Thu, 30 Dec 2004

December issue out

The December RIPR is in the mailbox today (just in time, too).

• Welfare applications - the good news is that there is help available for people who need it. The bad news is you have to apply for it.
• The iconography of welfare department logos.
• What are the real points of disagreement in evaluating the future of the current Social Security system?

To subscribe, click here.

10:49 - 30 Dec 2004 [/y4/de]

One cheer for the free market

Markets do what markets do: they set prices at which everyone who has something to sell can sell it and everyone who wants to buy badly enough can buy it. Fabulous. But what if what's being bought and sold is a social good, something that people need and that be can't be readily substituted? Housing would be a good example. (Look here, too, if you can read Projo stories.) So would jobs, and medicine.

The reason we have a minimum wage is because the available evidence shows that the free market sets wages too low for people to support themselves. And this makes sense. People will still take crappy jobs with low pay because few of us are in a position to stop trying to support ourselves.

The latest bit of evidence comes in a study of drug prices released by US PIRG. See it at RI PIRG's web site here. Here's a bit from the PIRG report. The rest you can guess, but it's worth reading.

Uninsured consumers carry the full cost of overpriced prescription drugs. The federal government uses its buying power to negotiate lower prices for the drugs it purchases for its beneficiaries by the discounted price negotiated by their insurance company. Uninsured consumers, with no one to negotiate on their behalf, pay the highest prescription drug prices not only in America, but in the rest of the industrialized world as well.

The words our elected officials use to describe policy show fealty to free markets, but the actions of our government belie those words. At the state level, we regulate markets (and here I mean regulating prices) in taxicabs, tow trucks and cigarettes. At the federal level, we have price supports for grain. Why is it that asking for price controls for essentials like housing and medicine is thought so radical?

09:32 - 30 Dec 2004 [/y4/de]

Tue, 28 Dec 2004

The cost of Wal-Mart jobs

Anyone concerned with municipal or state economic development—policies usually embodying the idea that any new job in our community is a net asset—should read the Wal-Mart report here. The authors, part of the Labor Center at UC Berkeley, have calculated the cost to the state of California of Wal-Mart's "Always Low Wages." That is, they found that Wal-Mart employees use subsidized health insurance and public emergency rooms at a much higher rate than other workers at supermarkets and large retail stores, and are more likely to require food stamps to feed their families, and so on. Wal-Mart is pretty much a closed book, so much of this is statistical inference, but their assumptions look conservative to me. They came up with a number of $86 million in 2001, with $32 million in health care alone. This was apparently based on an estimate of Wal-Mart workers too low by a third. As you can see at the link, Wal-Mart has responded, but not very effectively.

Sally Lieber, a CA Assembly member had an October press release on the subject, proposing to have the state pension plan divest from Wal-Mart.

Wal-Mart employs about 1,875 people in Rhode Island, making them the 16th biggest employer here, as of last June. This is a bit more than 4% of the number of employees the study assumed in California, making the fiscal impact to the state of Rhode Island in the neighborhood of $3.6 million per year. Of course this assumes that Government benefits are the same here as there. The cost of living is higher there, but the state is more generous here, so probably it's close to a wash.

The report also estimates a cost to the federal government of $2,103 per employee. As of 2001, Wal-Mart had 930,000 employees in the US.

18:04 - 28 Dec 2004 [/y4/de]

Welfare reform report card

Finally got around to looking at a Cato Institute report that came out in October, that awards states grades for their success in welfare reform. As expected, the high grades went to the states who have used the "Personal Responsibility and Work Opportunity Reconciliation Act of 1996" (a.k.a. PRWORA, or "ending welfare as we knew it") as cover for minimizing benefits, maximizing punishment and claiming success for decreasing the number of people on welfare. Rhode Island earned an F.

I did not expect, however, that states who allowed their welfare recipients to attend school would get a bad grade. It's pretty well documented that education is a good way to stay off welfare. Nor did I expect that the author would assume some sort of causal relation between a state's welfare policies and its poverty rate. Can even Cato institute researchers believe that generous welfare programs are a cause of poverty? Yet this is essentially what the report claims, so we must assume the answer is yes.

