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]

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