During his Senate confirmation hearings, President Bush's nominee for Attorney General, Judge Michael Mukasey, refused to answer one way or the other whether waterboarding was torture and therefore illegal. The 10 Democrats on the Senate Judiciary Committee sent Judge Mukasey a letter, asking him to "clarify his views" regarding waterboarding. Several members of the panel have said that their votes to move the nomination forward will hinge on Judge Mukasey's response.
Yesterday, Judge Mukasey issued a letter in which he stated that techniques like waterboarding "seem over the line or, on a personal basis, repugnant to me, and would probably seem the same to many Americans." The letter also noted that waterboarding is illegal for the military under the Detainee Treatment Act. However, Judge Mukasey refused to say whether the technique was illegal in and of itself or whether it could be used by other parts of the government, most notably the CIA.
Judge Mukasey hedged most of his explanation on the use of the technique being "hypothetical." However, the technique is specific enough to be listed and prohibited in the Army's Field Manual on Intelligence Interrogation. He also indicated that it would be irresponsible to make a firmer statement, but of course nothing could be more responsible.
Vice President Cheney has agreed that "a dunk in the water" to elicit information from suspected terrorists is a "no brainer." Waterboarding, however, is no such thing. Waterboarding involves restraining a person, pouring water over his face and into his throat until the gag reflex sets in, and thereby simulating the terrifying, physical sensation of drowning. One news report indicated that CIA officers who have tested the technique lasted an average of 14 seconds before giving in. Or as Senator John McCain, a former POW who was himself tortured, said, "to make someone believe that you are killing him by drowning is no different than holding a pistol to his head and firing a blank. I believe that it is torture, very exquisite torture."
The United States needs an Attorney General who won't equivocate on this issue and craftily define away "torture" into meaninglessness. If Judge Mukasey continues his evasion on this most fundamental human rights issue and effectively allows the President to continue ignoring Title X, Section 1003 of the lawfully-enacted Detainee Treatment Act, the Senate will be right in refusing to confirm him.
Wednesday, October 31, 2007
Tuesday, October 30, 2007
Vampires slurping electricity
Electronic vampires lurk in my house and are probably lurking in yours, too. While the bloodthirsty vampires of fiction are frightening, the electronic variety should scare you--or at least your wallet--even more.
Electronic vampires refer to the standby and low-power components in products like microwave ovens, DVD players, computers, phone chargers, and the like. They get their name from the two electric plug "fangs" that stick out from small black voltage adapters in consumer electronics but refer more generally to any device that draws power continuously, 24 hours a day regardless of whether the device is switched on. So unlike the fictional vampires, electronic vampires don't retreat when the sun comes out.
Those small amounts of electricity add up. It's estimated that some five percent of U.S. electrical consumption is devoured by vampires.
President Bush brought attention to these devices early on in his administration. One of the most useful things to come out of this was a directive to the Department of Energy to develop new standards for its ENERGY STAR labeling program, so that consumers could be better informed and act voluntarily.
To defang the vampires, there are three main things that consumers can do. The first is to shut off appliances and devices when they are not in use. The DOE recommends shutting down computer monitors and CPS if they are not going to be used for at least two hours. TVs, stereos, and lights should also be turned off if you are leaving a room.
The second is to really turn off some unneeded devices by cutting the power that flows to them when they are not in use. For example, cell phone, toothbrush, and other types of rechargers can be unplugged when they are not needed. It's as simple as removing the plug from the outlet. Other systems, like computers, are more complicated because of the number of plugs involved or the awkward placement of the outlets. For these systems, you can connect all of the relevant plugs to a surge protector with an on/off switch and then flip that single switch when the system is shut down.
The third thing is to look for the ENERGY STAR label when purchasing new appliances or replacing old ones. The approved appliances often use less than half the electricity of other appliances. The approved appliances typically cost more up front but end up saving money in the long run. It seldom makes economic sense to replace an otherwise functional existing applicance. However, ENERGY STAR replacements are a good idea when those less-efficient appliances wear out (or when you can talk your wife into the necessity of a new gadget).
Cutting energy use this way obviously saves consumers money without much in the way of inconvenience. It also reduces the need for power plants, cuts pollution, and reduces greenhouse gas emissions. It's not tricky to treat your wallet and the environment well.
Electronic vampires refer to the standby and low-power components in products like microwave ovens, DVD players, computers, phone chargers, and the like. They get their name from the two electric plug "fangs" that stick out from small black voltage adapters in consumer electronics but refer more generally to any device that draws power continuously, 24 hours a day regardless of whether the device is switched on. So unlike the fictional vampires, electronic vampires don't retreat when the sun comes out.
Those small amounts of electricity add up. It's estimated that some five percent of U.S. electrical consumption is devoured by vampires.
President Bush brought attention to these devices early on in his administration. One of the most useful things to come out of this was a directive to the Department of Energy to develop new standards for its ENERGY STAR labeling program, so that consumers could be better informed and act voluntarily.
To defang the vampires, there are three main things that consumers can do. The first is to shut off appliances and devices when they are not in use. The DOE recommends shutting down computer monitors and CPS if they are not going to be used for at least two hours. TVs, stereos, and lights should also be turned off if you are leaving a room.
The second is to really turn off some unneeded devices by cutting the power that flows to them when they are not in use. For example, cell phone, toothbrush, and other types of rechargers can be unplugged when they are not needed. It's as simple as removing the plug from the outlet. Other systems, like computers, are more complicated because of the number of plugs involved or the awkward placement of the outlets. For these systems, you can connect all of the relevant plugs to a surge protector with an on/off switch and then flip that single switch when the system is shut down.
The third thing is to look for the ENERGY STAR label when purchasing new appliances or replacing old ones. The approved appliances often use less than half the electricity of other appliances. The approved appliances typically cost more up front but end up saving money in the long run. It seldom makes economic sense to replace an otherwise functional existing applicance. However, ENERGY STAR replacements are a good idea when those less-efficient appliances wear out (or when you can talk your wife into the necessity of a new gadget).
Cutting energy use this way obviously saves consumers money without much in the way of inconvenience. It also reduces the need for power plants, cuts pollution, and reduces greenhouse gas emissions. It's not tricky to treat your wallet and the environment well.
Friday, October 26, 2007
Napping while California burns
Nothing like a roaring fire (or 15 of them roaring out of control) and a cozy Cabinet chair to put our Vice President to sleep.
Thursday, October 25, 2007
Rep. Rangel's "mother of all tax reforms"
Rep. Charles Rangel (D-NY) today introduced his long-awaited and mammoth tax reform bill, describing it as "the mother of all tax reforms." Rep. Rangel's bill is a revenue-neutral reform, meaning that cuts and other fixes that reduce the tax receipts going to Uncle Sam are balanced by increases in other areas. Thus, the bill is fiscally responsible--it addresses some problems in the tax code without adding to the federal deficit. However, this also means that the complicated legislation will result in winners and losers.
Rep. Rangel's bill would reduce taxes for some by
eliminating the Alternative Minimum Tax (AMT),
increasing the standard deduction for households,
increasing the refundable part of the child tax credit for low-income households,
extending the coverage and amount of the Earned Income Credit (EIC) for low-income childless households, and
lowering the corporate tax rate.