Interestingly, Rhode Island charts the second-best reduction in children living in poverty during the period measured (1996-2002), while earning the fourth-worst score of all states on their report card. This is not to say that all's happy here. Too many people are poor and too many kids have babies. But if the goal is to help people who need help, measuring your success by the reduction in caseload is a poor way to do it. But probably I've misunderstood and this is not the Cato Institute's goal. But it's mine and I'm proud to live in a state that flunks this kind of test.

There's more about this in the December (paper) issue, in mailboxes this week. To see it sooner, why not subscribe?

01:26 - 28 Dec 2004 [/y4/de]

Mon, 27 Dec 2004

Assumptions

It seems that the assumptions about the future growth of the US economy used by the President to show how the federal budget deficit is under control (from the July mid-year budget review) are more optimistic than the ones he uses to show that Social Security is in trouble (from the Congressional Budget Office forecast about SS).

How strange.

(Also see about the "fictional" SS surplus.) More in the December issue, too.

09:12 - 27 Dec 2004 [/y4/de]

Wed, 22 Dec 2004

Westin sale might happen in secret

It seems that at the January meeting, the Convention Center Board, the technical owner of the Westin hotel, will choose among the 15 bidders for that hotel. (story). Unfortunately you and I, who paid for it, and continue to pay for it at $17 million every year in debt service, apparently won't know who bid what, or what kind of deal we've agreed to, until it's all over and too late.

It would be nice if the sale got the state off the hook for the debt, but no one has said this will be the case. My impression, partially confirmed by the large number of bidders, is that the Westin subsidizes the Convention Center. From the outside, it appears that the state is selling the asset that earns money and keeping the asset that loses it. The price will make all the difference.

This is the same problem we've always had with the quasi-public agencies. They take public money and public assets, they rely on public credit, but they have no loyalty to the public. The Separation of Powers amendment, which was supposed to get legislators off executive commissions and boards, is the wrong cure to the wrong problem. The problem isn't that legislators are on the board controlling quasi-public agencies. The problem is that the quasi-public agencies exist at all. For exactly what reason is the Convention Center not part of the state? We paid for its construction, we support its losses. Whose is it?

Update: Not ours any more. The Governor has announced it's sold for $95.5 million to the Cranston-based Procaccianti Group. They also own and run the Holiday Inn downtown.

21:59 - 22 Dec 2004 [/y4/de]

Tue, 21 Dec 2004

Affording housing

The National Low Income Housing Coalition published its annual report today. Called Out Of Reach, it shows how much you have to earn to live in an average apartment. The report covers all 50 states.

According to their RI data, you need to earn around $16/hour in order to afford the median two-bedroom apartment, or work 97 hours a week at minimum wage.

There are a lot of little points to pick at in a study like this: for example, I don't see distribution statistics (though maybe they're in the print version), so you can't tell how much it costs to rent a below-the-median apartment; it's based on spending 30% of your income on rent, which hasn't been true of many people for a long time; it's all about averages, and very few of us occupy those niches.

But picking at the nits is dumb here. The big picture is all too clear, and this report is simply more evidence. We are in a housing crisis, we have been in a housing crisis, and we will be in a housing crisis until this becomes a concern of our elected officials and our other leading lights. The unregulated free market in real estate has brought us exactly what unregulated free markets do: a housing price at which the market clears. You don't see many unoccupied houses around here. But this triumph of efficiency in resource allocation still leaves many people out in the cold, and many others struggling to afford a roof over their heads.

Because we don't trust the unfettered marketplace, the state of Rhode Island regulates markets in taxicabs, tow trucks, haircuts and much more. What about the more important things?

09:12 - 21 Dec 2004 [/y4/de]

Mon, 20 Dec 2004

Military pensions, accounting fiction?

It seems, from Congressional Budget Office documents, that social security holds slightly more than 50% of the US bonds held by the US government. The rest is held by the trust funds for military pensions, civil service pensions, unemployment insurance, and Medicare.

