Monday, December 31, 2012

Law enforcement officer deaths down 23 percent in 2012

Fatalities among law enforcement officers fell 23 percent from a year earlier, according to a preliminary report from the National Law Enforcement Officers Memorial Fund (NLEOMF). The NLEOMF reports that 127 law enforcement officers lost their lives while performing their jobs in 2012.

The loss of life is appalling; however, the trend is good news. The number of fatalities is not only far lower than last year's toll but also near the 50-year low set in 2009, as shown in a graph from the NLEOMF web-site.

The fall largely reflects a decline in firearm-related deaths, which dropped 32 percent from 72 in 2011 to 49 in 2012. However, traffic-related deaths also fell by 17 percent.

Although the overall trend is welcome news, there were some disturbing developments. Ambush attacks increased and were the largest single source of firearms-related deaths, accounting for just over one in nine officer deaths.

Let's hope that 2013 is safer.

Sunday, December 30, 2012

Death by dysfunction

As nauseating and potentially damaging as the current stalemate over the fiscal cliff is, it's only one of several important pieces of legislation to run afoul of the dysfunctional Republican House of Representatives.

Farm Bill. In June, the Farm Bill, which sets the country's agricultural policy, authorizes U.S. Department of Agriculture programs, and funds food and farm disaster assistance programs passed the Senate (S. 3240) with a bipartisan 64-35 majority. The bill includes several tough reforms; the Congressional Budget Office estimates that the bill would cut $23.1 billion in expenditures over the next ten years

The House Committee on Agriculture marked up a version of the bill and passed it with an overwhelming and bipartisan 35-11 vote. However, there it stopped, as House leaders, under pressure from extreme conservatives, refused to allow a general vote. Foreshadowing the shrewd strategy that he would later adopt for the fiscal cliff, House Speaker Boehner substituted a one-year "plan B" bill but then pulled that when the radical right wouldn't go along.

As the year ends, $23.1 billion in program cuts along with five-year certainty for farm policy languish without an up or down vote because the cuts aren't extreme enough for a portion of the radical right. Worse, several provisions of the current farm bill are set to expire on January 1, including the dairy cliff.

Friday, December 28, 2012

"All I need is a miracle" -- growth in the no-personal-income-tax states

Earlier this week, I analyzed a proposal that the John W. Pope Civitas Institute has made to eliminate the corporate, personal, and business franchise taxes that North Carolinians pay and to replace these with a higher and expanded sales tax, a business license fee, and a real estate conveyance fee (a real estate sales tax). The proposal would shift the responsibility for paying taxes away from North Carolina's wealthiest households and most prosperous corporations and towards its poorest households and smaller businesses.

Civitas acknowledges that the tax proposal would be regressive but claims that it would lead to greater economic growth. As evidence it cites the experiences of states that do not assess personal income taxes and of those that do not assess corporate income taxes. These states experienced higher growth in their Gross Domestic Products (GDPs) than other states.

As I wrote in the earlier post, this contention is correct, but it is hardly evidence of the effect of the states' tax policies. For example, total GDP is influenced by the number of people in a state, and GDP growth is influenced by population growth. Each of the no-personal-income-tax (NPIT) states experienced above-average population growth. Several of the states have other things that make them unique. Below I analyze the growth rates for the states, highlighting some of their characteristics.

Tuesday, December 25, 2012

Civitas' immiserating tax scheme

Charge them for the lice
Extra for the mice
Two percent for looking in the mirror twice
Here a little slice
There a little cut
Three percent for sleeping with the window shut
Taking inspiration where it can (and probably recommending that the poor pay a tax for that too), the John W. Pope Civitas Institute has released an audacious proposal to reduce rich North Carolinians' payments by having everyone else pay more in taxes for food, medicine, and rent.