At the same time, it would increase taxes for others by
adding surtaxes for couples earning more than $200,000 and single filers earning more than $150,000,
taxing "carried interest," mostly earned by investment fund managers, at the same rate as regular income,
eliminating many special tax breaks for corporations, and
changing inventory accounting rules.
By far the biggest changes are the permanent elimination of the AMT and the offseting surtax on upper-income households. The AMT was originally intended as a minimum tax for households with very high incomes that also claimed lots of deductions and would have otherwise paid little if any tax. The AMT is a good idea in principle. However, it has never been indexed for inflation. This has led to "bracket creep" whereby inflation pushed more and more families into the income range where the AMT takes effect. Congress has addressed the problem on a patchwork year-by-year basis but never enacted a permanent reform. Rep. Rangel's bill would simplify the tax code by eliminating this parallel tax system; it would also remove the uncertainty associated with the year-by-year patches.
As currently structured, the AMT brings in an enormous amount of revenue; the projection without any other fixes was $800 billion over the next decade. Eliminating the AMT while remaining revenue-neutral means that all of that money must be replaced. The revenue losses are what have stymied previous reforms. As upper-income households benefit the most from the repeal of the AMT, it makes sense that compensatory, offseting tax increases should be concentrated among them. The proposed surtax is calibrated to match the loss in revenues from the AMT.
Another major component of the reform involves corporate taxes. Tax rates would be lowered, but special deductions would be eliminated and accounting rules would be altered. The net result would be a simplified and more even-handed tax system. This would be devastating to tax accountants. But more importantly, it should remove the government from picking and choosing among special business interests.
It wasn't that long ago that tax simplification was championed by Republicans. Indeed, one of the crowning economic policy achievements of the Reagan administration was the enactment of the bipartisan 1986 Tax Reform Act--a sweeping revenue-neutral package that eliminated deductions, lowered tax rates, and eliminated tax brackets.
Sadly, bipartisanship and budget concerns are absent from today's GOP. The party's spokespeople and special business lobbyists are howling about the necessary offsets and licking their chops at the opportunity to point out all sorts of individual tax increases--without, of course, mentioning that there will be no net change in taxes and that the compensating increases will be concentrated among the very people who benefit the most from the repeal of the AMT. With budget deficits already projected to grow wider over the coming years because of war spending and looming old-age entitlements, the country needs to return to fiscal sanity. Instead, all the Republicans can offer is a bankrupt supply-side fantasy of never-ending (and never paid for) tax cuts.
Because of the herd of oxen that it gores, Rep. Rangel's tax plan has virtually no chance of passing this year or probably next. However, he has offered a sensible, fiscally-sound proposal for finally fixing the AMT and simplifying several parts of the tax code. Maybe there will be an opportunity to return to the bipartisan "spirit of '86."
Rep. Rangel's bill would reduce taxes for some by
At the same time, it would increase taxes for others by
By far the biggest changes are the permanent elimination of the AMT and the offseting surtax on upper-income households. The AMT was originally intended as a minimum tax for households with very high incomes that also claimed lots of deductions and would have otherwise paid little if any tax. The AMT is a good idea in principle. However, it has never been indexed for inflation. This has led to "bracket creep" whereby inflation pushed more and more families into the income range where the AMT takes effect. Congress has addressed the problem on a patchwork year-by-year basis but never enacted a permanent reform. Rep. Rangel's bill would simplify the tax code by eliminating this parallel tax system; it would also remove the uncertainty associated with the year-by-year patches.
As currently structured, the AMT brings in an enormous amount of revenue; the projection without any other fixes was $800 billion over the next decade. Eliminating the AMT while remaining revenue-neutral means that all of that money must be replaced. The revenue losses are what have stymied previous reforms. As upper-income households benefit the most from the repeal of the AMT, it makes sense that compensatory, offseting tax increases should be concentrated among them. The proposed surtax is calibrated to match the loss in revenues from the AMT.
Another major component of the reform involves corporate taxes. Tax rates would be lowered, but special deductions would be eliminated and accounting rules would be altered. The net result would be a simplified and more even-handed tax system. This would be devastating to tax accountants. But more importantly, it should remove the government from picking and choosing among special business interests.
It wasn't that long ago that tax simplification was championed by Republicans. Indeed, one of the crowning economic policy achievements of the Reagan administration was the enactment of the bipartisan 1986 Tax Reform Act--a sweeping revenue-neutral package that eliminated deductions, lowered tax rates, and eliminated tax brackets.
Sadly, bipartisanship and budget concerns are absent from today's GOP. The party's spokespeople and special business lobbyists are howling about the necessary offsets and licking their chops at the opportunity to point out all sorts of individual tax increases--without, of course, mentioning that there will be no net change in taxes and that the compensating increases will be concentrated among the very people who benefit the most from the repeal of the AMT. With budget deficits already projected to grow wider over the coming years because of war spending and looming old-age entitlements, the country needs to return to fiscal sanity. Instead, all the Republicans can offer is a bankrupt supply-side fantasy of never-ending (and never paid for) tax cuts.
Because of the herd of oxen that it gores, Rep. Rangel's tax plan has virtually no chance of passing this year or probably next. However, he has offered a sensible, fiscally-sound proposal for finally fixing the AMT and simplifying several parts of the tax code. Maybe there will be an opportunity to return to the bipartisan "spirit of '86."
A swing and a miss on the revised SCHIP legislation
Update to the update. The Hill reports that today's vote on the revised State Children's Health Insurance Program (SCHIP) legislation fell short of a veto-proof majority in the House. The vote was 265-142, with 26 members absent.
House will consider a new SCHIP bill
Update to yesterday's post. The Washington Post reports that Democrats in the House of Representatives will introduce and vote on a new State Children's Health Insurance Plan (SCHIP) reauthorization bill today; The Hill has a longer article on the same story. Details of the legislation are still being ironed out, but it appears that the revision will have several features to increase support among Republicans. Most features of the original legislation, including its overall cost of $35 billion over the next five years and its financing through higher tobacco taxes would remain.
Among the new features...
The bill will set a firm eligibility cap of 3 times the poverty line (about $60,000 for a family of four).
It would mandate that all applicants provide Social Security Numbers and have those numbers checked by the Social Security Administration to ensure that illegal immigrants do not get benefits.
Performance bonuses would be given to states with high enrollments in the Medicaid program to make sure that the greatest effort was being made to cover the most disadvantaged children.
It would place greater restrictions on participation by non-pregnant adults.
Recall that the House missed overriding the President's veto of the original legislation by a mere 13 votes; so, sponsors only need to pick up a few more votes to get a veto-proof majority.
The administration is grumbling, with no apparent sense of irony, that the House is not negotiating. The Hill reports that Secretary of Health and Human Services Leavitt acknowledged that some of the changes addressed administration concerns but said "it would be clear that they are not interested in compromise, that they’re not interested in a negotiation, that they’re simply interested in being able to expand [government] health insurance to higher and higher incomes, that they’re interested in moving people off of private insurance to government insurance, that they’re interested in seeing adults on SCHIP, and so forth."
The SCHIP train may finally be leaving the station. The administration should declare this a return on success and climb on board.
Among the new features...
Recall that the House missed overriding the President's veto of the original legislation by a mere 13 votes; so, sponsors only need to pick up a few more votes to get a veto-proof majority.
