Texas consumers and taxpayers suffer after malpractice "reform"

Conservatives tout caps on malpractice awards as a good medicine for the health care system and for bringing down health costs. However, a new report by the consumer organization, Public Citizen, shows that many health care outcomes in Texas got worse after 2003 when that state capped non-economic damages in malpractice cases.

From the report

• Medicare spending in Texas has risen far faster than the national average. Per-enrollee spending for Medicare’s two main programs ranked second-highest in Texas among the 50 states in 2009. In 2003, Texas ranked seventh. In light of the steep reduction in litigation that has occurred in Texas since 2003, these figures contradict the theory that medical malpractice litigation is driving health care costs.
  
• Medicare spending specifically for outpatient services in Texas has risen even more steeply compared to national averages.
  
• Premiums for private health insurance in Texas have risen faster than the national average.
  
• The percentage of Texans who lack health insurance has risen, solidifying the state’s dubious distinction of having the highest uninsured rate in the country.

The report gives evidence that doctors and insurance companies benefited, but those benefits didn't get passed on to consumers or to taxpayers generally.

Greensboro's latest goodwill ambassador

Greensboro residents are spreading their good cheer far and wide. The city's latest goodwill ambassador received the following praise from the Hickory Daily Record.

Blind rage caused a Greensboro man to put three lives at risk while driving down a Hickory street.

Raymond Morris Patterson, 32, was arrested after he admitted to crashing his girlfriend’s car – on purpose – while she was driving. His 7-year-old son was in the back seat at the time. He was strapped into a child safety seat.

Way to pay it forward Greensboro!

A very solid jobs report

The headlines from today's monthly national jobs report are likely to focus on the unemployment rate stagnating at a still-too-high 9.1 percent, but a closer read of the report shows some signs for optimism.

The unemployment rate is defined as the ratio of (a) people who are not working but looking for work (the government's definition of unemployed) to (b) the sum of people who are working and people who are unemployed (the government's definition of being in the "labor force"). The rate changes as more people become employed. Over the last two months, the number of people who report being employed has increased by 364,500 a month. But the rate also changes as people decide to look for work. Over the last two months, the number of people in the labor force has grown by just under 400,000 people per month, which is twice as fast as population growth.

As a result of these changes, the percentage of the adult population that is now in the labor force has edged up over the last two months to 64.2 percent, and the percent of the adult population that is employed has edged up to 58.3 percent. However, when the numbers of adults who are employed and adults who are actively looking for work both grow, the unemployment rate can stagnate.

The modest growth in the percentages of the adults working and looking for work is a hopeful sign, while the fact that these percentages remain lower than a year ago is a discouraging one.

The other optimistic components of the monthly jobs report are the growth of just over 100,000 establishment-reported payrolls in September and upward revisions of job growth in July and August. Last month's job report estimated that jobs grew by 85,000 in July and were unchanged in August; this month's report estimates that July's increase was 127,000 and August's was 57,000. The growth in the number of jobs would have been even larger had it not been for the elimination of 65,000 public sector jobs over the last three months. The government reports that more than half a million local government jobs have been eliminated since September 2008, a significant drag on overall employment and on economic growth.

Overall, the job growth numbers, while far from outstanding, provide some hope that the country may dodge a double-dip recession. The country remains in a very deep hole, but for this month, at least, it doesn't seem to be digging any deeper.

Corporate entitlement

Entitlement seems to start at the top.

Bank of America's CEO defended his bank's new $5 fee on debit cards on Wednesday, saying that customers and shareholders understand the bank has a "right to make a profit."

...Moynihan (BofA's CEO) said that the bank will talk to its customers, teammates and shareholders and "they'll understand what we're doing -- understand we have a right to make a profit."

I'm sure that BofA's CEO and some of its shareholders sincerely believe that their company has this right, but they should not expect any such understanding from their customers or "teammates" (especially the 30,000 "teammates" who are about to be kicked to the curb).

BofA has a limited right to pursue success and to pursue profits; it can't, for instance, pursue profits through restraints of trade or collusion. But even these rights are different from any rights "to make a profit."