Specifically, Civitas recommends eliminating the personal income tax, the corporate income tax, and the franchise tax that North Carolina households and businesses currently pay and replacing these with
  • a higher (8.05 percent) sales tax which would be extended beyond the current tax base to cover groceries, insurance premiums, out of pocket medical expenses, residential leases, lottery ticket sales, and any service that is taxed in at least one other state (the proposal would also eliminate other exemptions and special rates in the current tax code but would exempt business expenditures on capital goods);
  • a business license fee; and
  • a real estate conveyance fee (a tax on commercial real estate sales)
Civitas claims that the change would be "revenue neutral," meaning that the new and increased taxes would bring in as much money as the taxes they are replacing. The claims of neutrality are suspect because the revenue figures that Civitas uses are $750 million less than what the state actually took in. Let's assume, however, that the final proposal is revenue neutral.

Under a revenue neutral tax reform, some households and businesses will pay less, while others will pay more. The reform shifts the responsibility of paying taxes from one group to another.

For this particular proposal, the responsibility would shift from rich households and prosperous corporations to poor households and smaller businesses. The tax system would lurch from being progressive (meaning that wealthier people pay a higher proportion of their income in taxes than poorer people) to regressive (meaning that poorer people pay a higher proportion of their income in taxes than wealthier people).

Civitas claims that this shift will actually be beneficial because "progressive income taxes (are) more harmful to growth." As evidence in support of this claim, Civitas compares "growth rates" for states with and without corporate income taxes and states with and without personal income taxes. It finds that states without the taxes experienced higher rates of economic growth.

Civitas provides almost no documentation for its figures besides saying that they are based on data from the Bureau of Economic Analysis (BEA). An analysis of the BEA data, however, indicates that the Civitas claims don't hold water.

The "headline" measure of state economic growth that the BEA uses is real (inflation-adjusted) gross domestic product (GDP), an estimate of the value of goods and services produced within the state. For instance, Civitas claims that average annual growth from 2002-2011 was half a percent lower in states with a personal income tax than in states without such a tax (1.7 percent growth vs. 2.2 percent growth). There is some question regarding which states do and don't have personal income taxes. Seven states (Alaska, Florida, Nevada, South Dakota, Texas, and Washington) definitely do not have personal income taxes. Two other states (New Hampshire and Tennessee) only assess personal income taxes on certain types of income, such as dividends or interest. For the present analysis, I computed the annual changes in real GDP for 2002-3, 2003-4, ..., 2010-11, averaged the annual changes for the first seven states, and averaged the annual changes for the remaining 43 states (omitting the District of Columbia). Doing this reproduces Civitas' 2.2 percent average annual growth figure for the no personal tax states but only produces a 1.5 percent growth figure for the other states. These comparisons are more favorable to Civitas' argument than others (such as including DC or treating NH and TN as no-personal-income-tax states), so I'll continue with them.

There are a number of problems with Civitas' analysis. For one thing, Civitas does not adjust its GDP figure for population growth. Redoing the comparisons using real per capita GDP reveals that economic output per person grew slightly more in the personal-income-tax states (0.7 percent per year) than in the no-personal-income-tax states (0.6 percent per year).

Civitas similarly fails to account for the fact that three of the seven no-personal-income-tax states are major oil and gas producers that have benefited from high energy prices over the last decade. Although oil and gas extraction accounted for only one percent of economic output nationally in 2010, it accounted for 16.4 percent of the output in Alaska, 14.2 percent of output in Wyoming, and 6.3 percent of output in Texas. Indeed, Alaska gets so much revenue from its oil and gas fields that it actually pays an annual royalty to its citizens.

Federal government military and civilian activity also accounts for a larger share of economic output in the no-personal-income-tax states than in the others, and federal military and civilian activities grew at a faster rate in the last decade in those economies than in others. For example, although federal civilian and military activities only accounted for 3.7 percent of state economic output nationally in 2010, they accounted for 10 percent of the economic activity in Alaska and 5.1 percent of the activity in Washington. The state and local governments in the seven no-personal-income-tax states also get more intergovernmental revenue from the federal government (e.g., payments from the federal government to help the state and local governments operate schools and build roads) on a per capita basis than other states. Figures from an analysis by The Economist also reveal that the seven no-personal-income-tax states enjoyed a bigger net differential over other states between 1990 and 2009 in the receipt of federal expenditures over the payment of federal taxes. It's much easier to lower your state's tax rates when taxpayers from other states are footing so much of the bill.