The administration is grumbling, with no apparent sense of irony, that the House is not negotiating. The Hill reports that Secretary of Health and Human Services Leavitt acknowledged that some of the changes addressed administration concerns but said "it would be clear that they are not interested in compromise, that they’re not interested in a negotiation, that they’re simply interested in being able to expand [government] health insurance to higher and higher incomes, that they’re interested in moving people off of private insurance to government insurance, that they’re interested in seeing adults on SCHIP, and so forth."
The SCHIP train may finally be leaving the station. The administration should declare this a return on success and climb on board.
Wednesday, October 24, 2007
How did those adults get on the State Children's Health Insurance Program?
- I want to tell you a startling statistic, that based on their own states' projections -- in other words, this isn't a federal projection, it's the states saying this is what's happening -- states like New Jersey, Michigan, Minnesota, Rhode Island, Illinois and New Mexico spend more money on adults in the S-CHIP program than they do on children. In other words, the initial intent of the program is not being recognized, is not being met.
- G. W. Bush, Oct. 3, 2007.
Last week, President Bush vetoed bipartisan legislation that would have reauthorized and expanded the State Children's Health Insurance Program (SCHIP). SCHIP is a federal-state partnership, in which the federal government provides capped grants to states who in turn offer free or subsidized health insurance to children and pregnant women in families whose incomes are too high to qualify for Medicaid. The legislation would have doubled funding for SCHIP and increased coverage substantially among the nearly 9 million uninsured children in the U.S.
One reason the President gave for vetoing the expansion--and that his supporters have seized on--was that SCHIP funds were being diverted from their original purpose of covering low-income children and were instead being spent on adults. Indeed, the Center for Medicare and Medicaid Services (CMS, the federal agency that administers SCHIP) reports that in FY 2006 just over 700,000 adults in 12 states were receiving coverage through either SCHIP or a related Medicaid expansion program; this compares to more than 6.6 million children who were served by the program.
So how did those adults get on the children's health insurance program? (Those of you who like your hypocrisy served up big are really going to like the answer to this one). The "startling" fact is that those adults are included in the federally-funded portion of the programs because of the administration's own 2001 Health Insurance Flexibility and Accountability Initiative (HIFA). HIFA encouraged states to apply for waivers to the statutory regulations for SCHIP programs to make a number of changes, including adding parents and childless adults who were not otherwise eligible to participate in SCHIP or Medicaid (the Robert Wood Johnson foundation summarized the provisions of HIFA); all waivers were subject to approval by the Secretary of Health and Human Services.
Prior to HIFA, some states covered adults in their SCHIP programs through their own funds; waivers approved under HIFA allowed them to use federal funds. As of September 2007, the President's own Secretary had approved adult-related waivers for 17 states. Of the states that the President now criticizes, New Mexico, New Jersey, Minnesota, and Rhode Island have had extensions or amendments of their adult programs approved since 2005 (corrected Oct. 24, 2007, please see #1 below). So absent the administration's own initiative and absent its approvals of individual state plans, there would be no adults other than pregnant women receiving federally subsidized SCHIP benefits.
What about the costs of these waivers? All of the applications require the states to provide detailed cost projections (even if the states gave faulty projections, you would think that cost experiences would be considered when states like New Jersey and New Mexico renewed their programs). Also, state plans can only be approved if the overall impact of the waiver is budget neutral (i.e., it results in offsetting cost savings elsewhere) or if it relies on unspent federal funds. How could extending coverage to adults possibly be budget neutral? In some cases, states have used funds to subsidize employer plans that cover whole families or purchase entire family plans that cost the same as "child-only" plans.
Through the 2005 Deficit Reduction Act, one group of adults--childless adults--can no longer be included in any new waivers (when the current waivers expire, the childless adults will lose coverage). Thus, existing legislation already partly addresses this problem.
In a final hypocritical twist, it turns out that the President's own preferred legislation, "states can continue to cover parents up to existing eligibility levels".
If adult coverage is such an awful problem, why did this administration encourage it, approve it, and propose continuing it?
- Corrections:
- The post originally stated that "New Mexico had an extension of its adult program approved just last month, and New Jersey had its plan reapproved last year." Actually, the last amendment to the adult (HIFA) component of New Mexico's program was approved in June 2005. A different non-FIFA waiver component was renewed last month.
Sunday, October 21, 2007
Wal-Mart and wages
An article by Emek Basker in the latest issue of the Journal of Economic Perspectives (subscription required) analyzes the causes, benefits, and consequences of Wal-Mart's phenomenal expansion over the last 40 years. On the plus side, Basker finds that Wal-Mart is a boon to consumers both directly through the lower prices that Wal-Mart itself charges and indirectly through the lower prices that its competitors end up charging. Through technical efficiencies, especially early and continuing computerization, Wal-mart has increased productivity throughout the retail sector.
On the negative side, Wal-Mart hurts the country's trade balance--approximately one-seventh of all of the consumer goods that China exports end up being sold by Wal-Mart stores. The company also has enormous market power in the domestic wholesale market, allowing it to restrict profit margins for its suppliers. Wal-Mart also drives profits down among local competitors and causes some of them to go out of business. Wal-Mart does not appear to add much to job growth. Although a new Wal-Mart will hire lots of workers, these employment gains are typically offset by job losses among other retailers. Finally, it appears that Wal-Mart may lower wages in the labor markets where its stores operate.
One of the really interesting things in all of this is how Wal-Mart can keep its wage costs so low. The business itself is remarkably productive. The company leads the retail industry in terms of output per worker--productivity, efficiency, and size are its primary competitive advantages. Nevertheless, little of this productivity advantage seems to find its way into workers' pockets.
Wal-Mart's checkered labor history is well known. The company has staunchly resisted unionization efforts, using both legal and illegal means. The company has gone so far as to shut down its internal meat-packing operations after a unit in Jacksonville, Texas voted to form a union and closed one of its stores in Quebec after workers there voted to form a union. The company is also facing a discrimination lawsuit filed on behalf of 1.5 million of its female employees (although women make up vast majority of Wal-Mart's hourly employees, they are severely under-represented in Wal-Mart's salaried management ranks, both in absolute terms and relative to other retailers; they are also underpaid relative to men).
But anti-union efforts and possible wage discrimination only take us so far. While the company is large relative to its competitors (in fact, it is the largest employer in the U.S.) and possibly able to affect wages in local labor markets, there still should be competitive pressures that force the company to pay something close to the market-clearing wage. Thus, the very low wages remain something of a puzzle.
One potential explanation for the lower wages is that Wal-Mart may be able to bring the technological and scale advantages from its general operations into its hiring and human resource operations. Low wages usually imply high rates of voluntary (worker-initiated) turnover. Workers who are just entering the job market or who have recently been laid off may be willing to accept low wage employment while they continue to search for something better. Thus, workers come in the door, but they also go out the door as soon as a reasonable alternative shows up. Wal-Mart appears to have reduced many of the "fixed costs" of hiring. Because of the size of the stores, each one has a personnel manager dedicated to recruiting employees. There are streamlined procedures for hiring. There also appear to be relatively low-cost methods for training new employees, including self-paced computer-based learning, self-paced reviews of the employee manual, and coaching from department managers. In other words, if one employee leaves, she can be easily and relatively costlessly replaced.