BofA's entitlement attitude in this $5 debit card fee debacle has been clear from the beginning. The new regulations that cap debit card interchange fees leave plenty of room for reasonable profits from BofA and other large banks, while protecting merchants from the excessive fees that these banks had been able to charge because of their size and market power. Indeed, banks in other countries have remained profitable despite facing much lower caps on interchange fees.

These reasonable profits weren't enough, and BofA is now trying to reach into its poorer customers' pockets (the richer customers are, of course, "entitled" to free debit-card use) for an extra $5 a month.

BofA has every right to ask this sum from its customers. It also has a right to bad-mouth the government and to deflect attention.

Customers, however, have the right to change their behavior to avoid the fee. Given BofA's behavior, the safest route would seem to choose a less-entitled financial institution. Just avoiding debit-card purchases with your BofA card (paying cash) is another.

Changes in customer behavior might not be enough to cure BofA of its entitlement mentality (the entitlement force is strong with this one). Changes in customer behavior would though send an appropriate signal.

Yes, but how about the international ranking of education researchers

Civitas Review touts a recent study that allegedly "exposes the myth of suburban schools." But it seems that the study actually exposes the myth of competent George W. Bush Presidential Center education researchers.

The study in question, the Global Report Card sponsored by the George W. Bush Presidential Center, compares the test score distributions of individual schools and school districts to international distributions. However, because states don't all use the same tests, the study uses a normalizing procedure. The study's web-site describes its procedure

The calculations begin by evaluating the distributions of student achievement at the state, national, and international level. To allow for direct comparisons across state and national borders, and thus testing instruments, we map all testing data to the standard normal curve using the appropriate student level mean and standard deviation. We then calculate at the lowest level of aggregation by estimating average district quality within each state. Each state's average quality is evaluated then using national testing data. And finally, the average national quality is determined using international testing data. Essentially, this re-centers our distribution of district quality based upon the relative performance of the individual state when compared to the nation as a whole as well as the relative performance of the nation when compared to our economic competitors.

For example, the average student in Scarsdale School District in Westchester County, New York scored nearly one standard deviation above the mean for New York on the state's math exam. The average student in New York scored six hundredths of a standard deviation above the national average of the NAEP exam given in the same year, and the average student in the United States scored about as far in the negative direction (-.055) from the international average on PISA. Our final index score for Scarsdale in 2007 is equal to the sum of the district, state, and national estimates (1+.06+ -.055 = 1.055). Since the final index score is expired in standard deviation units, it can easily be converted to a percentile for easy interpretation. In our example, Scarsdale would rank at the seventy seventh percentile internationally in math.

This may be an example of the "new math," but it looks like the index number should be 1.005, not 1.055.

There are other problems with the methodology. A big one is that it normalizes standard deviations in the distribution of test scores across countries and states. Consider a hypothetical state that was successful in improving test scores and in "closing the achievement gap," that is, the state improved test scores among all students but improved them more for students in the bottom of the test score distribution than for students in the top. The standard deviation (measure of dispersion) for its test scores would fall. The Global Report Card, however, uses standard deviations as its unit of measure. The effect would be that school districts within this state would be evaluated on a different standard than school districts in other states.

Another problem is that the methodology does not account for the characteristics of students, such as numbers of students who enter with limited native-language proficiency.

So, beyond the obvious goof on the web-site, there's a lot about this report (and Civitas reporting) that doesn't add up.

Funding a Republican near you

In a development that would make Ronald Reagan proud, it turns out that some of the wealth that has bankrolled the Tea Party and other conservative causes comes from sales of petrochemical capital to Iran. Bloomberg reports

A Bloomberg Markets investigation has found that Koch Industries -- in addition to being involved in improper payments to win business in Africa, India and the Middle East -- has sold millions of dollars of petrochemical equipment to Iran, a country the U.S. identifies as a sponsor of global terrorism.

Internal company documents show that the company made those sales through foreign subsidiaries, thwarting a U.S. trade ban. Koch Industries units have also rigged prices with competitors, lied to regulators and repeatedly run afoul of environmental regulations, resulting in five criminal convictions since 1999 in the U.S. and Canada.

From 1999 through 2003, Koch Industries was assessed more than $400 million in fines, penalties and judgments. In December 1999, a civil jury found that Koch Industries had taken oil it didn’t pay for from federal land by mismeasuring the amount of crude it was extracting. Koch paid a $25 million settlement to the U.S.

