Rhode Island Policy Reporter

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A look at the lousy situation Rhode Island is in, how we got here, and how we might be able to get out.

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RIPR is a (paper) newsletter and a weekly column appearing in ten of Rhode Island's finer newspapers. The goal is to look at local, state and federal policy issues that affect life here in the Ocean State, concentrating on action, not intentions or talk.

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whole site RIPR back issues

Available Back Issues:

  • Aug 09 (38) - How your government's economic policies have worked against you. What a fake nineteenth century nun can teach us about the tea party protests.
  • Jun 09 (37) - Statistics of optimism, the real cost of your government. Judith Reilly on renewable tax credits. Review of Akerlof and Shiller on behavioral economics.
  • Apr 09 (36) - Cap and trade, the truth behind the card check controversy, review of Governor's tax policy workgroup final report.
  • Feb 09 (35) - The many varieties of market failures, and what classic economics has to say about them, review of Nixonland by Rick Perlstein.
  • Dec 08 (34) - Can "Housing First" end homelessness? The perils of TIF. Review of You Can't Be President by John MacArthur.
  • Oct 08 (33) - Wage stagnation, financial innovation and deregulation: creating the financial crisis, the political rhetoric of the Medicaid waiver.
  • Jul 08 (32) - Where has the money gone? Could suburban sprawl be part of our fiscal problem? Review of Bad Money by Kevin Phillips, news trivia or trivial news.
  • Apr 08 (31) - Understanding homelessness in RI, by Eric Hirsch, market segmentation and the housing market, the economics of irrationality.
  • Feb 08 (30) - IRS migration data, and what it says about RI, a close look at "entitlements", historic credit taxonomy, an investment banking sub-primer.
  • Dec 07 (29) - A look at the state's underinsured, economic geography with IRS data.
  • Oct 07 (28) - Choosing the most expensive ways to fight crime, bait and switch tax cuts, review of Against Prediction, about the perils of using statistics to fight crime.
  • Aug 07 (27) - Sub-prime mortgages fall heaviest on some neighborhoods, biotech patents in decline, no photo IDs for voting, review of Al Gore's Against Reason
  • Jun 07 (26) - Education funding, budget secrecy, book review of Boomsday and the Social Security Trustees' Report
  • May 07 (25) - Municipal finance: could citizen mobility cause high property taxes? What some Depression-era economists had to say on investment, and why it's relevant today, again.
  • Mar 07 (24) - The state budget disaster and how we got here. Structural deficit, health care, borrowing, unfunded liabilities, the works.
  • Jan 07 (23) - The impact of real estate speculation on housing prices, reshaping the electoral college. Book review of Blocking the Courthouse Door on tort "reform."
  • Dec 06 (22) - State deficit: What's so responsible about this? DOT bonding madness, Quonset, again, Massachusetts budget comparison.
  • Oct 06 (21) - Book review: Out of Iraq by Geo. McGovern and William Polk, New rules about supervisors undercut unions, New Hampshire comparisons, and November referenda guide.
  • Aug 06 (20) - Measuring teacher quality, anti-planning referenda and the conspiracy to promote them, affordable housing in the suburbs, union elections v. card checks.
  • Jun 06 (19) - Education report, Do tax cut really shrink government?, Casinos and constitutions, State historic tax credit: who uses it.
  • May 06 (18) - Distribution analysis of property taxes by town, critique of RIEDC statistics, how to reform health care, and how not to.
  • Mar 06 (17) - Critique of commonly used statistics: RI/MA rich people disparity, median income, etc. Our economic dependence on high health care spending. Review of Crashing the Gate
  • Feb 06 (16) - Unnecessary accounting changes mean disaster ahead for state and towns, reforming property tax assessment, random state budget notes.
  • Jan 06 (15) - Educational equity, estimating the amount of real estate speculation in Rhode Island, interview with Thom Deller, Providence's chief planner.
  • Nov 05 (14) - The distribution of affordable houses and people who need them, a look at RI's affordable housing laws.
  • Sep 05 (13) - A solution to pension strife, review of J.K. Galbraith biography and why we should care.
  • Jul 05 (12) - Kelo v. New London: Eminent Domain, and what's between the lines in New London.
  • Jun 05 (11) - Teacher salaries, Veterinarian salaries and the minimum wage. Book review: Confessions of an Economic Hit Man
  • Apr 05 (10) - Choosing a crisis: Tax fairness and school funding, suggestions for reform. Book review: business location and tax incentives.
  • Feb 05 (9) - State and teacher pension costs kept artificially high. Miscellaneous tax suggestions for balancing the state budget.
  • Dec 04 (8) - Welfare applications and the iconography of welfare department logos. The reality of the Social Security trust fund.
  • Oct 04 (7) - RIPTA and DOT, who's really in crisis?
  • Aug 04 (6) - MTBE and well pollution, Mathematical problems with property taxes
  • May 04 (5) - A look at food-safety issues: mad cows, genetic engineering, disappearing farmland.
  • Mar 04 (4) - FY05 RI State Budget Critique.
  • Feb 04 (3) - A close look at the Blue Cross of RI annual statement.
  • Oct 03 (2) - Taxing matters, a historical overview of tax burdens in Rhode Island
  • Oct 03 Appendix - Methodology notes and sources for October issue
  • Apr 03 (1) - FY04 RI State Budget critique
Issues are issued in paper. They are archived irregularly here.