Low costs of hiring also mean that Wal-Mart can accommodate secondary workers, such as mothers of small children, students, retirees, and moonlighters, who wish to work part-time hours and may be willing to trade some schedule flexibility for pay. Businesses typically face a trade-off between the number of people they hire and the number of hours that each employee works. If the fixed costs of hiring are high, a business will employ fewer people but require them to work full-time schedules. If hiring costs are low (and if productivity doesn't vary much with the number of hours worked), a business can be more flexible and hire more part-timers. This flexibility may allow Wal-Mart to reach further into the lower-paid secondary labor market than its competitors.
Low hiring costs would also allow Wal-Mart to continuously hire employees and then adjust its labor force by firing the least productive, least cooperative, or most expensive workers. Indeed, workers complain that Wal-Mart routinely fires long-tenured employees to make way for less-expensive new workers.
Wal-Mart may also have features that appeal to certain kinds of workers. If Wal-Mart stores are continuously hiring, then workers who want immediate employment will find them appealing. Some people are highly risk averse or are unable to finance a prolonged period of unemployed job search; these people would prefer the "sure thing" of a Wal-Mart job. Along the same lines, Wal-Mart stores represent very stable establishments in a relatively unstable industry. So a Wal-Mart position would offer some measure of job security that other retailers can't match. Risk-averse workers would be willing to trade some salary for near-term job stability.
Wal-Mart should "play fair" in labor markets. That means respecting workers' decisions to organize and paying women and men fairly. However, Wal-Mart appears to have many natural advantages in labor markets that allow it to attract productive workers at low wages. Moreover, the company is known for its ferocious low-cost ethic, which it certainly applies to its labor relations. It would be unreasonable for regulators or local governments to try to strip these advantages away.
On the negative side, Wal-Mart hurts the country's trade balance--approximately one-seventh of all of the consumer goods that China exports end up being sold by Wal-Mart stores. The company also has enormous market power in the domestic wholesale market, allowing it to restrict profit margins for its suppliers. Wal-Mart also drives profits down among local competitors and causes some of them to go out of business. Wal-Mart does not appear to add much to job growth. Although a new Wal-Mart will hire lots of workers, these employment gains are typically offset by job losses among other retailers. Finally, it appears that Wal-Mart may lower wages in the labor markets where its stores operate.
One of the really interesting things in all of this is how Wal-Mart can keep its wage costs so low. The business itself is remarkably productive. The company leads the retail industry in terms of output per worker--productivity, efficiency, and size are its primary competitive advantages. Nevertheless, little of this productivity advantage seems to find its way into workers' pockets.
Wal-Mart's checkered labor history is well known. The company has staunchly resisted unionization efforts, using both legal and illegal means. The company has gone so far as to shut down its internal meat-packing operations after a unit in Jacksonville, Texas voted to form a union and closed one of its stores in Quebec after workers there voted to form a union. The company is also facing a discrimination lawsuit filed on behalf of 1.5 million of its female employees (although women make up vast majority of Wal-Mart's hourly employees, they are severely under-represented in Wal-Mart's salaried management ranks, both in absolute terms and relative to other retailers; they are also underpaid relative to men).
But anti-union efforts and possible wage discrimination only take us so far. While the company is large relative to its competitors (in fact, it is the largest employer in the U.S.) and possibly able to affect wages in local labor markets, there still should be competitive pressures that force the company to pay something close to the market-clearing wage. Thus, the very low wages remain something of a puzzle.
One potential explanation for the lower wages is that Wal-Mart may be able to bring the technological and scale advantages from its general operations into its hiring and human resource operations. Low wages usually imply high rates of voluntary (worker-initiated) turnover. Workers who are just entering the job market or who have recently been laid off may be willing to accept low wage employment while they continue to search for something better. Thus, workers come in the door, but they also go out the door as soon as a reasonable alternative shows up. Wal-Mart appears to have reduced many of the "fixed costs" of hiring. Because of the size of the stores, each one has a personnel manager dedicated to recruiting employees. There are streamlined procedures for hiring. There also appear to be relatively low-cost methods for training new employees, including self-paced computer-based learning, self-paced reviews of the employee manual, and coaching from department managers. In other words, if one employee leaves, she can be easily and relatively costlessly replaced.
Low costs of hiring also mean that Wal-Mart can accommodate secondary workers, such as mothers of small children, students, retirees, and moonlighters, who wish to work part-time hours and may be willing to trade some schedule flexibility for pay. Businesses typically face a trade-off between the number of people they hire and the number of hours that each employee works. If the fixed costs of hiring are high, a business will employ fewer people but require them to work full-time schedules. If hiring costs are low (and if productivity doesn't vary much with the number of hours worked), a business can be more flexible and hire more part-timers. This flexibility may allow Wal-Mart to reach further into the lower-paid secondary labor market than its competitors.
Low hiring costs would also allow Wal-Mart to continuously hire employees and then adjust its labor force by firing the least productive, least cooperative, or most expensive workers. Indeed, workers complain that Wal-Mart routinely fires long-tenured employees to make way for less-expensive new workers.
Wal-Mart may also have features that appeal to certain kinds of workers. If Wal-Mart stores are continuously hiring, then workers who want immediate employment will find them appealing. Some people are highly risk averse or are unable to finance a prolonged period of unemployed job search; these people would prefer the "sure thing" of a Wal-Mart job. Along the same lines, Wal-Mart stores represent very stable establishments in a relatively unstable industry. So a Wal-Mart position would offer some measure of job security that other retailers can't match. Risk-averse workers would be willing to trade some salary for near-term job stability.
Wal-Mart should "play fair" in labor markets. That means respecting workers' decisions to organize and paying women and men fairly. However, Wal-Mart appears to have many natural advantages in labor markets that allow it to attract productive workers at low wages. Moreover, the company is known for its ferocious low-cost ethic, which it certainly applies to its labor relations. It would be unreasonable for regulators or local governments to try to strip these advantages away.
Friday, October 12, 2007
Gore shares the Nobel prize
This morning former Vice President Al Gore and the U.N.'s Intergovernmental Panel on Climate Change won the Nobel Peace Prize for their work bringing attention to global warming. For Gore, the award caps a great year in which he won an Oscar and numerous other awards for his documentary, An Inconvenient Truth. Gore promptly announced that he would donate his half of the $1.5 million prize (corrected, please see below) to The Alliance for Climate Protection.
Gore's story is a remarkable and inspiring one. After the close defeat to George Bush in 2000, Gore could have easily fallen into a state of bitterness and completely withdrawn from the public stage. Instead, he almost immediately began teaching. He also dedicated himself to his long-held interests in technology and climate issues.
The documentary, An Inconvenient Truth, contains elements of the global warming presentation that Gore has been making and honing for many years. It also shows Gore during his travels and contains personal snippets that show how he has come to terms with the 2000 loss.
While Gore's winning the Nobel Prize is a fantastic achievement that all Americans should be proud of, his strength in overcoming the loss and finding a different avenue for leadership is the real achievement.
Corrections:
The original post said "that he would donate half of his prize." Thank you to Ged Maheux for pointing out the error in the original post. Corrected Oct. 12, 11:42 a.m.
Gore's story is a remarkable and inspiring one. After the close defeat to George Bush in 2000, Gore could have easily fallen into a state of bitterness and completely withdrawn from the public stage. Instead, he almost immediately began teaching. He also dedicated himself to his long-held interests in technology and climate issues.
The documentary, An Inconvenient Truth, contains elements of the global warming presentation that Gore has been making and honing for many years. It also shows Gore during his travels and contains personal snippets that show how he has come to terms with the 2000 loss.