The Bloomberg article goes on to describe how Koch industries has stolen, lied, polluted, bribed and killed. One of Koch's employees called it, "the Koch method."

KochPAC has been a major contributor to Rick Perry, Michelle Bachmann, and other Republicans. Don't hold your breath, however, waiting for any of them to give any of that money back.

Proposed electric monopoly wants customers to pay the costs of firing workers

There are stories that Chinese communists would execute prisoners with a gun shot to the back of the head and then charge the prisoners' families for the bullet.

Executives from the likely-to-be-merged Duke Energy and Progress Energy companies must have taken these stories to heart.

In a hearing yesterday by the North Carolina Utilities Commission, which is considering whether to approve the companies' merger, executives made this jaw-dropping admission.

The chief executives of Duke Energy and Progress Energy said Tuesday that their companies will have to raise electricity rates to cover the cost of severance payments that will be paid to employees who lose their jobs as a result of the utilities' merger.

Who pays for severance costs remains the single biggest unresolved issue related to the Duke-Progress merger, which was announced in January and is expected to close before the end of the year.

The merger, which would reduce the already meager amount of competition in power generation, is expected to cost 2,000 workers their jobs. Many of those jobs would be in North Carolina.

It's bad enough that this unnecessary merger will weaken a struggling economy. Now energy executives and the companies' shareholders want local customers to foot the bill for the companies' destruction of jobs.

Somewhere a Chinese communist is smiling.

Austerity killed the radio star

The Washington Post reports

After more than a year of aggressive budget cutting by European governments, an economic slowdown on the continent is confronting policymakers from Madrid to Frankfurt with an uncomfortable question: Have they been addressing the wrong problem?

The campaign to reduce government deficits has come in response to a European debt crisis that could endanger the global banking system. And the budget cutting has been coupled with a reluctance by the the European Central Bank to stimulate economic growth like the Federal Reserve has in the United States; the ECB has instead raised interest rates twice this year to contain inflation.

Those steps have sucked hundreds of billions of dollars out of a European economy that may be edging towards recession.

American politicians sneer at everything "European," yet they swoon for this current European affectation like tween-age girls swooning for Justin Bieber.

Children's lives aren't priceless

The Washington Post has a great story that illustrates the quandary that regulatory agencies face when they consider new safety measures and that illustrates the use of cost-benefit analysis.

For years, safety advocates have been pressuring the federal government to require seat belts in school buses. The rationale behind this request is as sensible as it is compassionate--seat belts would save lives and reduce injuries among bus passengers.

The National Highway Traffic Administration (NHTSA) has considered the request and rejected it, mostly on cost considerations.

NHTSA found that "that an average of 19 school-age children die in school bus-related traffic crashes each year: 5 are occupants of school buses and 14 are pedestrians near the loading/unloading zone of the school bus." (p. 20). Thus, school buses are already incredibly safe (several times safer than traveling in an automobile), though fatalities still occur.

NHTSA also agreed that seat belts would increase safety and reduce the number of fatalities among passengers. In particular, the agency "estimated that lap/shoulder seat belts would save about 2 lives per year and prevent about 1,900 crash injuries, of which 97 percent are of minor/moderate severity (mainly cuts and bruises), assuming every child wore them correctly on every trip."

So why not require seat belts?

Saving those 2 lives and preventing those 1,900 crash injuries would require enormous costs. NHTSA estimates that seat belts would add $5,500-$7,300 to the cost of each new school bus. Adding up the costs for all new school buses, NHTSA estimates that "the benefits would be achieved at a cost of between $23 and $36 million per equivalent life saved."

Worse, those very high costs could lead to some perverse effects. In particular, the costs would likely lead to school districts using fewer buses and spending less on student and driver training. NHTSA calculates that the likely changes in school district behavior might actually lead to a net loss of 10 to 19 additional lives. Thus, school buses themselves would be safer. However, they would available to fewer children and would be operated in a less safe manner, leading to a greater loss of lives.

NHTSA's analysis not only shows the costs associated with the regulation but how those costs will affect behavior. Regrettably, those high costs will continue to cost some children their lives.

