Democratic energy policy is that A) There’s a ton of it left in the ground and B) If “energy independence” takes over global warming as the central concern of our energy policy, a move to more coal, or at least arresting coal’s fall is basically inevitable.  If, for instance, there’s a terrorist attack, expect coal to stick around.

Add on the billions of dollars involved for coal companies, and it’s almost guaranteed that they’ll find some way to stick around if they can.  Contra Sheppard, absent some major policy changes that are basically contingent on getting a Democrat elected with a strong mandate to do something about climate change, expect coal to be a “cheap, abundant energy source for much longer.”  The “green economy” and the “death of coal” are hardly inevitable.

Democrats Manage to Be Democrats

Last night, I got really worried that Max Baucus was going to push through a stimulus bill that gave checks to high  income people (75K for individuals, 150K for families).  This would, of course, be really stupid, as rich people are unlikely to spend their stimulus checks, thus increasing the deficit without getting a bump in consumer spending.  This wouldn’t have been the first time Baucus betrayed core Democratic ideals — he voted for the Bush tax cuts and the Bankruptcy Bill.  But, luckily, Harry Reid found his spine and, according to the Politico, is “confident the caps will be there.”  So while this stimulus bill maybe ill-timed and likely ineffective, at least we won’t be sending rich people checks.

Giuliani Is All About Small Government…

Steve Forbes goes to the WSJ to pimp for Giuliani’s massive tax cuts — including slashing the corporate rate by 10%, scrapping the estate tax, reducing the income tax to three 10%, 15% and 30% brackets and cutting capital gains from 15% to 10%.  While it goes without saying that his plan is fiscal lunacy - where exactly will all this money come from? - Forbes  manages to make a series of bogus claims.

He goes on a slight rant about how damn complicated the tax plan is and we’re left to assume that Giuliani will “simplify the tax code.”  Giuilian’s plan would, according to Forbes, allow someone to fill out a “FAST” form with the three brackets, or to stay with the current tax code.  Forbes tries to pull a fast one over us by trying to say that three brackets = simple, but then in the next sentence, Forbes reassures us that “Prized deductions for mortgage payments, state and local taxes, charitable contributions, and child tax credits will all be preserved on the FAST Form.”  So, instead of providing a new tax code that is free of all those deductions, Giuliani would just add another layer of complexity to the tax system and encourage people to even spend more time hunting for deductions between the two systems.  Forbes provides an anecdote: “Moreover, taxpayers can choose each year which plan works best for them. For instance, a small business owner might take advantage of the deductions in the current tax code one year, but choose the FAST Form the next.”  As someone who professes

The second humdinger in Forbes’ piece is that “Rudy Giuliani knows self-government, not centralized government, makes America great. His proposals demonstrate an opposition to centralized power and a commitment to a growth society.”  There are two things Forbes refused to acknowledge in his relentless pimping of Rudy: 1. the plan would eviscerate revenue and 2. Giuliani wants to jack up spending. None of these extreme tax cuts make sense in a world where Giuliani wants to increase the end strength of the military by 10 brigades, buy more submarines, do missile defense and stay in Iraq indefinitely.  But, as is so typical among conservatives, military spending doesn’t count as “centralized” or “big” government.  Again, this combination of profligate war mongering and tax cuts for the rich

Stimulus Chart of the Day

Bruce Bartlett has a great chart in today’s Times.

I see little reason to believe that this stimulus, unlike nearly every other one, will be properly timed so as to hit before the business cycle bottoms out.  I have more thoughts on stimuli coming sometime later, but mull over this for a while.

Just Sending Out Checks

You know a stimulus plan is a poor one when Bruce Bartlett, Paul Krugman and Clive Crook all agree that the Bush plan is unlikely to do much to stimulate demand and is just a bizarre boondoggle.  I mean, when I read about it in the Times on Sunday, it sounded ridiculous.  Seriously, an income tax rebate that would give no money to the people who A. need it most and B. are most likely to spend it.  Literally, mailing out checks…

What Does “Really Clean” Mean?