A recurring spin-point about Social Security is that, since the bonds it holds represent debt owed by the government to itself, that the trust fund is an "accounting fiction." Here's an example. (It's from the "National Center for Policy Analysis," which appears to these cynical eyes to be a Dallas-based fake organization dedicated to Social Security privatization.) The point is supposed to be that these bonds are not, in a sense, "real" debt. But if they are not real obligations, why are we funding military pensions with them?

Update: I spoke a bit with someone in the US Treasury Dept. press office. She tells me that the bonds in the Social Security fund are special-issue bonds, and not marketable. The trust fund can't sell them, unlike regular-issue bonds which can be sold to anyone. But she also tells me that the bonds in the other funds are exactly the same type.

Update update: Apparently the bonds are even paper, and they exist in a (locked) file cabinet in the Special Investments Branch office of the Bureau of Public Debt (part of the Treasury Department), in Parkersburg, West Virginia. Pictures here.

23:00 - 20 Dec 2004 [/y4/de]

No smoking?

The Chair of the House Finance Committee in Minnesota plans to introduce legislation designed to punish people on state aid (health care or welfare benefits) for smoking. The legislation will call for decreased aid payments or increased health premiums or co-pays for people who smoke. Story here.

Presumably he'll follow this with another bill requiring morning calisthenics between 6 and 6:30, followed by a brisk run, breakfast not to exceed one egg with dry toast...

21:56 - 20 Dec 2004 [/y4/de]

Fri, 17 Dec 2004

Green building

This rolled into my mailbox today:

Green Communities Initiative Announces Grant Guidelines

Deadline: Rolling

The Green Communities Initiative is a five-year, $550 million initiative to build more than 8,500 homes across the United States that provide significant health, economic, and environmental benefits to low-income fami- lies and communities. The effort is a partnership of the Enterprise Foundation and the Natural Resources Defense Council, in collaboration with the American Institute of Architects, the American Planning Association, and leading corporate, financial, and philanthropic organizations.

The initiative will offer financing, grants, and technical assistance to developers to build affordable housing that promotes health, conserves energy and natural resources, and provides easy access to jobs, schools, and services.

Grants will help cover the costs of planning and imple- menting green components of affordable housing projects, as well as tracking their costs and benefits.

A minimum of $1 million in grant funds is available to participants. Individual grants are expected to range between $15,000 and $50,000.

The grant competition is open to 501(c)(3) nonprofit, public housing authorities and tribally designated housing entities. For-profit entities may participate though joint ventures with qualified organizations.

For more information, grant and application guidelines, and an FAQ, see the Enterprise Foundation Web site.

RFP Link: http://enterprisefoundation.org/resources/green/

20:46 - 17 Dec 2004 [/y4/de]

States go it alone

If the Feds won't go along, states can always make their own foreign policy. A delegation of states was at the Buenos Aires UN conference on climate change (COP 10 for those in the know), with the opposite view from the official US position. The states are New York, Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut, New Jersey and Delaware (story), and they're there to promote carbon limits, and are even exploring the idea of emissions trading with European countries.

Eight of the states make up the Northeast States for Coordinated Air Use Management, which is a 38-year-old organization of the air quality officials of the six New England states, plus New York and New Jersey. (Delaware seems to have tagged along to Buenos Aires.)

It would figure that the states downwind of the rest of the country would be particularly concerned about air pollution, and it would also make sense that the ones able to act are the ones already organized. If the rest of the country won't act, there is no reason we can't. Now if we could persuade our neighbors to cooperate on health care...

12:23 - 17 Dec 2004 [/y4/de]

Wed, 15 Dec 2004

Blue Cross defends its largesse

Blue Cross filed a petition in Superior Court asking for a stay of a DBR ruling that they could no longer provide free health insurance to their directors. (Projo story here.)

There are two important points about this. One is that Blue Cross has been running its business in fairly plush fashion at our expense for quite a while. This is an outrage, and it's a shame it took so long for people to get outraged. (Check out our analysis of their books last winter, before the latest fuss started. issue 3.)