Look who Republicans want to tax

In recent weeks, Republican dogma against raising taxes has evolved. Republicans had previously been opposed to raising any taxes under any circumstances. Now, however, Republicans are complaining that 47 percent of American households pay no federal income taxes and are arguing that new taxes should be imposed on them. For instance, David Weigel of Slate writes

On Sunday, in an interview with the Wall Street Journal, Huntsman found himself in a virtual love-in with Rick Perry and Michele Bachmann over, of all things, taxes. The paper asked Huntsman if "the half of American households no longer paying income tax—mainly working poor families and seniors—should be brought onto the income tax rolls."

He agreed, crediting the GOP's current front-runner for vice president, Sen. Marco Rubio, with the insight that "we don't have enough people paying taxes in this country."

The Journal called this position the "new GOP orthodoxy," which it is. When he announced his presidential bid two weeks ago, Perry told a room of conservative activists and bloggers that "we're dismayed at the injustice that nearly half of all Americans don't even pay any income tax." He was following on Bachmann, who'd just told the South Carolina Christian Chamber of Commerce the very same thing.

"Part of the problem is today, only 53 percent pay any federal income tax at all; 47 percent pay nothing," said Bachmann. "We need to broaden the base so that everybody pays something, even if it's a dollar. Everyone should pay something, because we all benefit."

So who are these households that Republicans want to tax? The Tax Policy Center of the Urban Institute and Brookings Institution has recently conducted an analysis of "Why Some Tax Units Pay No Income Tax."

The Tax Policy Center found that of the households in the U.S. that pay no income taxes, about half do so because their incomes are so low that they fall below the standard exemption and deduction amounts. In 2010, the exemption and standard deduction for a single, non-elderly adult totaled $9,350; the exemptions and standard deduction for a non-elderly married couple filing a joint return totaled $18,700. The exemptions and standard deduction for elderly or blind filers or for households with children were somewhat higher. These income cut-offs are near or in some cases below the poverty threshold. For example, the poverty threshold for a single, non-elderly adult is $11,344; the threshold for a non-elderly married couple is $14,602.

Note that these exemptions and deductions can be claimed by nearly all taxpayers. Thus, most single, non-elderly taxpayers pay no federal income taxes on the first $9,350 of income, and most married, non-elderly taxpayers pay no federal income taxes on the first $18,700.

The other half of households that currently pay no income taxes do so because of special provisions and breaks in the tax code, which are sometimes referred to as "tax expenditures" or loopholes. One of the biggest tax breaks in the tax code is that a portion of Social Security benefits is excluded from taxable income. The Tax Policy Center calculates that special provisions for the elderly (the Social Security exclusion and the slightly larger standard deduction) account four out of nine households that owe no taxes because of tax expenditures.

There are also special provisions for households with children (e.g., the child tax credit) and the working poor (e.g., the Earned Income Tax Credit). These provisions account just under another third of the households that owe no taxes because of tax expenditures. Some means-tested cash transfers, such as Supplemental Security Income and Temporary Assistance for Needy Families, is not treated as taxable. These exclusions account for another six percent of households.

If we put these figures together, at least 90% of the households that are not paying federal income taxes are either have very low incomes or have somewhat higher incomes but are elderly or have children. Indeed, the Tax Policy Center calculates that 80% of the households that escape federal income taxation have incomes below $30,000.

Of the other households that escape federal income taxation, most do so because of policies that Republicans favor, including the mortgage interest deduction and the special treatment of capital gains and dividend income.

Taxes for some of these "no tax" households are scheduled to increase in coming years. In particular, the tax package that was approved last December extended some credits for working and poor families. Under the current law and under the Obama administration's budget proposals, the proportion of people paying some taxes would rise. So a tax increase is on the way.

Self-inflicted economic wounds in the Tar Heel State

North Carolina's (former) workers are reaping the bitter fruit of the Republican legislature's slashing of government spending. Non-farm employment in North Carolina, which was starting to recover when the Republicans took control of the legislature, has now declined from 3,890,000 jobs in March to 3,868,100 jobs in July, a loss of 21,900 jobs.

In March, there were 435,200 unemployed workers in North Carolina, and the unemployment rate was 9.7 percent. In July, the number of unemployed workers was 455,000, and the unemployment rate was 10.1 percent.