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The Rhode Island Policy Reporter is an independent news source that specializes in the technical issues of public policy that matter so much to all our lives, but that also tend not to be reported very well or even at all. The publication is owned and operated by Tom Sgouros, who has written all the text you'll find on this site, except for the articles with actual bylines.


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Fri, 28 Aug 2009

Freedom's just another word...

I was at Representative Langevin's "town hall" meeting last week at Warwick City Hall. It was a pretty raucous event, as I'm sure you've heard already. Being late with the news is part of the routine for a weekly column.

A number of people spoke movingly about freedom while asking questions of Langevin. There was talk about freedom of speech, of course, though precious little about any accompanying responsibility to allow the same for one's fellow citizens. A woman told a moving story about how a brain tumor had cost her job, which then cut off her insurance, leaving her facing brain surgery without a way to pay for it. In the middle of this, someone yelled "No funding abortion!" forcing her to stop momentarily. Other people yelled "Liar!" and "Doubletalk!" at Langevin while he spoke. One woman in the front row brought a sign that simply read, "Boo," which she held up from time to time.

Beyond the irritating stuff, there was a lot of earnest concern shown by people who are worried about what reform might mean to them. These people deserve real answers, and it's to Congress's shame that they haven't been able to come up with a real bill yet. But in addition to earnest questions, there were also a lot of crazy ideas on display: comparisons between Obama and Hitler, claims that health care reform leads to socialism, and so on. But the claim that I find amazing was implicit in so much of what was said: that only government can oppress.

Freedom is an important thing, and certainly plenty of people have fought and died for it. I honor their sacrifice, but I also wonder if they would all agree that government is the only danger to freedom. After all, my favorite paean to freedom was made famous by Tennessee Ernie Ford:

You load sixteen tons and what do you get?
Another day older and deeper in debt.
St. Peter don't you call me, cause I can't go.
I owe my soul to the company store.

I suppose that ultimately, at the back of the coal mine owners, the company store, and the security forces that enforced these debts, there was a law about debts, and so government played a part here. But really, to blame that oppression on government is a stretch. For miners, government lifted oppression by ratifying in law in the 1930's what they had fought for in violent strikes over the previous five decades: the eight-hour day, the minimum wage, minimum safety standards, disability insurance and more. (And the company store thing didn't really stop until the 1950's, after Ford sold about 2 million recordings.)

When I think of the oppressive forces in my life, it's hard to avoid considering health insurance. More than any other single factor, maintaining coverage for my family defines the jobs I can afford to take and the risks I can afford to take in my business. That is, it constrains the actions I can take, and isn't that the very definition of a loss of freedom?

The background here is that I'm healthy, and whatever constraints there are on me are minimal compared to people who are sick. I have one relative who has insurance, but he's diabetic and probably can't get insurance if he moves to another state. And what about people stuck in their jobs because of a child with a chronic condition? Or the over 600,000 people who go bankrupt each year because of medical bills? (That's an estimate from a June article in the American Journal of Medicine.) Or that woman with the brain tumor? Are these people free?

And yes, I've heard economists say that the government created the health care problem by offering a tax advantage to corporate-sponsored health insurance plans, and this distorts the market, causing higher prices for me. But that doesn't explain why the discounted corporate premiums are more than twice as high here than in any other industrial country in the world, nor why we leave millions of our fellow citizens out in the cold when they need help, and that's the problem that needs solving.

I also heard from people the other night that we should just rely on increasing competition among private insurers. This has a plausible sound, but according to a 2007 AMA report, Massachusetts and Connecticut both have a more competitive health insurance market than we have here in Rhode Island. According to the 2008 Medical Expenditure Panel survey, they have lower rates for a single person. But they also have higher premiums for families, so competition alone can't be enough.

So what is freedom, really? Is it the absence of government or the absence of compulsion? Isn't it the ability to choose your own fate? In that sense, yes, we already have freedom here: you are always free to choose illness and destitution if you want to.