Debates about nuclear power can be endless and frustrating. On one hand, you have environmental contrarians that see nuclear power as some sort of panacea largely because it’s a fun, contrarian argument to take, while on the other hand, you have people with a hysterical fear of nuclear power that is simply inappropriate for these times. Yglesias doesn’t seem to fall in either court, but he’s more skeptical of nuclear power than he ought to be. While we both agree that nuclear power should be implicitly subsidized by raising the price of carbon emission, I don’t see a problem with explicit subsidies or at least regulatory fast-tracking of new plants.

With the amount of petty hostility the nuclear power industry has faced in the 30 years, some sort of governmental kick-start seems necessary if we’re serious about reducing reliance on carbon-emitting energy sources. As of now, besides hydro power, which is basically maxed out, nuclear is really all we have right now that can provide for a large portion of America’s electricity generation with no carbon emissions. For instance, France and Japan essentially get all their electricity from nuclear power, I don’t see why we can’t try to at least match their output in gross terms, if not in proportion.

Yglesias also waspishly suggests that nuclear advocates tell us all sorts of tall tales, like”We’ll be weaned off the dastardly power, perhaps, with nuclear powered cars?” The day of nuclear powered cars may be far off, but nuclear power could help reduce automobile emissions if more people drive plug-in hybrids which could be powered by nuclear energy.

Sacrifice and Global Warming

Kate Sheppard has a very good post in which she explains that contrary to a lot of liberal and environmentalist rhetoric about global warming, we shouldn’t be framing the issue as one where we need to sacrifice some growth and material well being to prevent irreversible damage to the planet. This type of rhetoric is appealing for Democrats because their best moments, rhetorically, have come when charismatic leaders talk about sacrifice. JFK’s inaugural is a great example of this rhetoric at its best (ask not what you can do for your country…), while Jimmy Carter’s infamous “malaise” speech, though certainly admirable, has not had a favorable reputation. Sheppard’s point is that because the costs of doing nothing to reverse, forestall or even slow down climate change are so large, we aren’t sacrificing by expending capital and possibly slightly slow down growth in the short term, we are instead averting long term catastrophe that would make us all worse off.

Sheppard concludes that framing  climate change policy, as Barack Obama does, in terms of sacrifice will ultimately be self defeating:

“Sacrifice” is the message those who’d like to keep dragging their feet on climate change want the public to believe. Having failed in trying to convince the public that the world is in fact not warming, they’ve turned to arguing that solving the problem will be just too darn pricey. Yes, putting a price on carbon will raise energy prices, at least for a little while, but nothing spells big, expensive catastrophe like rising shorelines, increased heat deaths, ever-more-powerful tropical storms, and wars over ever-shrinking reserves of fossil fuels.

Rather than talking about the “sacrifices” Americans might have to make, Dems should be talking about how much we all stand to gain by addressing this problem. It’s not a choice, and the alternative to acting will prove even more expensive.

Ted Nordhaus and Michael Schellenberger make the argument in their book Break Through that the environmentalist movement will fail politically and practically if it is pessimistic, sees human intervention as always negative and insists that the only way to pursue green goals is to inflict pain on people’s pocketbooks and diminish their lifestyles. Instead of using the old “pollution model” of austerity and regulation, the best response to global warming is massive public investment in alternative energy so that the price of non-polluting energy is low enough that we don’t have to trade-off between economic growth and the health of our planet.

What’s odd is that Kate Sheppard reviewed Break Through and was mostly negative about it.  There are differences, as far as I can tell, in Sheppard and N&S’s approach — Sheppard is much more friendly towards pricing carbon and mandating emissions reductions — but their approach is very similar.  One reason why I think Nordhaus and Schellenberger were so poorly received among many green types was not just because of the inflammatory nature of much of the book, but also because their critique and message was already being absorbed by environmental organizations and advocates, and even by their critics.