The state has performed worse than the rest of the country. While the national job picture has been far from than stellar, the national economy has still managed to add 433,000 jobs since March. Over the same period, employment in North Carolina has fallen.

The state's net job losses were as unnecessary as they were painful because they all came from the elimination of jobs in the public sector. From March to July, North Carolina shed 25,000 state and local government jobs.

The Republicans' policies are inflicting lots of pain in the form of displaced government workers, reduced public services, and more crowded classrooms but are producing no discernible benefits for the general economy. Worse still, the cuts have largely come from the education sector, which will likely lead to North Carolina's children and young adults being less productive and earning lower wages in the future.

How about some change we can believe in

On the first market day following S&P's downgrade of U.S. debt, the world looked to Washington for leadership and confidence. Instead, the world got a few minutes of dispiriting remarks from a President that is clearly in over his head.

On Friday, we learned that the United States received a downgrade by one of the credit rating agencies -- not so much because they doubt our ability to pay our debt if we make good decisions, but because after witnessing a month of wrangling over raising the debt ceiling, they doubted our political system’s ability to act. The markets, on the other hand, continue to believe our credit status is AAA. In fact, Warren Buffett, who knows a thing or two about good investments, said, “If there were a quadruple-A rating, I’d give the United States that.” I, and most of the world’s investors, agree.

Investors didn't agree. The Dow Jones Industrial Average, which was already down about 400 points when the President went on the air, dropped another 200 points in the final two hours of trading.

Investors and the rest of the world were surely looking for concrete steps to stem the crisis. Instead, the President used the White House stage to chide Congress for its intransigence and to make a vague call for change. At the same time, the President revealed that he had nothing to offer beyond some empty words.

Given the crisis that we are facing, Congress should immediately call itself back into session. The President and Congress should then take the following steps to improve the economy and restore confidence:

• Ratify the outstanding free trade agreements with South Korea, Panama, and Columbia that Republicans want and the extension of Trade Adjustment Assistance that Democrats want. The President and Congress appear to have an agreement for these four pieces of legislation to begin moving forward in September, but why not remove all uncertainty and pass the package now?
• Negotiate an agreement for and pass the fiscal year 2012 federal budget. The budget should include a continuation of the 99-week unemployment benefits.
  
• Complete and pass the two-year bipartisan transportation reauthorization that has been negotiated by Senators Barbara Boxer and James Inhofe.
• Negotiate and pass the long-term reauthorizations of the FAA, No Child Left Behind, and a host of other bills stalled by partisan infighting.
• Drop all single-senator holds on the President's nominees and hold votes on the nominees' confirmations.

None of these actions would be a magic bullet. However, action on each is needed, could make modest improvements to the country's economic functioning, and is achievable in short order. Despite their "small ball" nature, completion of each would be a vast improvement over lurching from one self-inflicted crisis to the next.

The debt-ceiling debacle has already cost us $1.7 billion

CNN/Money reports

The debt ceiling debacle has just cost U.S. taxpayers more than $1.7 billion.

That's the amount of additional interest the government had to pay investors Monday to sell Treasury bills that finance its operations.

To be precise, the extra cost is $1,721,250,000 more in interest payments than the government would have needed to pay investors just two weeks ago, when they were willing to accept far lower rates before the debt ceiling became a crisis.

And here I thought that the Republicans were concerned about the deficit.

Sen. McConnell's Theater of the Absurd

Senate Republican minority leader, Mitch McConnell, started the day criticizing President Obama's "smoke and mirrors" deficit reduction plans. Recall that Republicans have been holding a vote to raise the debt ceiling hostage to a larger deficit reduction plan.

A few hours later, Sen. McConnell came out with this doozy of a proposal.

Senate Republican Leader Mitch McConnell proposed a “last choice option” to avoid a default on U.S. debt obligations that effectively would grant President Barack Obama power to unilaterally raise the debt limit in installments.

McConnell’s plan would let the president raise the limit in three stages unless Congress disapproves by a two-thirds majority, while Obama would also be required to propose offsetting spending cuts. The spending reductions would be advisory, and the debt-ceiling increase would occur regardless of whether lawmakers enact the cuts, McConnell said.