If you think this is a pretty lousy definition of freedom, though, please raise your voice in support of reforming our health insurance system, with real reforms -- including a public option -- that will lower its price.

10:36 - 28 Aug 2009 [/y9/cols]

Tue, 25 Aug 2009

History: Leveraged buyouts

Apropos of issue 38, out tomorrow, here's some good reading about how government policy encouraged layoffs in the 1980's, from those radicals at Forbes magazine. Remember, the shape of today's economy wasn't randomly forged by impersonal forces of nature. It is largely the result of consciously chosen government policies. Read here.

14:19 - 25 Aug 2009 [/y9/au]

Fri, 21 Aug 2009

We're in it together

In order to deal with the ongoing budget crisis, it seems that East Providence may be losing 13 police officers. Earlier this spring, Woonsocket and North Providence narrowly averted similar layoffs.

There are a bunch of reasons to worry about news like this -- it's an obvious symptom of financial catastrophe, for one thing -- but the big one for me is about preventing crime.

Police officers are the most cost-efficient way we have of combating crime. During the 1990's, the nation's crime rate dropped precipitously. To this day, experts debate the reasons why, and there is not yet a consensus. But I like an important contribution to the debate that came in 2004, from University of Chicago economist Stephen Levitt. He published an article that year called "Understanding why crime fell in the 1990s: Four factors that explain the decline and six that do not." (It was reprinted in his book, "Freakonomics," and you can find it here.)

What Levitt did was to apply sophisticated statistical analysis to all the variables he could find suggested in the news or in criminology journals as possible causes, as well as some that hadn't been suggested. The analysis was interesting, not least because lots of the obvious answers seem not to have anything to do with the decline. Levitt's analysis suggests that improvements in the nation's economy, innovative police strategies (like William Bratton's widely hailed "Broken Windows" strategy), gun control laws, concealed carry laws and demographic changes have approximately zero statistically detectable impact on the levels of crime. On the other hand, he did find some other factors that appear to have had a profound impact.

Notoriously, his statistics seem to suggest that one of the factors that lowered the crime rate may have been the establishment of legal abortion in the 1970's, and a consequently missing generation of criminals by the 1990's. The debate still rages about this one, and I'll leave it alone here. But two less controversial findings were that you can reduce crime either by locking up lots of criminals, or by hiring lots of police. He also pointed out that the second strategy is way cheaper. And I'd point out it's a more humane way to run the world, too.

So this is one reason why it's worrisome when a town sheds police. The state runs our prisons, but not the police. Cities and towns that fail to prevent crime will wind up costing the state more money down the line.

East Providence is not a high-crime kind of place, but it's not a zero-crime kind of a place, either. Among the cities and towns of our state, the 2007 FBI crime reports put it around 10th or 11th in violent crimes, the slightly higher end of the middle of the pack. They don't seem to be doing a bad job with crime in East Providence, but the statistics don't exactly give one confidence that it's a good idea to ease off.

While I was looking into the crime reports, I updated some numbers I developed for a Policy Reporter article a couple of years ago. There, I noticed that only the low-crime parts of the state were really able to add officers over the past decade. That is, in 2000, the low-crime parts of the state had 2.07 police department employees for every 1,000 residents, while in 2007, they had 2.29, a 10% increase. Meanwhile, the high-crime cities and towns in the state had 2.98 police department employees per 1,000 residents in 2000, and 2.98 in 2007, before the fiscal crisis was really upon us.

So how's that for a crime-fighting strategy? Increase the police where they're least needed, and hold them steady where they're needed most.

Why is this? It's not too hard to see. The low-crime places are the affluent towns and rural parts of the state: Portsmouth, Barrington, Burrillville and so on. These towns can afford to add police, so they do. The high-crime places are the cities and towns whose budgets are under the most pressure: Central Falls, Woonsocket, Pawtucket, Providence. For the most part, they can only add police when some new federal program allows them to.

Remember, though, that towns run police departments, but the state runs the prisons. That's a fiscal reason to be concerned about East Providence. But that's not all. It's simply dumb to imagine that crime in Providence is not East Greenwich's problem. Or crime in Woonsocket isn't North Smithfield's problem. Crime in our cities has a profound effect on our suburbs and rural towns. In addition to the costs to the state for imprisoning people and running the courts, there are also the increased pressures on suburbs as people move in order to avoid crime. Certainly crime isn't one of the top reasons to move, as it was a couple of decades ago, but it's not nothing, either.