Shifting more of the responsibility of paying taxes from those who have benefited from the economy to those who haven't is a cruel prescription, especially given the deprivations that poor families have faced over the last few years. However, it's crueler still to do this with no demonstrable benefit to the economy.

Friday, December 21, 2012

Gun realism

There are a couple of principles that seem useful as we consider sensible measures to improve gun safety.

The first principle considers how much firepower should be in ordinary hands. Reasonable people would agree that there is a line where the capabilities of a firearm create more risks than benefits. For example, we sensibly limit the ownership of fully automatic firearms and other powerful weapons. Most people believe that the capabilities of assault-style semi-automatic weapons and weapons with massive ammunition clips go beyond the reasonable needs of ordinary households. A sensible approach to gun safety is to set a limit on capabilities; possession any firearm or component that exceeds those capabilities would require federal licensing, which in turn would require an extensive criminal and mental background check, special training, reporting mandates if the firearm or component is lost or stolen, and fees to cover the administration of these provisions.

The second principle considers who should be allowed to possess a gun in the first place. Most guns are kept and used for legitimate purposes. However, some guns are also used for illegitimate and offensive purposes. Criminals and people who lack the rational capacity to use a firearm responsibly should not have them. The problem is the people who shouldn't have access to guns aren't immediately distinguishable from people who should have access. Worse, methods of distinguishing different types of people (a) are imperfect (for example, no reasonable system will identify people with criminal intent but no prior criminal activity), (b) impose costs on the legitimate potential owners--the vast majority of the population, and (c) have to be nearly universal to be effective (the analogy is a fence that runs along three-quarters of a property line--with little effort someone can just walk around).

The U.S. currently requires some gun purchasers to undergo checks through the National Instant Criminal Background Check System (NICS). However, the system is far from universal. Federal regulations require licensed sellers to perform the checks, but depending on the state, other sales often go unchecked. The checks should be universal and national. This would raise the costs for some private transactions and reduce their convenience, but maybe not as much as some people think. For example, we have a system of notaries public that verify identities for legal documents. It's hardly a stretch to imagine a private system that could provide NICS verification. Gun shows could hire these verifiers to staff a booth and perform the checks for private sales and exchanges. Outside of gun shows, private seller and traders could go to a local verifier.

An additional problem with the NICS is that a subset of states have not cooperated in providing records. Financial incentives should be provided to obtain the necessary cooperation.

As if these impediments to keeping guns out of the hands of criminals weren't enough, the gun lobby has also worked to neuter the modest amounts of enforcement that are there by cutting its staffing and by denying it leadership. The country needs a functioning Bureau of Alcohol, Tobacco, Firearms and Explosives, and that Bureau needs a confirmed director. Conservative legislators have also worked to reduce funding for federal-local partnerships, like Project Safe Neighborhoods, that reduce gun trafficking and that promote the safer use of guns.

Taken together, how much would capacity restrictions, better checks, and more effective enforcement help to stem gun violence? Unfortunately, we shouldn't expect much impact--initially. America is awash in guns; all guns are capable of producing harm; and all guns can be misused. Restrictions on the most powerful guns would only put a small dent in overall gun ownership. More consistent and complete checks would slow the circulation of guns into the wrong hands but would not remove guns. Indeed, it is actually reasonable to suspect that things would initially get worse, as the announcement of any policy change would lead some people to speed up their transactions before the implementation date.

Over time, however, there could be improvements in safety, but realistically these improvements would be modest and gradual. The most noticeable direct improvement would come from choking off the supply of guns to criminals. In 2008, there were approximately 1,800 gun homicides committed in conjunction with another crime (74 percent of all homicides involving a felony) and approximately 900 gun homicides that were gang-related (92 percent of all gang-related homicides). These accounted for about one out of nine homicides committed in 2008. While tragic events, like the shooting in Newtown, CT, command our attend, an equivalent number of victims are gunned down in the commission of crimes or in gang murders every four days.