In other words, the Republicans are willing to cede their precondition that meaningful action be taken about the deficit in return for three meaningless, "smoke and mirror" no votes against the debt limit that they would effectively be agreeing to raise.

Talk about the "Party of No." Republicans are willing to give up all responsibility for this issue and let $4 trillion in proposed deficit reduction slip through their fingers just so they vote no three times (after voting yes).

Sen. McConnell and other Republicans are hoping that the Tea Partiers won't notice that they've just been sold out. However, that "smoke and mirrors" with the Republicans' base seems to be easier than actually governing.

If the Tea Partiers have any rationality at all, they'll recognize that Sen. McConnell is not only selling them out but also insulting their intelligence.

Update (5:30 p.m., 7/12): It didn't take long for some in the Tea Party to see through this. Freedom Works tweets

Sen. McConnell thinks cutting spending is too hard. Help him find his spine! Call him at 202-224-2541

Get well soon ... or else

Got a cold? If you live in North Carolina, you might just receive a "get well soon ... or else" card from the State Bureau of Investigation (SBI).

The North Carolina General Assembly is poised to pass HB 12, a bill that would require drug stores to

before completing a sale of a product containing a pseudoephedrine product, electronically submit the required information to the National Precursor Log Exchange (NPLEx) administered by the National Association of Drug Diversion Investigators (NADDI)... The seller shall not complete the sale if the system generates a stop alert.

The bill further requires that the information retailers provide to the NADDI on North Carolina residents be forwarded on a weekly basis to the SBI.

All that state cold sufferers need to do to make it into the NADDI and SBI databases and be treated as criminal suspects is purchase medicine with pseudoephedrine (e.g., Sudfed).

So much for the NC GOP wanting to reduce regulations for businesses and get "big government" off our backs. Democrats can share the blame as well.

Senate votes to continue throwing $6 billion a year down the ethanol rabbit hole

There are precious few occasions where I find myself in agreement with both Tom Coburn and Richard Burr, but today's Senate vote on ending ethanol subsidies was one of those occasions. Sadly, their amendment went down in flames due mostly to overwhelming support by Democrats, including Kay Hagan.

Shame on Kay for supporting this wasteful, budget-busting measure.

Kudos to Coburn, Burr and 33 other GOP senators who showed courage by not only rejecting this tax break but also by breaking with the Americans for Tax Reform and not requiring an offsetting tax break.

I hope that we can agree again under more successful circumstances.

Republicans agree that some state workers are underpaid--their own staff!

Most state workers in North Carolina have gone three years without a raise, have been hit with higher contributions, deductibles and co-payments on their health insurance, and have even had a short furlough. However, the News & Observer reports that some state workers have done much, much better.

House Speaker Thom Tillis in the last few months handed out raises as high as 27 percent to half his staff after vowing in January to set an example for others in state government by cutting his office payroll.

Tillis' general counsel Jason Kay got a 27 percent raise, from $110,000 a year to $140,000.

Chief of staff Charles Thomas got a 25 percent, $30,000-a-year increase, from $120,000 to $150,000.

Policy advisers Christopher Hayes and Amy Hobbs received $12,000 raises, both going from salaries of $70,000 to $82,000 a year. Kay, Hayes and Hobbs are all new hires who joined the state payroll for the first time in January. Thomas is a former state House member from Asheville.

In all, Tillis gave raises to seven members of the 14-person staff he had before April. He hired an additional employee in May, paying him $70,000 annually.

Far from cutting his own office payroll, the News & Observer found that Rep. Tillis' was at least 10 percent higher than his Democratic predecessor.

So much for shared sacrifice.

Bitterness & division

A story linked from CNN's main page asks "After 50 years of racial strife: Why is Greensboro still so tense?"

The story plumbs the depths of nearly every bit of nastiness over the years, from the KKK shootings 32 years ago to the current controversies over reopening the White Street landfill and moving city council boundaries. Only the Wray fray seems to be left out.

The story misleadingly depicts a mostly seamless pattern of tension. Milestones such as the election of a black mayor and appointment of a black police chief are ignored other black city leaders are mentioned but not examined closely.

Sadly, the central premise of the story is spot on. The question is what to do about it?