While Gore's winning the Nobel Prize is a fantastic achievement that all Americans should be proud of, his strength in overcoming the loss and finding a different avenue for leadership is the real achievement.
Corrections:
The original post said "that he would donate half of his prize." Thank you to Ged Maheux for pointing out the error in the original post. Corrected Oct. 12, 11:42 a.m.
Monday, October 8, 2007
National reconciliation moving off the Iraqi political agenda
The Washington Post is reporting this morning that several top Iraqi politicians no longer think that national reconciliation is an achievable near-term goal. According to the article, the politicians see little hope for passing legislation explicitly targeted at reconciliation. It also indicates that the current Shiite-led government is simply unwilling to take meaningful steps to share power with other groups.
The United States' current military surge strategy was put in place to buy time and provide the Iraqis with "breathing space" to make the hard political decisions necessary to mend their country. Without political reconciliation, the surge strategy is like sticking your hand in water--once you remove it, there is nothing to indicate that it was ever there. Absent reconciliation, animosity and the competition for political control will lead to a resumption in violence and possibly civil war.
If Iraqis have indeed given up on this process, the primary justification for the surge has evaporated, and the U.S. is faced with two terrible choices. The first is to continue to remain in the middle indefinitely, keeping troop levels near where they are to minimize the violence. The "success" of this strategy is far from certain, as the pressures for both civil war and Iraqi self-determination are likely to lead to increased violence. Moreover, without a fundamental shift in how we replenish the troops, such as a draft, we cannot long maintain the current force levels.
The second choice is to end the surge and reduce our involvement sooner rather than later. The mission of our remaining troops would be narrowed to fighting Al Qaeda in Iraq, helping to secure borders, and training troops. It's very likely that violence would increase, but again, without political reconciliation, violence is likely to be inevitable.
Until now, the administration has justified its surge strategy using an investment framework. The U.S. was to pay a substantial up front cost in terms of troop levels and lives in return for long-term benefits in terms of Iraqi stability. The prospects of such benefits were always chancy; more and more they appear to be wholly unobtainable.
The United States' current military surge strategy was put in place to buy time and provide the Iraqis with "breathing space" to make the hard political decisions necessary to mend their country. Without political reconciliation, the surge strategy is like sticking your hand in water--once you remove it, there is nothing to indicate that it was ever there. Absent reconciliation, animosity and the competition for political control will lead to a resumption in violence and possibly civil war.
If Iraqis have indeed given up on this process, the primary justification for the surge has evaporated, and the U.S. is faced with two terrible choices. The first is to continue to remain in the middle indefinitely, keeping troop levels near where they are to minimize the violence. The "success" of this strategy is far from certain, as the pressures for both civil war and Iraqi self-determination are likely to lead to increased violence. Moreover, without a fundamental shift in how we replenish the troops, such as a draft, we cannot long maintain the current force levels.
The second choice is to end the surge and reduce our involvement sooner rather than later. The mission of our remaining troops would be narrowed to fighting Al Qaeda in Iraq, helping to secure borders, and training troops. It's very likely that violence would increase, but again, without political reconciliation, violence is likely to be inevitable.
Until now, the administration has justified its surge strategy using an investment framework. The U.S. was to pay a substantial up front cost in terms of troop levels and lives in return for long-term benefits in terms of Iraqi stability. The prospects of such benefits were always chancy; more and more they appear to be wholly unobtainable.
Thursday, October 4, 2007
Carbon emissions can come down ... and did
A May report by the U.S. Energy Information Administration gave preliminary evidence that total energy-related CO2 emissions in the U.S. fell by 1.7 percent from 2005 to 2006. If the numbers hold up to subsequent revisions, that's very good news.
There are short-term and long-term explanations behind the numbers. The biggest short-term explanation is that the weather in 2006 was milder than in 2005. The winter was warmer, while the summer was cooler. This led to fewer heating and cooling days. Accordingly, the biggest decrease in energy-related CO2 emissions in both absolute and percentage terms occurred in the residential sector, where emissions dropped by 3.7 percent.
While year-to-year temperatures can go up and down, the long-term trends give some reason for optimism. Overall, the U.S. is continuing to become more energy- and emissions-efficient. Energy-intensity (units of energy per dollar of total economic ouput) fell by 4.0 percent from 2005 to 2006, and carbon-intensity (CO2 emissions per dollar of output) fell by 4.5 percent. Since 1990, the EIA reports that carbon-intensity dropped by more than a quarter, or just under 2 percent per year. At least some of this can be explained by restructuring in the economy and the steady shift from industrial activity to services and other types of commercial activity.
Another positive trend is that the long-run overall growth in emissions appears to be slowing. Since 1990, overall emissions have grown by about 1 percent per year. However, since 2000, there has only been one year (2004) with emissions growth above 1 percent. Emissions declined in 2001, partly due to the recession and partly due to the brief transportation shut-down following the 9/11 attacks. After 2001 though, growth in emissions has been very modest; this occurred despite relatively strong growth in the economy.
The short- and long-term pictures would be brighter still were it not for the transportation sector. Transportation has overtaken the industrial sector as the largest contributor to emissions. Since 2000, the growth rate in transportation emissions has been nearly triple the growth rate of residential emissions and 50 percent higher than the growth rate of commercial emissions. Energy-related CO2 emissions continue to be dominated by the use of petroleum.
Both sides of the climate change debate should be cheered by these numbers. For the stay-the-course crowd, the numbers show that regular market and technological forces, and perhaps voluntary action, can slow the production of greenhouse gases. For the policy-change crowd, the numbers show that zero growth and even reductions in energy-related CO2 emissions may be more easily achievable than we might have thought, and that reductions can occur without driving the economy into recession. The numbers also seem to justify a special focus on improving the efficiency of the transportation sector.
There are short-term and long-term explanations behind the numbers. The biggest short-term explanation is that the weather in 2006 was milder than in 2005. The winter was warmer, while the summer was cooler. This led to fewer heating and cooling days. Accordingly, the biggest decrease in energy-related CO2 emissions in both absolute and percentage terms occurred in the residential sector, where emissions dropped by 3.7 percent.
While year-to-year temperatures can go up and down, the long-term trends give some reason for optimism. Overall, the U.S. is continuing to become more energy- and emissions-efficient. Energy-intensity (units of energy per dollar of total economic ouput) fell by 4.0 percent from 2005 to 2006, and carbon-intensity (CO2 emissions per dollar of output) fell by 4.5 percent. Since 1990, the EIA reports that carbon-intensity dropped by more than a quarter, or just under 2 percent per year. At least some of this can be explained by restructuring in the economy and the steady shift from industrial activity to services and other types of commercial activity.
Another positive trend is that the long-run overall growth in emissions appears to be slowing. Since 1990, overall emissions have grown by about 1 percent per year. However, since 2000, there has only been one year (2004) with emissions growth above 1 percent. Emissions declined in 2001, partly due to the recession and partly due to the brief transportation shut-down following the 9/11 attacks. After 2001 though, growth in emissions has been very modest; this occurred despite relatively strong growth in the economy.
The short- and long-term pictures would be brighter still were it not for the transportation sector. Transportation has overtaken the industrial sector as the largest contributor to emissions. Since 2000, the growth rate in transportation emissions has been nearly triple the growth rate of residential emissions and 50 percent higher than the growth rate of commercial emissions. Energy-related CO2 emissions continue to be dominated by the use of petroleum.