But the other point worth noting is that public pressure has changed how business is done at Blue Cross. They are, after all, a locally-owned non-profit, with a public board of directors, and a supposedly charitable purpose under law. What's more, they are subject to state laws. Since their 2004 annual report revealed the extent of the largesse they bestowed on their CEO and their board, the laws have changed, and the practices have changed.

People who think that the for-profit, out-of-state, huge UnitedHealth corporation will be better, kinder members of the community are in for a shock. Just for the record, Dr. William McGuire, United's CEO, earned around $94 million last year, and this year will probably earn well over $100 million, making him one of the nation's most expensive CEO's. That money comes from premiums, not from trees.

21:35 - 15 Dec 2004 [/y4/de]

Sun, 12 Dec 2004

Income Volatility is up

A study done cooperatively by the Los Angeles Times and economists at Johns Hopkins has some interesting things to say about income. The most interesting finding is that, while the living conditions of the poor are somewhat better than they were 25 years ago, the (income) risks are greater.

What the study says is that people (all of us) can expect much wider swings in income from one year to the next than was true of people like us 25 years ago. For people at the top, or the solid middle of the income distribution, maybe this isn't serious, but if you're poor, or nearly, this is bad news. They always had more dramatic swings than people higher up the economic ladder, but now it's even worse.

Which is to say that many people—and not just the ones we think of as poor—are only a medical emergency, a layoff, or a messy divorce away from poverty. And many more people are in this position than were 25 years ago.

23:06 - 12 Dec 2004 [/y4/de]

Fri, 10 Dec 2004

Another EDC venture bites the dust

It seems that "Gateway Eight, LLP" the owner of the building next to the Providence train station is bankrupt. Which is not great, since the state pension system holds their $23 million mortgage. But wait, the state's Economic Development Corporation made a $3 million loan guarantee, so it will be ok.

It's hard to know where to start. First, why is one arm of the state indemnifying another? Against what harm? Did EDC imagine that if they stepped in, then state finances wouldn't be hurt?

Second, what did EDC think it was doing by offering loan guarantees to a real estate partnership? These aren't real companies in the sense that you and I think of them. Mostly they are all but imaginary entities conjured up at the wave of a real-estate investor's hand. The whole point of such a partnership is to limit the investors' liability to a single project, so that failure of one project (or one partner) can't affect the profitability of another. They are designed to go down in flames when they have hard times, so that someone else will be left holding the bag. In this case, that would be us.

Trying to pick winners is usually poor development policy. There are exceptions, but it's hard to think of them. And it's really hard to think that loans to a fly-by-night real estate partnership constitute one.

08:38 - 10 Dec 2004 [/y4/de]

Thu, 09 Dec 2004

Those teachers

There is a new issue of RIPEC's education report available (look here).

A quick look in it shows that they recycle the scandal that our teachers are the 8th highest paid in the country. This is data from the NEA. The AFT has a survey that puts us at seventh.

But while cruising about, why not also look at the Wall Street Journal's CareerJournal.com, and look at accountant salaries. There, you'll learn (if you are patient about clicking) that Rhode Island has the seventh highest paid accountants in the country:

We think this is a scandal, and we await the troubled press releases from the Governor's office that remind us that our accountant salaries must be lowered in order to make our state competitive with others. Presumably he'll start denouncing the obstructionist accountant unions, and then RIPEC will chime in with helpful statistical abstracts, and pretty soon the cause of the problem will become common knowledge and any future data will only serve to buttress the opinions of right-thinking people.

11:25 - 09 Dec 2004 [/y4/de]

Tue, 07 Dec 2004

Pier Market to close

The small grocery store in the middle of downtown Narragansett—the one you can walk to, near the beach—will close this month so that the landlord can triple the rent.

As was reported in the Projo this morning, Gilbane Properties, the landlord, offered to raise the Pier market's rent from $75,000 per year to $225,000.