Ultimately these are not just financial issues. Our state leaders are convinced that they must run the state on a "you're on your own" basis. Providence is left to deal with Providence's problems, and Narragansett to its problems. But Providence's crime is Narragansett's problem, just as Narragansett's closed beaches are Providence's problem, and I wish never to hear politicians in one place try to wash their hands of the problems of the other places. Our state is, as we are endlessly reminded, fairly small. The economic fate of each of our towns is inextricably tied to the rest of them, and it is simply wrong to imagine that any town can succeed individually. East Providence's police department woes should concern us all.

23:37 - 21 Aug 2009 [/y9/cols]

Mon, 17 Aug 2009

How do they do that?

Some places in America are not doing so badly controlling health care costs. Some other places are simply awful. What makes them different and which are they, anyway? An interesting conference called "How do they do that?" attempted to get at some of these points, and a New Yorker article found there picks up some, too.

What's the answer? Seems to be one of those unsatisfying and villain-less, but likely correct, stories about the culture of the place, and what people think is normal.

21:52 - 17 Aug 2009 [/y9/au]

Health care information from the White House

I appreciate lists of things, as anyone can tell. So here are some good lists of eight things. I'd only suggest that some uses of "myth" below are a little kind. I think "lie" might be equally appropriate.

8 ways reform provides security and stability to those with or without coverage

  1. Ends Discrimination for Pre-Existing Conditions: Insurance companies will be prohibited from refusing you coverage because of your medical history.
  2. Ends Exorbitant Out-of-Pocket Expenses, Deductibles or Co-Pays: Ins urance companies will have to abide by yearly caps on how much they can charge for out-of-pocket expenses.
  3. Ends Cost-Sharing for Preventive Care: Insurance companies must fully cover, without charge, regular checkups and tests that help you prevent illness, such as mammograms or eye and foot exams for diabetics.
  4. Ends Dropping of Coverage for Seriously Ill: Insurance companies will be prohibited from dropping or watering down insurance coverage for those who become seriously ill.
  5. Ends Gender Discrimination: Insurance companies will be prohibited from charging you more because of your gender.
  6. Ends Annual or Lifetime Caps on Coverage: Insurance companies will be prevented from placing annual or lifetime caps on the coverage you receive.
  7. Extends Coverage for Young Adults: Children would continue to be eligible for family coverage through the age of 26.
  8. Guarantees Insurance Renewal: Insurance companies will be required to renew any policy as long as the policyholder pays their premium in full. Insurance companies won't be allowed to refuse renewal because someone became sick.

Learn more and get details: http://www.whitehouse.gov/health-insurance-consumer-protections/

8 common myths about health insurance reform

  1. Reform will stop "rationing" - not increase it: It's a myth that reform will mean a "government takeover" of health care or lead to "rationing." To the contrary, reform will forbid many forms of rationing that are currently being used by insurance companies.
  2. We can't afford reform: It's the status quo we can't afford. It's a myth that reform will bust the budget. To the contrary, the President has identified ways to pay for the vast majority of the up-front costs by cutting waste, fraud, and abuse within existing government health programs; ending big subsidies to insurance companies; and increasing efficiency with such steps as coordinating care and streamlining paperwork. In the long term, reform can help bring down costs that will otherwise lead to a fiscal crisis.
  3. Reform would encourage "euthanasia": It does not. It's a malicious myth that reform would encourage or even require euthanasia for seniors. For seniors who want to consult with their family and physicians about end-of life decisions, reform will help to cover these voluntary, private consultations for those who want help with these personal and difficult family decisions.
  4. Vets' health care is safe and sound: It's a myth that health insurance reform will affect veterans' access to the care they get now. To the contrary, the President's budget significantly expands coverage under the VA, extending care to 500,000 more veterans who were previously excluded. The VA Healthcare system will continue to be available for all eligible veterans.
  5. Reform will benefit small business - not burden it: It's a myth that health insurance reform will hurt small businesses. To the contrary, reform will ease the burdens on small businesses, provide tax credits to help them pay for employee coverage and help level the playing field with big firms who pay much less to cover their employees on average.
  6. Your Medicare is safe, and stronger with reform: It's myth that Health Insurance Reform would be financed by cutting Medicare benefits. To the contrary, reform will improve the long-term financial health of Medicare, ensure better coordination, eliminate waste and unnecessary subsidies to insurance companies, and help to close the Medicare "doughnut" hole to make prescription drugs more affordable for seniors.
  7. You can keep your own insurance: It's myth that reform will force you out of your current insurance plan or force you to change doctors. To the contrary, reform will expand your choices, not eliminate them.
  8. No, government will not do anything with your bank account: It is an absurd myth that government will be in charge of your bank accounts. Health insurance reform will simplify administration, making it easier and more convenient for you to pay bills in a method that you choose. Just like paying a phone bill or a utility bill, you can pay by traditional check, or by a direct electronic payment. And forms will be standardized so they will be easier to understand. The choice is up to you - and the same rules of privacy will apply as they do for all other electronic payments that people make.