What’s even weirder about Obama’s sacrifice rhetoric is that it doesn’t really match up well with his actual global warming plan.  The center-point of it is a “$150 billion over the next ten years to develop and deploy climate friendly energy supplies, protect our existing manufacturing base and create millions of new jobs.”  And, surprise surprise, Nordhaus and Schellenberger support it whole heartedly.  I think this shows that focusing on the framing of the climate change debate is only marginally important; if Obama can use sacrifice rhetoric while at the same time supporting the policy mix of massive public investment accompanied by necessary carbon caps, regulation and revenue raising measures, then maybe this sacrifice rhetoric isn’t part of his environmental approach or frame, but rather another manifestation of his inclination to describe policies as embodying some common purpose, and in some cases, common sacrifice.

The “-Stat” Candidate

Giuliani’s City Journal essay laying out his homeland security vision is notable for a bunch of reasons, including his shocking refusal to mention that he put his disaster command center in the World Trade Center so he’d have a “shag shack” in which to…do stuff…with his girlfriend, but more importantly, he has decided that his response to every policy question is to establish a “-stat” program.   For example, here’s what he wants to do on counter terrorism:

 To gather and analyze such useful information, first preventers can be assisted by the widespread implementation of a “Terrorstat” program, an idea proposed by former NYPD police commissioner William Bratton and criminologist George Kelling… By bringing all crime and arrest data together by category and by neighborhood, Compstat revolutionized policing, enabling officers to focus their efforts in problem areas, armed with up-to-the-minute, accurate intelligence, rapid deployment of resources, individual accountability, and relentless follow-up. Terrorstat would do the same for counterterrorism.

And border security:

To bring real order to the border, we should establish a “Borderstat” program, also based on Compstat principles. Borderstat would use technology to monitor illegal border crossings and compare them with captures…Even before the completion of SBI, however, we can use Borderstat to monitor incidents better along the border—shootings, petty crimes, and garbage dumping—that indicate illegal crossings and deploy border law enforcement resources to where they can have the most impact. Borderstat will apply a version of the Broken Windows policing theory to our borders.

Disaster Preparedness:

Federal officials need a new “Readystat” system to measure localities’ preparedness against risks and prioritize federal funding accordingly. Readystat would conduct annual assessments to determine the needs of each locality based on geography, population, and the unique threats that each community faces. These data would then be used as an objective guide to funding and grant decisions. Armed with the data, DHS regional directors would also work with state and local leaders to ensure preparedness. Readystat could have pointed out New Orleans’s pre-Katrina vulnerabilities and given us the chance to correct them.

What’s next?  How about “healthstat”to address people not using government programs like medicaid or S-CHIP? (oh wait, Rudy already proposed that) Abortionstat to identify women who are likely to have unwanted children?

Biden’s quip definitely needs an update.  “Noun-Verb-9/11-Stat”

California Carbon

Since the 1970s, California has claimed a unique exemption to EPA pollution mandates, and has been able to enact stricter regulations due to “special topographical, climate and transportation circumstances.”  The Bush administration is claiming that California doesn’t need to put in their stricter CO2 standards and should instead just go by the federal regulations, and has refused to let California and 16 other states put in their stricter standards.

The Bush administration, at least on pure legal grounds, has a decent case. The Clean Air Act waiver was established because California needed to enact stricter pollution guidelines due to the lion’s share of the car pollution was being emitted in a coastal basin abutted by high mountains that ten million people live in.  The rather unique circumstances of the Los Angeles basin call for California to have their own stricter pollution standards.  The same argument, however, can not be made with CO2.  Even if a massive amount of CO2 is emitted in the LA basin, it doesn’t meaningfully affect the quality of life in the basin.  CO2 doesn’t get trapped up against the hills like lower lying smog or sulfur dioxide.  In short, CO2 emissions concentrated in a single area won’t make life in that area uniquely misreable.

This is all academic, however.  The Bush administration isn’t making this judgment based on the reasoning I just described.  It’s because they really don’t want to have strict CO2 emissions standards, and since California is the state that buys the most cars, they can effectively set industry standards with their rules.  And as far as CO2 emissions standards go, they should be national and much higher.