I called Wes Cotter, the Gilbane Properties spokesman quoted in the story, and he told me that they aren't losing any money there, but the property is "undervalued" and they can get much more out of it. For the record, the town assesses the grocery building at $180,000. With its share of the land underneath it, the taxes on the market are around $6,500.

Which is to say that once again, we lose an asset of great value to all of us, not because it's not profitable, but because it's not profitable enough.

There's more below, but it's worse.

It turns out this is not the only change planned. From the Projo:

In October, Gilbane notified residents of the Pier Village Apartments, adjacent to the supermarket, that their leases would not be renewed.

Instead, the company plans to renovate the 10-building complex.

"It's a wonderful asset right in the center of town, and we think it's time to make that asset bigger and better," said Cotter.

Residents, many of whom are elderly, have expressed concern about finding low-rent housing alternatives in Narragansett. Rent in the remodeled complex will increase, said Cotter.

The project is scheduled to begin in mid-2005. Gilbane will renovate the 88 units one building at a time.

13:25 - 07 Dec 2004 [/y4/de]

Mon, 06 Dec 2004

Charter School Plea

We received another issue of the Governor's e-news:

Governor Carcieri Calls for End to Moratorium on New Charter Schools

Governor Carcieri today greeted young students at the Learning Community Charter School in Pawtucket , where he highlighted the need for charter schools in Rhode Island .

"We have a growing demand for Charter Schools," the Governor noted. "In fact, over 500 students are currently on the waiting list to enroll in Rhode Island 's charter schools. That's proof positive that we need more schools of this kind, especially in our urban communities."

"Unfortunately, the laws that we have on our books hinder our ability to do so."

He goes on to demand that more charter schools be opened.

There used to be a lot of debate over whether or not charter schools would take money away from the regular public schools. Fortunately, the Governor put an end to this debate by proposing, in the current fiscal year's budget (FY2005), to cut all state funds to public schools by $7.9 million, and use that money to fund... charter schools.

This is a good thing, really, because the debate was tiresome, and now we don't have to argue about it any more.

(In the budget document itself, Carcieri claimed a "modest" increase in state education aid by counting some additional pension contributions.)

"During the last legislative session, the General Assembly rejected my attempts to remove the cap. Instead they established a moratorium which prevents our ability to approve new charter schools."

Whatever you think about the merits of charter schools, you might suspect that funding them by taking money right out of municipal budgets may not be the best strategy for marshalling support. If The Governor is wondering why this is a tough sell around here, he should look no further than the budget office.

This was covered in the March budget issue.

18:08 - 06 Dec 2004 [/y4/de]

Ethics rules are flexible in the executive branch, too.

Now (federal) administration officials can lobby their former colleagues (and former subordinates) right away. The old rules required waiting a year. Aren't you relieved? Washington Post reports here.

These new rules were deemed so important that the ethics office waived the 30-day requirement, and any opportunity for public comment. No wonder cabinet secretaries are lining up to jump ship: there's money to be made!

13:24 - 06 Dec 2004 [/y4/de]

Thu, 02 Dec 2004

Tax ranking

The Poverty Institute at RIC has just put out a report about Rhode Island's tax ranking. The ranking is yet another attempt to measure a two-hundred dimensional thing with a single number, and to compare rural states to urban ones, tiny ones to huge ones, and rich ones to poor ones. But somewhere it is written that rankings like these must be made, and this one is from the US Census Bureau, who has RI ranked seventh in the US in 2002 in tax burden. What a scandal.

As usual, the rankings don't illuminate, they mask what's important. It turns out that RI citizens are taxed at 11.1% of total personal income, but this is down from 2000, even as our ranking moved up from 12th. The story in sum is that the recession didn't hit as hard here as in other places, so we advanced up the list even as our tax burden declined slightly. There's a bit more detail in the report, so go read it (it's short).

The lesson again is that rankings like these are to be trusted very little, if at all. IQ tests don't measure application, wit or creativity, and tax rankings don't measure who pays. These aren't just minor details.

01:26 - 02 Dec 2004 [/y4/de]

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