Both sides of the climate change debate should be cheered by these numbers. For the stay-the-course crowd, the numbers show that regular market and technological forces, and perhaps voluntary action, can slow the production of greenhouse gases. For the policy-change crowd, the numbers show that zero growth and even reductions in energy-related CO2 emissions may be more easily achievable than we might have thought, and that reductions can occur without driving the economy into recession. The numbers also seem to justify a special focus on improving the efficiency of the transportation sector.
Wednesday, October 3, 2007
Bluegreen? Just say no.
The proposed Bluegreen development along the Haw River certainly makes sense to the Bluegreen Corporation and the current property owners but doesn't make sense to the rest of us.
The development would benefit from the proximity to both the river and the state park. It would also benefit from relatively cheap land and proximity to the Triad. It's easy to see why it's an attractive development target and why people would eventually want to move there.
It doesn't make sense, however, from a planning perspective. The development would be outside much of existing road, service, school, and infrastructure networks. More importantly, it would encourage sprawl away from the "Heart of the Triad."
Guilford County needs development--especially high-end residential development--but that development should occur closer to existing urban centers, jobs, and infrastructure. The rezoning required for the Bluegreen development should be rejected. There is plenty of land to be developed in other parts of the county; the Bluegreen Corporation should go there first.
The development would benefit from the proximity to both the river and the state park. It would also benefit from relatively cheap land and proximity to the Triad. It's easy to see why it's an attractive development target and why people would eventually want to move there.
It doesn't make sense, however, from a planning perspective. The development would be outside much of existing road, service, school, and infrastructure networks. More importantly, it would encourage sprawl away from the "Heart of the Triad."
Guilford County needs development--especially high-end residential development--but that development should occur closer to existing urban centers, jobs, and infrastructure. The rezoning required for the Bluegreen development should be rejected. There is plenty of land to be developed in other parts of the county; the Bluegreen Corporation should go there first.
Monday, October 1, 2007
Running out the clock on climate change
Sometimes you have to ask, "why bother?" Through much of this summer, the White House has put out the word that it is shifting policies and giving attention to climate issues. That now appears to be so much hot air.
Last Friday, President Bush spoke at a conference of major greenhouse gas producing nations that was convened by the White House. Many observers were looking for the President to fill out his earlier calls for a voluntary system of reductions--maybe something along the lines of what he did with electric utilities during his last years as Governor of Texas. Hopes may have been raised when the President began by saying "Energy security and climate change are two of the great challenges of our time" and "The United States takes these challenges seriously." However, those hopes were subsequently dashed. The rest of the speech made clear that the President has no intention of making any serious efforts during his remaining time in office.
Instead, the President offered to participate in negotiations that would lead to a working set of "goals"--not programs or strategies mind you, but "goals"--by next summer. These, in turn, would lead to a global consensus on goals that could be adopted by 2009. Of course, that comes after the President leaves office and means that the tough choices will be left to his successor.
That's not leadership; it's running out the clock and passing the buck.
Last Friday, President Bush spoke at a conference of major greenhouse gas producing nations that was convened by the White House. Many observers were looking for the President to fill out his earlier calls for a voluntary system of reductions--maybe something along the lines of what he did with electric utilities during his last years as Governor of Texas. Hopes may have been raised when the President began by saying "Energy security and climate change are two of the great challenges of our time" and "The United States takes these challenges seriously." However, those hopes were subsequently dashed. The rest of the speech made clear that the President has no intention of making any serious efforts during his remaining time in office.
Instead, the President offered to participate in negotiations that would lead to a working set of "goals"--not programs or strategies mind you, but "goals"--by next summer. These, in turn, would lead to a global consensus on goals that could be adopted by 2009. Of course, that comes after the President leaves office and means that the tough choices will be left to his successor.
That's not leadership; it's running out the clock and passing the buck.
Friday, September 28, 2007
GOP front-runners skip forum on black issues
Rudy Guiliani, John McCain, Mitt Romney, and Fred Thompson--the four leading Republican candidates--all skipped a forum hosted by PBS talkshow host, Tavis Smiley that was held last night at Morgan State University. The forum was different from other GOP debates in that it focused on minority concerns, relied on a panel of minority reporters and commentators (Ray Saurez, Cynthia Tucker, Juan Williams), and was held in front of a largely minority audience. A similar forum for Democrats drew nearly every candidate, including all of the front runners.
The minority community holds diverse views. Some Republican policies should be attractive to conservative church-goers, business owners, and the rising middle and upper class, regardless of race. Other policy concerns, like homeland security and the wars in Afghanistan and Iraq, cut across all racial, ethnic, and class lines.
Even if the leading Republican candidates don't expect to get much minority support, they do have an obligation to communicate to all of the constituents that they might one day represent. They also should be willing to have their proposals, promises, and views scrutinized by different audiences. Unfortunately, we are all too familiar with what happens when a chief executive won't leave his comfortable policy bubble.
By skipping the debate, the GOP front-runners missed a golden opportunity to deliver their message to and get feedback from a vital segment of the electorate. More than that, they sent the unmistakeable message that the minority community is simply not worth their time and that they don't have much to offer to that community.
The candidates' myopic strategy will ultimately limit their and the party's appeal. Should any of them win election, it will also limit their ability to govern.
The minority community holds diverse views. Some Republican policies should be attractive to conservative church-goers, business owners, and the rising middle and upper class, regardless of race. Other policy concerns, like homeland security and the wars in Afghanistan and Iraq, cut across all racial, ethnic, and class lines.
Even if the leading Republican candidates don't expect to get much minority support, they do have an obligation to communicate to all of the constituents that they might one day represent. They also should be willing to have their proposals, promises, and views scrutinized by different audiences. Unfortunately, we are all too familiar with what happens when a chief executive won't leave his comfortable policy bubble.
By skipping the debate, the GOP front-runners missed a golden opportunity to deliver their message to and get feedback from a vital segment of the electorate. More than that, they sent the unmistakeable message that the minority community is simply not worth their time and that they don't have much to offer to that community.
The candidates' myopic strategy will ultimately limit their and the party's appeal. Should any of them win election, it will also limit their ability to govern.
Wednesday, September 26, 2007
Cotton O'Reilly Comes to Harlem
Proving that some conservatives are open to new, potentially mind-changing, experiences, talk-show host Bill O'Reilly shared his observations about a recent trip to Sylvia's, a black-owned restaurant in Harlem.
Said Bill, "I couldn't get over the fact that there was no difference between Sylvia's restaurant and any other restaurant in New York City. I mean, it was exactly the same, even though it's run by blacks, primarily black patronship."
Get over it Bill.
Bill went on to add, "There wasn't one person in Sylvia's who was screaming, 'M-Fer, I want more iced tea.' You know, I mean, everybody was -- it was like going into an Italian restaurant in an all-white suburb in the sense of people were sitting there, and they were ordering and having fun. And there wasn't any kind of craziness at all."
No craziness excepting Bill.
Finally, about the meal itself, "I like that soul food. I had the meatloaf special. I had coconut shrimp. I had the iced tea. It was great."
As Gomer Pyle would say, "Surprise! Surprise! Surprise!"
If the radio gig ever fizzles out, Bill has a fine future in ethnography.