Learn more and get details: http://www.whitehouse.gov/realitycheck http://www.whitehouse.gov/realitycheck/faq .

8 Reasons We Need Health Insurance Reform Now

  1. Coverage Denied to Millions: A recent national survey estimated that 12.6 million non-elderly adults - 36 percent of those who tried to purchase health insurance directly from an insurance company in the individual insurance market - were in fact discriminated against because of a pre-existing condition in the previous three years or dropped from coverage when they became seriously ill. Learn more: http://www.healthreform.gov/reports/- denied_coverage/index.html
  2. Less Care for More Costs: With each passing year, Americans are paying more for health care coverage. Employer-sponsored health insurance premiums have nearly doubled since 2000, a rate three times faster than wages. In 2008, the average premium for a family plan purchased through an employer was $12,680, nearly the annual earnings of a full-time minimum wage job. Americans pay more than ever for health insurance, but get less coverage. Learn more: http://www.healthreform.gov/reports/hiddencosts/index.html
  3. Roadblocks to Care for Women: Women's reproductive health requires more regular contact with health care providers, including yearly pap smears, mammograms, and obstetric care. Women are also more likely to report fair or poor health than men (9.5% versus 9.0%). While rates of chronic conditions such as diabetes and high blood pressure are similar to men, women are twice as likely to suffer from headaches and are more likely to experience joint, back or neck pain. These chronic conditions often require regular and frequent treatment and follow-up care. Learn more: http://www.healthreform.gov/reports/women/index.html
  4. Hard Times in the Heartland: Throughout rural America, there are nearly 50 million people who face challenges in accessing health care. The past several decades have consistently shown higher rates o f poverty, mortality, uninsurance, and limited access to a primary health care provider in rural areas. With the recent economic downturn, there is potential for an increase in many of the health disparities and access concerns that are already elevated in rural communities. Learn more: http://www.healthreform.gov/reports/hardtimes
  5. Small Businesses Struggle to Provide Health Coverage: Nearly one-third of the uninsured - 13 million people - are employees of firms with less than 100 workers. From 2000 to 2007, the proportion of non-elderly Americans covered by employer-based health insurance fell from 66% to 61%. Much of this decline stems from small business. The percentage of small businesses offering coverage dropped from 68% to 59%, while large firms held stable at 99%. About a third of such workers in firms with fewer than 50 employees obtain insurance through a spouse. Learn more: http://www.healthreform.gov/reports/helpbottomline
  6. The Tragedies are Personal: Half of all personal bankruptcies are at least partly the result of medical expenses. The typical elderly couple may have to save nearly $300,000 to pay for health costs not covered by Medicare alone. Learn more: http://www.healthreform.gov/reports/inaction
  7. Diminishing Access to Care: From 2000 to 2007, the proportion of non-elderly Americans covered by employer-based health insurance fell from 66% to 61%. An estimated 87 million people - one in every three Americans under the age of 65 - were uninsured at some point in 2007 and 2008. More than 80% of the uninsured are in working families. Learn more: http://www.healthreform.gov- /reports/inaction/diminishing/index.html
  8. The Trends are Troubling: Without reform, health care costs will continue to skyrocket unabated, putting unbearable strain on families, businesses, and state and federal government budgets. Perhaps the most visible sign of the need for health care reform is the 46 million Americans currently without health insurance - projections suggest that this number will rise to about 72 million in 2040 in the absence of reform. Learn more: http://www.whitehouse.gov/- assets/documents/CEA_Health_Care_Report.pdf

08:46 - 17 Aug 2009 [/y9/au]

Sat, 15 Aug 2009

As predictable as mushrooms after rain

Some things are easy to predict: mushrooms will bloom three days after the rain; mosquitoes will come out at dusk; and property tax increases will follow a disastrous state budget cycle like we saw this spring. I admire the weird delicacy of the mushrooms, but otherwise watching these events unfold gives me no pleasure. But they do have an oddly reassuring feel, a sign that indeed the world is still spinning on the same axis, sigh.

Much of the state is now enjoying substantial property tax increases in order to pay for the tax cuts to the rich that survived yet another General Assembly session. Around half the towns in the state are going to see increases over 4%. The City of Pawtucket is looking at an 8% increase this year. They and others were granted an exemption to the 4.75% limit because of the cuts in state aid. I also see that the Woonsocket school committee has settled its Caruolo suit seeking more funds from the city, but Pawtucket's suit is still pending. West Warwick's suit appears to have collapsed into a morass of finger-pointing, Cranston has an appeal pending for the 2008 school year, and, well, it's hard to tell exactly what's going on in East Providence.