Correction (June 8, 2011): The second paragraph of the CNN states that "African Americans have won unprecedented positions of political power in Greensboro in the past four years, including mayor and city manager." (Thanks to Jeff Sykes for alerting me to my poor reading skills.)

Real job-killing government policies

Add sharp cuts in state and local employment to the list of economic headwinds. CNNMoney reports

Don't look to state and local governments to prop up the job market.

To the contrary, this cash-strapped sector is set to go on a record-breaking layoff binge when the new fiscal year starts on July 1.

State and local governments are forecast to shed up to 110,000 jobs in the third quarter, the first time the blood-letting has risen into the triple digits, according to IHS Global Insight.

Nationally, the number of state employees peaked at 5.2 million in August 2008, and the number of local government employees peaked at 14.6 million in September 2008. Since then, state governments have shed 100,000 jobs, while local governments have shed 450,000.

Parents and students will feel the cuts in terms of more-crowded classrooms, fewer class choices, and reduced school services (who needs those pesky nurses, librarians or guidance counselors). Other taxpayers will notice the cuts in terms of longer lines at the DMV and longer waits for tax refunds.

Less noticeable but as important will be the overall drag on local economies.

Slashing jobs doesn't make much sense in a weak employment market.

Less dynamism in the U.S. job market

Last week the Washington Post's Steve Pearlstein had an interesting column on the decline in dynamism in the U.S. job market. The column describes the research of John Haltiwanger from the University of Maryland and his colleagues on job flows. By coincidence, I had an opportunity to see one of Haltiwanger's co-authors, Javier Miranda from the U.S. Census Bureau, present some of their research while I was in Denmark.

"Job flows" are technique for breaking net employment growth down into four components:

• Jobs added by brand new employers (establishment births),
  
• Jobs added by existing employers (establishment expansions),
  
• Jobs lost because of employers shutting down (establishment deaths), and
• Jobs lost because of employers contracting (establishment contractions).

By simple arithmetic, if you add the jobs created by new and expanding employers and subtract the jobs by "dying" and contracting employers, you get the net change in the number of jobs. While much attention is paid to the net employment change (e.g., the paltry 54,000 jobs added last month), we actually learn quite a bit by examining changes in the separate components. The latest figures from the U.S. Bureau of Labor Statistics, which extend through the third quarter of 2010, are shown below.


The figures show that there is tremendous dynamism in the labor market. While the overall number of jobs might change by a few hundred thousand in a given quarter, there are actually several million jobs being created and lost. Also, though we tend to think about jobs changing from businesses opening or shutting down, far and away the lion's share of job changes occur among continuing employers.

The decrease in dynamism that Pearlstein and Haltiwanger refer to is the overall downward trend in all four job flow components. The downward trend is even more pronounced when you consider that the U.S. population has grown and when the flows are expressed in per capita terms.

Employer "births" and "deaths" have trended steadily downward. However, employer expansions and contractions have also trended downward.

Some of this is a new phenomenon. Prior to the Great Recession, expansions were not viewed as being especially cyclically sensitive. However, during the Great Recession, employment growth associated with expansions fell by more than one million and has yet to recover. The credit crisis offers one explanation for the plunge and the incomplete recovery. Many firms have had a difficult time borrowing and issuing commercial paper, and firms that have had funds have either built up cash reserves or used their funds to buy back stock and to buy out competitors.

More interesting, though, is that the downward trend in dynamism pre-dated the recession. During the 2000s, taxes were cut, and the government followed an unabashed pro-business policy. These advantages for businesses and entrepreneurs, however, did not translate into increased job creation.

Haltiwanger offers a novel "too big to grow" explanation. His research shows that "young" firms contribute disproportionately to job growth. As older behemoths, like Walmart, come to dominate local markets, they take the air out of other newer but potentially faster-growing firms. More generally, the abandonment of anti-trust policy may be keeping new entrepreneurs from entering markets and may be robbing the economy of a prime source of job creators.

If Haltiwanger's hypothesis is correct, you can add "too big to grow" to a host of other problems associated with businesses being "too big," including moral hazard ("too big to fail"), undue political influence ("too big to play nice in elections"), and undue influence in markets ("too big to pay fair wages or prices").