NEXT EPISODE: Bill quiera Taco Bell!
Said Bill, "I couldn't get over the fact that there was no difference between Sylvia's restaurant and any other restaurant in New York City. I mean, it was exactly the same, even though it's run by blacks, primarily black patronship."
Get over it Bill.
Bill went on to add, "There wasn't one person in Sylvia's who was screaming, 'M-Fer, I want more iced tea.' You know, I mean, everybody was -- it was like going into an Italian restaurant in an all-white suburb in the sense of people were sitting there, and they were ordering and having fun. And there wasn't any kind of craziness at all."
No craziness excepting Bill.
Finally, about the meal itself, "I like that soul food. I had the meatloaf special. I had coconut shrimp. I had the iced tea. It was great."
As Gomer Pyle would say, "Surprise! Surprise! Surprise!"
If the radio gig ever fizzles out, Bill has a fine future in ethnography.
NEXT EPISODE: Bill quiera Taco Bell!
Tuesday, September 25, 2007
Ticket auctions and other allocations
Young girls in Greensboro were in tears and their parents were up in arms last week when an upcoming Hannah Montana concert sold out in just a few minutes, leaving many families were waiting in line at the venue's ticket window.
Indignant letters to the editor soon followed expressing frustration that so many "little girls dreams (had been) crushed" and blaming promoters for allowing tickets to go to scalpers--parents noticed that tickets were immediately available on resale at inflated prices on web-sites like stubhub.com.
In this instance, bad communication was part of the problem. More than a third of the 13,000 tickets were "pre-sold" through Hannah Montana's fan club; only about 8,000 were available when the regular sales began. Although that should have been plenty to accommodate the families standing in line, there was an even larger virtual line. Internet sales quickly snapped up nearly all of the available tickets.
One way or the other, somebody was going to be disappointed in a situation like this where demand for a scarce good exceeds the available supply. The only way to reduce the disappointment would be to add another concert date, but even that might not be enough to meet demand.
The fans' real beef focuses on the "unfairness" of the rationing mechanism. Here a combination of pre-sales, queues, and regular sales were used to allocate the tickets initially, and resales (scalping) are being used to reallocate the tickets. Is this system actually unfair? Definitely, but maybe not in the way that you think.
Let's start with the scalpers, who put up the money for the tickets and then assume the risk of being able to resell them. If they can resell the tickets, scalpers are then in a position to capture the difference between the original sales price of the ticket and what some die-hard fans are willing to pay. Nobody forces the fans to actually buy the tickets from the scalpers. Those who do purchase tickets get what they want at a price they are willing to pay. It's just more than they would have had to pay in the absence of a resale market, with the scalpers pocketing the difference.
Even without a resale market, the scarcity of tickets would have led to some unfairness. Some people with only modest valuations of the performance would have gotten access to relatively low-cost tickets. Other people who had much higher valuations and who would be willing to pay more to satisfy those valuations would not have gotten access. Introducing a resale market (scalping) improves efficiency by allowing the people with the highest valuations to get access to the tickets.
There are alternatives that would eliminate the resale incentives. The simplest would have been for the concert promoters to set the initial ticket prices higher, so that there wasn't any excess demand. A clear implication from the fast sales was that the tickets were under-priced. If the tickets had been at the appropriate, market-clearing price there would have been no opportunity for resales--everyone who wanted a ticket at the going price would have already purchased one.
It's hard to forecast what the exact price should be. If promoters set the price too high, they might be stuck with empty seats. An alternative then would be to use a descending set of prices. Set the initial price very, very high, then every few hours or every day or so discount the prices by a certain amount until all of the tickets are sold. People with the strongest valuations and the least risk tolerance will start to take tickets at high prices; other people will move in at lower prices. Again though, at the end of the process, there won't be any resale opportunities. The unfairness in this system is that some people pay more than others for the same tickets.
Finally, the promoters could run an auction, with tickets and prime seat locations going to the highest bidders. Stubhub.com and Ticketmaster have already done this for some concerts.
Each of these allocation methods eliminates scalping; however, it's not clear that fans really want them. Under the current arrangement, a few lucky fans get access to tickets that are priced below the market clearing rate; others pay higher rates, with the surplus going to the scalpers. Under each of the alternatives--a uniform market-clearing price, high then descending prices, and auctions--tickets would never be sold below the market-clearing price. More of the revenue would be transferred to promoters instead of to scalpers and resellers.
In essence, the parents' complaint is that there weren't enough tickets at prices below the market-clearing rate. Little girls can wish for such make believe endings; parents should be more realistic.
Indignant letters to the editor soon followed expressing frustration that so many "little girls dreams (had been) crushed" and blaming promoters for allowing tickets to go to scalpers--parents noticed that tickets were immediately available on resale at inflated prices on web-sites like stubhub.com.
In this instance, bad communication was part of the problem. More than a third of the 13,000 tickets were "pre-sold" through Hannah Montana's fan club; only about 8,000 were available when the regular sales began. Although that should have been plenty to accommodate the families standing in line, there was an even larger virtual line. Internet sales quickly snapped up nearly all of the available tickets.
One way or the other, somebody was going to be disappointed in a situation like this where demand for a scarce good exceeds the available supply. The only way to reduce the disappointment would be to add another concert date, but even that might not be enough to meet demand.
The fans' real beef focuses on the "unfairness" of the rationing mechanism. Here a combination of pre-sales, queues, and regular sales were used to allocate the tickets initially, and resales (scalping) are being used to reallocate the tickets. Is this system actually unfair? Definitely, but maybe not in the way that you think.
Let's start with the scalpers, who put up the money for the tickets and then assume the risk of being able to resell them. If they can resell the tickets, scalpers are then in a position to capture the difference between the original sales price of the ticket and what some die-hard fans are willing to pay. Nobody forces the fans to actually buy the tickets from the scalpers. Those who do purchase tickets get what they want at a price they are willing to pay. It's just more than they would have had to pay in the absence of a resale market, with the scalpers pocketing the difference.
Even without a resale market, the scarcity of tickets would have led to some unfairness. Some people with only modest valuations of the performance would have gotten access to relatively low-cost tickets. Other people who had much higher valuations and who would be willing to pay more to satisfy those valuations would not have gotten access. Introducing a resale market (scalping) improves efficiency by allowing the people with the highest valuations to get access to the tickets.
There are alternatives that would eliminate the resale incentives. The simplest would have been for the concert promoters to set the initial ticket prices higher, so that there wasn't any excess demand. A clear implication from the fast sales was that the tickets were under-priced. If the tickets had been at the appropriate, market-clearing price there would have been no opportunity for resales--everyone who wanted a ticket at the going price would have already purchased one.
It's hard to forecast what the exact price should be. If promoters set the price too high, they might be stuck with empty seats. An alternative then would be to use a descending set of prices. Set the initial price very, very high, then every few hours or every day or so discount the prices by a certain amount until all of the tickets are sold. People with the strongest valuations and the least risk tolerance will start to take tickets at high prices; other people will move in at lower prices. Again though, at the end of the process, there won't be any resale opportunities. The unfairness in this system is that some people pay more than others for the same tickets.
Finally, the promoters could run an auction, with tickets and prime seat locations going to the highest bidders. Stubhub.com and Ticketmaster have already done this for some concerts.