The law underlying these "Caruolo suits" was put into place back in the 1990's. The problem then was that disputes between towns and their school committees were adjudicated by the Commissioner of Education. The process was said to be tilted in favor of school committees, and Rep. George Caruolo formulated a law to put these disputes in front of a judge, thought to be a more independent arbitrator. Now towns complain that the scales are still tilted against them, and were behind an unsuccessful push to repeal the Caruolo law this past spring.

But those complaints seem unsupportable now, since it's hard to see from the wreckage any evidence of bias. Woonsocket schools seem to have done ok, but as for the others, not so much.

To me, the interesting thing about the Caruolo suits is that there are so many. Before last year, the law was only invoked a half-dozen times since it was created in 1995, and this year there were five suits that I know of. It's not too surprising, really, since the past decade has seen school spending across the state pared and cut and trimmed each year to accommodate declines in state support and new expenses (mostly) beyond the control of the school committees. How long can this go on?

18:51 - 15 Aug 2009 [/y9/cols]

Tax cuts and tea parties

Speaking of tax cuts, I see from a press release they sent me that "RI Tea Party" activists, Colleen Conley and Marina Peterson, met with Reps. Langevin and Kennedy to request public meetings during the recess this August. Langevin had already scheduled two meetings, August 19th at the Warwick Police Station in Apponaug, from 6 to 7PM, and another in Westerly on September 3, 4:30PM at the Wilcox Park bandstand. (Please attend.) Rep. Kennedy has not made plans yet for public events, though he may hold some sessions at the state house.

Today's column is about predictable events, and I predict that the reason the tea partiers want to have public meetings is so they can flex their muscles in much the same way that allied activists in Tampa, Ohio, St. Louis, Arizona and other places have flexed theirs in the past week. In each of these places, public meetings by Democratic Representatives have been broken up, drowned out and dominated by shouting activists seeking to preserve the perquisites of health insurance and drug companies. In these other places, we've seen people carrying signs comparing health care reform to the Holocaust, almost a dictionary definition of loss of perspective.

These folks seem determined to let us all know that they -- a minority of the population according to all the polls I know about -- insist the rest of us continue to muddle by with our insane overspending on health care. (Health care is, of course, a major source of the angst at school committees, but also at my house, and probably yours, too.)

Just remember, we spend a huge amount of money on health care compared to other countries, and get worse results on almost all the important indicators. According to the OECD, in 2003, we spent $5,711 per person on health care. France spent $3,048, Canada $2,998, Germany $2983, Norway $3769, Switzerland $3847, and so on. Other people get more and pay less. Why not us, too?

Why are activists willing to overlook these facts and come out to shout at members of Congress? The sad truth is there is a certain perverse pleasure in focused hate, and the opportunity to yell about it for a bit. In George Orwell's 1984, the leaders of Oceania had everyone participate in a daily "Two Minute Hate" because it helped keep everyone focused. I predict that the local tea partiers want to have an event in order to keep their allies focused, and because it is politically convenient to weaken Democrats, even at the expense of fixing a health care system as broken as ours. That is, political advantage is more valuable to them than helping figure out how to get you the health care you need at a price that won't cripple our economy further.

I also predict that by predicting these things, I will become the focus of some of the activists' ire, but I further predict that they will be slightly less likely to become disruptive at Langevin's meetings in order to prove how wrong I am. I generally don't like to be proven wrong, but in this case, I welcome it.

18:50 - 15 Aug 2009 [/y9/cols]

Fri, 14 Aug 2009

Public Appearances

Hear me talk about my book, Ten Things You Don't Know About Rhode Island at 2pm, August 13, on Dan Yorke's show on WPRO (99.7FM and 630AM), and then again on Citadel Community, Sunday August 16, 790AM (5am), 106FM (6am), 105FM (6:30am), WPRO 99.7FM and 630AM (8am).

Update: Podcast of the Dan Yorke segment is here

13:50 - 14 Aug 2009 [/y9/au]

Sun, 09 Aug 2009

Just FYI

Health care spending per capita in the industrial countries, according to a 2003 OECD survey. Go look.

20:50 - 09 Aug 2009 [/y9/au]

Is it worth it?

Last week, Andrew Cuomo, the Attorney General of New York, put out a list of the bonuses paid to bank executives whose banks had received funds from the bank bailout of last winter.