Limiting access to more powerful weapons might reduce the number of mass shootings, but as horrendous as these tragedies are, they account for only a small fraction of homicides each year. In 2008, 95.5 percent of all homicides involved a single victim; 3.7 percent involved two victims; and less than 1 percent involved three or more victims. The percentage of shootings involving extraordinary weapons is obviously even lower still. At its best, a completely effective ban on overly capable weapons would only save a few dozen lives. This doesn't mean that we shouldn't enact these steps--each life that we can save is precious. Realistically, however, the number that will be directly saved is modest.

A more promising improvement would likely be indirect. As fewer gangs and criminals possessed guns and perhaps as there were fewer headline-grabbing mass murders, the fear that motivates a large portion of gun ownership would subside. This indirect, albeit rational and voluntary, effect would lead to reductions in gun ownership and would greatly increase safety. Guns in the home increase the chances of accidental deaths and injuries, suicides, homicides, and violent intimidation without much demonstrable effect on crime deterrence, self-defense. Gun manufacturers would suffer, but the rest of us would benefit.

Restricting access to the most dangerous guns and keeping all guns out of the hands of the most dangerous people are sensible steps that would help stem gun violence, but they are far from a cure all. Hopefully, though, they would be a first step toward a substantially safer and saner country.

Tuesday, December 18, 2012

Sensible gun control

An immediate, common-sense, and effective step that we could take to stem gun violence is to simply let the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) do its job.

The Washington Post reports
Amid an intense debate over gun control in the wake of the mass shooting in Connecticut, the federal agency at the heart of firearms regulation in America is so beleaguered and under-resourced that it has not had a confirmed director in six years.

The Bureau of Alcohol, Tobacco, Firearms and Explosives, a division of the Justice Department, is supposed to regulate the nation’s gun industry. But many within ATF say it is the industry that dominates the agency.

The gun lobby, concerned about government regulation of firearms ownership, has taken steps to limit the resources available to ATF and to prevent the agency from having a strong leader, according to former and current ATF officials.

For decades, the National Rifle Association has lobbied successfully to block all attempts to computerize records of gun sales, arguing against any kind of national registry of firearms ownership. And despite the growth of the gun industry and the nation’s population, ATF has fewer agents today than it did nearly four decades ago: fewer than 2,500.
A capable and qualified nominee to head the ATF has languished for two years. It's long past time for the gun lobby's accomplices in the Senate to allow this nomination to come to a vote.

Thursday, December 13, 2012

NC Republicans' latest prescription for higher health care costs

North Carolina Republicans latest contribution to spriraling health care costs is ... a proposal to drive up costs some more.

WRAL reports
A legislative panel on Wednesday suggested requiring a prescription for cold remedies containing one of the main ingredients used to make methamphetamine.

Lawmakers in 2005 ordered North Carolina pharmacies to put medicines containing pseudoephedrine behind the counter to make it more difficult for people to use them to cook up meth. Last year, pharmacists began entering customer names into a national database when they buy the medicines to alert them to anyone buying large quantities of the drug.

The changes have done little to stem the proliferation of home labs that produce meth, a potent stimulant that can be made with over-the-counter household products, often leaving behind a toxic mess.

According to the State Bureau of Investigation, law enforcement has busted a record 444 labs statewide so far this year – 100 more than the previous record, set in 2011. Wilkes County, in the mountains in the northwest part of the state, has had the most busts this year at 58, followed by Wayne County in the east at 27.
Each time one of these laws is passed, lawmakers confidently promise the same thing--that this new restriction will turn the tide against meth labs. And each time they are proven wrong. Such an unbroken record of failure should instill some humility or perhaps some consideration of other approaches; instead it only emboldens the drug crusaders and begets more restrictions.

And indeed, proponents are once again saying that this time will be different.

So far only two states--Oregon and Mississippi--have had enough disregard for the well-being of their law-abiding citizens to enact prescription requirements for cold medications. WRAL cites figures that show dramatic decreases in meth lab busts in those states following the enactment of the laws. It later quotes Rep. Rep. Craig Horn, chairman of the House Select Committee on Methamphetamine Abuse, who asks, "Do we just have to have more dead bodies? Or are we going to do something when we know there's an action that works?"

So what exactly do we know? Examinations of those data suggest--not a whole lot.