No Need for Health Care Specificity

Henry J. Aaron, a Brookings wonk, makes the case against specificity:

In this situation, what should Democratic primary election voters make of the dueling press releases and expert statements that each side has invoked on the desirability of an individual mandate? The answer, I believe, is close to nothing. Here’s why. First, the positions of the candidates are barely distinguishable. Second, if elected, no Democrat will be able to shove a health care reform plan through Congress without major modification. Third, all would call on a similar set of advisors with broadly similar views. (Do not doubt that most analysts advising each Democratic candidate would gladly serve in the administrations of their current rivals!) Primary voters should not base their votes on the negligible differences that distinguish the campaign statements of the candidates on health care. Rather, they should base their votes on their judgments regarding the capacity of each candidate, if elected, to unify their own party and to reach across the aisle to achieve the bipartisan cooperation that will be necessary to enact major health care reform.

It’s hard to underestimate just how important this point is. For some reason or another, Obama, as of now, has not endorsed an individual mandate for health insurance. He still would ramp up subsidies, include a child mandate, ban discrimination based on preexisting conditions and implement a whole host of reforms that all three Democratic candidates and the liberal health care policy community agrees on. And while I think that a mandate may be superior than just lowering the cost of health insurance as a way of avoiding adverse selection, the differences, especially as compared to the GOP plans, are marginal. What’s more, some Hillary defenders have taken her health care plan, with the mandate, as a sign that she’s somehow more progressive than Obama. When making a final accounting of which candidate has the best chance of building new, durable liberal coalitions, all three come out equal on the health care question. On just about everything else, Obama comes out ahead.

It Doesn’t Matter What Mark Cuban Thinks About Taxes

Since I support tax increases for the wealthiest Americans, I should be happy that Mark Cuban, like Warren Buffett, has joined the ranks of absurdly rich individuals who support higher taxes for themselves. But it’s pretty intellectually dishonest to pretend that Mark Cuban or Warren Buffett, aa billionaires, have any special standing to opine on optimal tax rates for the rich.

That’s because when you’re a billionaire, or in Buffett’s case a 52-billiondollaraire, no amount of taxes that could plausibly be leveled in America will affect your lifestyle in a meaningful way. Or to put it more brusquely, you’re not just rich, you have “fuck you” money. When we’re talking about raises taxes on the rich, those who will actually experience a noticeable change in their lifestyles are not Warren Buffet or Mark Cuban, but those making $250,000 a year. Under Obama’s tax plan, a large chunk of people lower down the income latter would be meaningfully affected by his proposed elimination of the the $97,000 payroll cap which would raise the top marginal rate (not including state taxes) from 37.9% to 46.7%. While Obama’s plan wouldn’t affect Mark Cuban all that much, it would take away quite a bit of money from those who aren’t incredibly rich. And while I’m hardly crying crocidle tears that those people will have less money under a Democratic president, it’s dishonest to pretend that Mark Cuban’s insight into the fairness of our tax code, on account of his being extremely wealthy, is all that meaningful.

The Rich and Their Bling

While I’m agnostic on the issues of luxury taxes or a progressive consumption tax, I feel that Ezra Klein’s enthusiasm for “simply taxing obscene wealth on the margins” because “Are we really concerned abut rich people buying less jewelry?”  Well, we used to have a luxury tax, and what we learned was that there are people concerned with “rich people buying less jewelry” — specifically those who work in the jewelery business.  The way this worked out was that in 1990, the Democratic congress and HW Bush passed a luxury tax on expensive items.  Three years later, George Mitchell and Teddy Kennedy, who both championed the bill, quietly removed it because it had devastated the Maine and Massachusetts yacht industry.  The tax didn’t just cause rich people to buy fewer yachts, but the yacht salesmen and dockyard workers lost their jobs — 25,000 by some estimates — due to less consumption.

The story of the luxury tax and the Maine yacht industry hasn’t totally swayed me into thinking that we need to not impose any burdens on the consumption of the rich, because expenditure cascades may well be a problem that affects everyone, but when discussing the desirability of consumption or luxury taxes, it’s best to at least mention the possibility of decreased employment as a result.