Citigroup, a bank that has received $45 billion from the "Troubled Asset Relief Program" (TARP), awarded $5.33 billion to a few hundred employees. Over 700 Citigroup employees received bonuses of over $1 million, 44 received bonuses of more than $5 million, and 3 got more than $10 million. Citigroup has not repaid any of the bailout money, and only survives to this day because accounting rules have been modified so they would not seem insolvent.

At Bank of America, who has also received $45 billion, they're giving away $6.9 billion in bonuses. (BOA only got $35 billion in TARP money, but another $10 billion went to Merrill Lynch, which they now own.) That's 868 employees getting more than $1 million, and 18 getting more than $10 million.

These bonuses are not only huge and inappropriate, but they were clearly made with your tax dollars. Merrill Lynch, for example, lost $27.6 billion last year.

Put another way, all the income tax I paid last year, along with all the tax from hundreds of thousands of my peers, went to pay the bonuses for a few hundred executives at a handful of companies who were at the center of a financial storm largely caused by their recklessness. I don't know about you, but I feel proud to be doing my part to protect the marvels of our great system of free enterprise. I'll sleep better at night knowing that my tax dollars are going to fund the expansion of some lovely private homes in Greenwich, Connecticut.

The news, of course, provoked outrage from people less committed than I to those marvels of free enterprise, and Congress last Friday passed legislation said to limit compensation practices at companies like these.

But will those limits work? My experience with studying public policy tells me that any rules people are smart to invent other people are smart enough to subvert. Far more effective would be simply to close loopholes and restore the tax rates on high incomes to what they were not so very long ago.

During the Eisenhower administration, for example, the top marginal rate was 91%, and the economy did just fine. Under Nixon, the top rate was 70%, and under Ronald Reagan, it was 50%. Now, of course, Obama is excoriated as a socialist for saying it would be nice to raise that top rate back to 39% from its current 35%. This is about marginal rates, not effective rates. It doesn't mean that during the 1950's anyone was paying 91% of their income in taxes, only that they were paying 91% of the income they earned above a fairly high threshold.

Over those years, in addition to the rates coming down, lots of loopholes were opened up. For example, it used to be hard to move your money to another country, and it still is, if you're a drug smuggler trying to move a few thousand dollars. Those people have to use briefcases with false bottoms or tape bundles of cash under their shirts to evade detection.

But if, instead of moving tens of thousands, you're trying to move tens of millions or more, the world is your oyster. There are even ads from Citigroup and others extolling the tax advantages of offshore banking with them. These banks have established subsidiaries (or "associates") in places like the Cayman Islands, the Isle of Jersey and the Seychelles, and if you have enough money, they will happily help you figure out how to transfer it to those subsidiaries, just like Meyer Lansky used to do. It's not exactly legal, but enough parts of it have become legal in the past couple of decades that it's harder to stop.

Who are the offenders? It will shock you to know that it's a lot of the same banks giving out bonuses with your tax dollars. A January report from the Government Accountability Office (GAO) reports that Citigroup has 427 foreign subsidiaries in the Cayman Islands, Switzerland and other tax havens. Bank of America has 115. For the most part, these subsidiaries exist only to shelter income -- whether the banks' income or their wealthy customers' -- from taxes.

There are other loopholes worth closing, including special capital gains rates, "deferred compensation," stock option manipulation and more. Closing these would bring in tens of billions of dollars, before the rates were adjusted at all.

People like me, who advocate that we stop cutting taxes on high income individuals, are routinely accused of wanting to eliminate the incentives for innovation and business acumen. But this is silly. The bonuses at these banks, and CEO salaries in general are not high pay in order to foster innovation or new business development. This is nothing more than a small number of ruthless and clever people who have engineered a system of scratch-my-back-and-I'll-scratch-yours in order to extract tremendous sums from corporations like these banks. The system features boards of directors recruited by the executives, and vice versa, and exquisitely tailored compensation consultants offering advice to those boards that executives deserve absurd levels of pay. (An ideal way, of course, to keep getting hired to offer that advice.) These cultural changes, along with the tax changes of the past few decades have brought us to a place where executives at many companies are now paid hundreds of times as much as the lowest-paid workers.

Though they might help, new corporate accounting rules won't get us back to sanity when it comes to executive pay, at the banks or anywhere else. But restoring income taxes on the wealthy back to the levels that existed under Ronald Reagan or Richard Nixon might. And if they don't, we can use the increase in revenue to finance health care reform... and special ed funding and longer unemployment benefits and public transit and much more. It's time.

20:25 - 09 Aug 2009 [/y9/cols]

Sat, 01 Aug 2009

Fiscal responsibility: A good thing or not?