An analysis earlier this year of the Oregon figures by the Cascade Policy Institute found that nearly all of the drop in meth lab busts occurred before that state's laws took effect and that California and Washington, which didn't enact prescription laws, saw nearly the same percentage drops in meth lab busts.

A look at the Mississippi experience isn't any more encouraging. In 2009, the year that Mississippi enacted its prescription law, the DEA reported 691 meth lab "incidents" in the state; two years later, the DEA reported that the number of incidents fell to 259. The numbers look impressive until you consider that in neighboring Alabama, meth lab incidents fell even more from 614 in 2009 to 177 in 2011. Over the same period, meth lab incidents in Louisiana fell from 80 to 36. Perhaps more disquieting, the DEA figures also indicate that meth incidents in Mississippi actually increased in the intervening year, rising to 698 in 2010.

While it is difficult to demonstrate the benefits of these laws, we do know the costs. The laws that moved cold medicines "behind the counter" inconvenienced millions of sick people and increased costs for all pharmacies. The most recent law in North Carolina, requiring the registration of all cold medicine purchases, increased costs further and created a massive invasion of privacy.

The proposed restrictions would go even further. Monetary costs would go up even more--either through doctor's fees, insurance copayments, or the cost to insurers. Time costs would also increase. Cold medicine might be out of reach for the poor and uninsured who can't afford a doctor. Costs for drug stores would also rise, as pharmacists have to read and process prescriptions. These are non-trivial costs. Worse, they are repeated over and over for all law-abiding North Carolinians.

Tuesday, December 11, 2012

Too big to fail means too big to jail

If corporations are people, as some conservatives insist, they are some of the luckiest people in the world when it comes to criminal behavior.

This morning, the Department of Justice announced a settlement with HSBC Holdings Plc, regarding its violations of the Bank Secrecy Act, violations of other anti-money-laundering laws, and transactions on behalf of Iranian, Libyan, and Sudanese clients as well as drug criminals and terrorists. Under the agreement, HSBC will pay a record-setting $1.92 billion in forfeitures and fines but will also avoid prosecution if it undertakes reforms.

HSBC's role as a place for criminals and terrorists--as well as run-of-the-mill tax evaders--to launder their money has been public knowledge for some time and extends back more than a decade. In 2010, HSBC received cease and desist orders from the Federal Reserve and Office of the Comptroller of the Currency (OCC) related to its activities that allowed money-laundering. Earlier this year, HSBC's activities were the subject of a a scathing Senate Permanent Subcommittee on Investigations report and hearing.

While the $1.92 billion in financial penalties sets a record, the penalties only amount to 9 percent of the bank's pre-tax profits for this year--effectively a slap on the wrist.

Actual human beings (as opposed to gigantic corporations) who provide financial succor to terrorists and rogue states receive incredibly harsh treatment. For example, Mohamad Hammoud was sentenced in 2003 to 155 years in prison for providing $3,500 in financial support to Hezbollah, although a "successful" appeal reduced that sentence to 30 years. In 2005, Rafil Dhafir was sentenced to 23 years for "participating in a conspiracy to unlawfully send money to Iraq and money laundering." In contrast, HSBC, which looked the other way while banking hundreds of millions of dollars for criminals and terrorists, will lose the equivalent of about one month's profits.

And this is hardly HSBC's first offense. In 2007, HSBC paid a $10.5 million penalty to settle a case in which the bank allowed its name and logo to be used in a fraudulent financial offering. In 2011, the OCC issued a consent order for HSBC over "unsafe or unsound banking practices" associated with its mortgage and foreclosure documentation procedures. In that same year, HSBC was ordered to pay £40 million for luring elderly customers in the UK into risky and unsuitable investments.

Nor is this is also not likely to be HSBC's last brush with the law, as traders at the bank have been linked to the LIBOR rigging scandal.

In states with "three-strikes" sentencing rules, a human HSBC would be facing a mandatory life sentence. A corporate HSBC just promises to do better next time.

And there most assuredly will be a next time.

Wednesday, December 5, 2012

Walmart's and the Gap's deadly penny-pinching

The second part of Wal-Mart's "Save money. Live better." motto has always been a bit dodgy. But now the giant retailer might have to scrap it altogether.