Is fiscal responsibility a good thing or not? Sometimes it's hard to tell. I was reading last week about the Congressional debates on health care. It reminded me of the last big health care overhaul Congress took on. This was the 2003 "Medicare Prescription Drug, Improvement and Modernization Act," and its passage has some things to teach us, or remind us, anyway.

For one thing, part of the reason health care reform is taking such a tortuous path through Congress is the professed concern among many of our representatives that the reform bill include a source of revenue to pay for the benefits. But this is complicated. Perhaps the money should come from a tax on millionaires. Maybe from taxing health benefits. Or maybe from taxing soda, or from savings squeezed out of the system. So, like any bill with complicated details, it's easy for people to find something to pretend an objection to, when their real goal is just to deep-six the whole thing.

Let's remember that the 2003 Medicare Act was all expense, and contained not a single dime of revenue. And yet, remarkably, it got most of the Republican votes, and lots of Democrats voted for it, too.

But not all. There were enough doubters that in order to pass the House, Speaker Dennis Hastert had to hold the vote open for almost three hours while they twisted arms on the floor. Michigan Congressman Nick Smith even told a Michigan reporter he'd been approached with a $100,000 bribe on the floor of the House (for his son's campaign) during those three hours, a claim he later recanted. A month later -- after passage -- the administration admitted it might cost about 33% more than the $400 billion they claimed at the time. A year and a half later, they said, well, maybe we really meant $1.2 trillion.

Remember what was in that bill, too. It forbade Medicare from bargaining with drug companies for better prices. It prevented Medicare from listing the drugs it would pay for (though private companies were free to do so). And it brought us the famous "Doughnut Hole" coverage, putting patients whose medications had reached a cost limit on the hook for thousands of dollars in prescription costs before Medicare would pay for their medicines again. It was a terrible, and expensive, piece of legislation, little more than a tremendous gift from taxpayers to pharmaceutical corporations and other large companies.

And yet "centrists" Mary Landrieu (D-LA), Ben Nelson (D-NE) and Ron Wyden (D-OR) voted for it, as well as Maine's two centrist Republicans, Olympia Snowe and Susan Collins. These are all Senators who say they support health reform but say the current plan is too expensive -- and refuse to support the public option, the source of the most significant cost savings. In the House it's the same story.

Of course the Medicare debacle wasn't all. The Bush tax cuts and the war in Iraq were also approved with nary a word about how they'd be paid for. We had a surplus, and the Republican Congress and George Bush turned it into a huge deficit, with the able help of some of the same centrist Democrats.

Here in Rhode Island, it's no different. Some expenses are just exempt from concerns about fiscal responsibility: tax cuts, highway construction and drug laws, for example. You may be interested to know that interest payments on highway bonds now total around $100 million. If Lincoln Almond had foregone half of his 1998 income tax cut, and applied that to DOT, the state's budget would be around $70 million lower today than it is because of the borrowing we would have avoided. In other words, that tax cut cost us real money, and made our budget bigger.

And what about drug laws? Like many states, we passed some very punitive drug laws in the 1980's. You can debate whether or not they were a good idea, but either way, these changes weren't free. I only remember those debates dimly, but I can't remember anyone dwelling on how expensive incarcerating all those non-violent prisoners would be.

On the other hand, try talking about public transit, education, health care or the environment, and suddenly the green eyeshades come out, and you have to be fiscally responsible, down to the last penny. Fiscal responsibility is a good thing, but it's a good thing all the time.

Postscript: It seems now as if the "Blue Dog" Democrats are going to make enough trouble in the House to jeopardize the prospects for any health care reform at all. But not to worry, Rhode Islanders, your delegation is standing firm in support of real reform.

Well, not really. You see, Representative Langevin and four other Democrats are proposing a "common ground solution" to the knotty problem of whether abortion is to be a covered service in the health exchange. They propose to forbid the government from paying for any abortion, directly or indirectly.

It all sounds highly reasonable and "centrist" until you realize that (1) under the leading proposals, almost all insurers will be getting some indirect government funds, so in a practical sense this will become a ban on insurance policies covering abortion, and (2) this is really just a threat. Langevin and his associates have essentially declared that they weigh the interests of unborn fetuses over children already born, and will sink the reform effort if they are not heeded. There are currently over 7 million uninsured children and 12 million uninsured parents out there, sitting with the rest of us on the other side of Langevin's scale.

Now that the Blue Dogs have threatened to defect from the reform effort en masse, every vote will be needed. Congressional Republicans are standing together to block reform completely. Health care reform is decades overdue, but it doesn't have a chance without solidarity on the other side, too. Please call Representative Langevin and ask him to work with his team, not threaten it.

23:12 - 01 Aug 2009 [/y9/cols]

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