Bloomberg reports that Wal-Mart Stores, Inc. and Gap, Inc. each made a calculated decision to risk the lives of workers in Bangladesh in order to save a few bucks.
At a meeting convened in 2011 to boost safety at Bangladesh garment factories, Wal-Mart Stores Inc. (WMT) made a call: paying suppliers more to help them upgrade their manufacturing facilities was too costly.

The comments from a Wal-Mart sourcing director appear in minutes of the meeting, which was attended by more than a dozen retailers including Gap Inc. (GPS), Target Corp. and JC Penney Co.

Details of the meeting have emerged after a fire at a Bangladesh factory that made clothes for Wal-Mart and Sears Holdings Corp. killed more than 100 people last month. The blaze has renewed pressure on companies to improve working conditions in Bangladesh, where more than 700 garment workers have died since 2005, according to the International Labor Rights Forum, a Washington-based advocacy group.

At the meeting in Dhaka, the Bangladesh capital, in April 2011, retailers discussed a contractually enforceable memorandum that would require them to pay Bangladesh factories prices high enough to cover costs of safety improvements. Sridevi Kalavakolanu, a Wal-Mart director of ethical sourcing, told attendees the company wouldn’t share the cost, according to Ineke Zeldenrust, international coordinator for the Clean Clothes Campaign, who attended the gathering. Kalavakolanu and her counterpart at Gap reiterated their position in a report folded into the meeting minutes, obtained by Bloomberg News.

“Specifically to the issue of any corrections on electrical and fire safety, we are talking about 4,500 factories, and in most cases very extensive and costly modifications would need to be undertaken to some factories,” they said in the document. “It is not financially feasible for the brands to make such investments.”
But Bloomberg goes on to report that other retailers, including PVH Corp., which sells Tommy Hilfiger clothing, did find these protections "financially feasible."

Those pennies do add up, however. Wal-Mart found it financially feasible to pay its CEO nearly $3 million in "cash incentives" and $18 million in total compensation in 2012. Gap paid its CEO $9.7 million in 2011.

Apparently, some lives are worth a whole lot more than others.

Monday, December 3, 2012

Risks of gun ownership outweigh the rewards

Think that owning a gun will make you or your family safer? You may want to think again.

A peer-reviewed article by David Hemenway, published last year in the American Journal of Lifestyle Medicine summarized scientific evidence regarding the health risks and benefits of gun ownership. On the risk side, Hemenway reviewed studies of how guns contributed to accidental deaths and injuries, suicides, homicides, and violent intimidation. On the benefit side, Hemenway examined studies of the effects of guns on crime deterrence, self-defense, and to stop crimes in progress. His conclusions were crystal clear.
...for most contemporary Americans, the scientific studies suggest that the health risk of a gun in the home is greater than the benefit. There are no credible studies that indicate otherwise. The evidence is overwhelming that a gun in the home is a risk factor for completed suicide and that gun accidents are most likely to occur in homes with guns. There is compelling evidence that a gun in the home is a risk factor for intimidation and for killing women in their homes, and it appears that a gun in the home may more likely be used to threaten intimates than to protect against intruders. On the potential benefit side, there is no good evidence of a deterrent effect of firearms or that a gun in the home reduces the likelihood or severity of injury during an altercation or break-in.
Hemenway cites some astounding statistics. For instance, with respect to accidents.
According to the Centers for Disease Control (CDC) data, between 2003 and 2007, the typical resident from the 15 states with the most guns (WY, MT, AK, SD, AR, WV, AL, ID, MS, ND, KY, TN, LA, MO, and VT) was 6 times more likely to die in a gun accident than a typical resident from the 6 states with the fewest guns (HI, NJ, MA, RI, CT, and NY). For example, although there were virtually the same number of children aged 5 to 14 years in both groups of states, 82 had died from accidental gunshot wounds in these high gun states, compared with 8 in the low gun states.
Hemenway is careful to note, correctly, that the absolute risks of either suffering harm or deriving a safety benefit from gun ownership are low. Nevertheless, the risks of harm outweigh the possibilities of benefit.