Each of these allocation methods eliminates scalping; however, it's not clear that fans really want them. Under the current arrangement, a few lucky fans get access to tickets that are priced below the market clearing rate; others pay higher rates, with the surplus going to the scalpers. Under each of the alternatives--a uniform market-clearing price, high then descending prices, and auctions--tickets would never be sold below the market-clearing price. More of the revenue would be transferred to promoters instead of to scalpers and resellers.
In essence, the parents' complaint is that there weren't enough tickets at prices below the market-clearing rate. Little girls can wish for such make believe endings; parents should be more realistic.
Monday, September 24, 2007
UAW strike
After two months of negotiations and roughly one week after its existing contract expired, the United Auto Workers (UAW) went on strike today against General Motors (GM), the country's largest automaker. Some 73,000 workers are expected to walk off the job.
The number of work stoppages has been down in the U.S. in recent years. Last year, there were no strikes of comparable size. The last major UAW strike occurred nearly a decade ago and involved several parts plants, and the last strike directly against auto manufacturing operations occurred three decades ago.
The strike comes at a bad time for the U.S. economy, which is already battling a housing slump, a credit crunch, and $80 a barrel oil prices. Employment figures last month indicated that the number of jobs had actually decreased from the month before. A large, long-lasting strike would increase the chances of entering a recession. The only "good" news (if you can call it that) is that GM's manufacturing workforce has shrunk so much that many fewer workers are involved than in the earlier UAW strikes.
The strike also comes at a bad time for GM. The company has seen its market share, work force, and profitability decline. In the late 1970s, GM sold nearly half of the vehicles in the U.S.; today it sells less than a quarter. The company has suffered net losses in the last two years. Although worker productivity is high, the company has huge legacy costs that reduce its competitiveness. Also, the strike comes right at the start of the new auto year.
Although both sides are rushing out press releases expressing disappointment and blaming the other for the work stoppage, there are some encouraging signs. The most hopeful are that the UAW and GM are keeping most details of the negotiations under wraps and that the UAW has asked to continue meeting. There also appears to have been some progess in the negotiations on some major issues, such as shifting some of the risk for retiree health expenses away from GM and towards the union. The remaining sticking points appear to be related to job security measures.
Still, a strike of any length is unwelcome news, especially for the families and communities involved.
The number of work stoppages has been down in the U.S. in recent years. Last year, there were no strikes of comparable size. The last major UAW strike occurred nearly a decade ago and involved several parts plants, and the last strike directly against auto manufacturing operations occurred three decades ago.
The strike comes at a bad time for the U.S. economy, which is already battling a housing slump, a credit crunch, and $80 a barrel oil prices. Employment figures last month indicated that the number of jobs had actually decreased from the month before. A large, long-lasting strike would increase the chances of entering a recession. The only "good" news (if you can call it that) is that GM's manufacturing workforce has shrunk so much that many fewer workers are involved than in the earlier UAW strikes.
The strike also comes at a bad time for GM. The company has seen its market share, work force, and profitability decline. In the late 1970s, GM sold nearly half of the vehicles in the U.S.; today it sells less than a quarter. The company has suffered net losses in the last two years. Although worker productivity is high, the company has huge legacy costs that reduce its competitiveness. Also, the strike comes right at the start of the new auto year.
Although both sides are rushing out press releases expressing disappointment and blaming the other for the work stoppage, there are some encouraging signs. The most hopeful are that the UAW and GM are keeping most details of the negotiations under wraps and that the UAW has asked to continue meeting. There also appears to have been some progess in the negotiations on some major issues, such as shifting some of the risk for retiree health expenses away from GM and towards the union. The remaining sticking points appear to be related to job security measures.
Still, a strike of any length is unwelcome news, especially for the families and communities involved.
Wednesday, September 19, 2007
Poor families on the red-tape diet
Few people like to fill out forms or other paperwork. At a minimum, paperwork is a tedious and time-consuming chore; too often, it can also be frustrating and confusing. In the case of poor families, paperwork can also lead people to lose out on needed food assistance.
Families and individuals who receive means-tested public assistance, like food stamps, are required to fill out numerous forms, supply lots of accompanying documentation, and schedule and participate in in-person or telephone interviews (for example, you could look at North Carolina's 10-page application form for its Food Stamp Program). The purpose behind these forms and procedures is reasonable--program administrators want to ensure that benefits only go to people who are eligible and that people receive exactly the benefits that they need. Nevertheless, the paperwork represents a substantial compliance cost to needy families, especially those with limited reading, writing, and math skills.
The procedures also create some strange incentives with respect to self-sufficiency. Families with earnings typically have to provide more extensive information and do so more frequently than families without earnings. Again, there's a logic to the extra requirements; earnings and hence eligibility can change. Still it's the case that earnings not only cause families to lose benefits but also add to families' paperwork and compliance burden. Not exactly the best way to encourage work.
Marilyn Edelhoch, a research director with the South Carolina Department of Social Services, and I have been looking at these issues for some time. Marilyn's agency gave us access to a large random sample of case records from the South Carolina Food Stamp Program. The records show how long families participate in food stamps before leaving or being kicked off the program. In earlier research, we found that families were several times more likely to stop receiving benefits at the times they were required to complete new paperwork than at other times.
We've just completed a new paper that goes back to these data and examines the reasons that program administrators entered for why the families left. For example, the system records whether families left voluntarily, whether they moved out of state, etc. All of the cases that we examined involved households with children.
The research shows that one-half of the families who lost benefits were dropped from the Food Stamp Program because they failed to re-apply for benefits. Another sixth of the terminations occurred because of incomplete paperwork or missing information. If you put these together, two-thirds of terminations occurred for reasons related to paperwork.
These terminations would not be bad news if many of the families were soon going to lose eligibility anyway. After all, what incentive is there to fill out paperwork if it's just going to show that you're ineligible? Not surprisingly, we find that the chances of being ineligible are higher among households that let their paperwork lapse than among households that stay on the program. However, we also find that the chances of being eligible are higher than those of being ineligible. So it appears that needy and otherwise eligible families are being dropped from the program. The results take us some way toward explaining why nationally about one-third of eligible families fail or decline to participate in food stamps in any given month.
As is often the case in economics, there are stories here about unintended consequences and about trade-offs in public policy. Clearly, states must check people's eligibility for services. However, they can take steps to streamline their paperwork, reducing it to the minimum necessary. States can also take better advantage of automated data available to them. People shouldn't go hungry because of red tape.
Families and individuals who receive means-tested public assistance, like food stamps, are required to fill out numerous forms, supply lots of accompanying documentation, and schedule and participate in in-person or telephone interviews (for example, you could look at North Carolina's 10-page application form for its Food Stamp Program). The purpose behind these forms and procedures is reasonable--program administrators want to ensure that benefits only go to people who are eligible and that people receive exactly the benefits that they need. Nevertheless, the paperwork represents a substantial compliance cost to needy families, especially those with limited reading, writing, and math skills.
The procedures also create some strange incentives with respect to self-sufficiency. Families with earnings typically have to provide more extensive information and do so more frequently than families without earnings. Again, there's a logic to the extra requirements; earnings and hence eligibility can change. Still it's the case that earnings not only cause families to lose benefits but also add to families' paperwork and compliance burden. Not exactly the best way to encourage work.
Marilyn Edelhoch, a research director with the South Carolina Department of Social Services, and I have been looking at these issues for some time. Marilyn's agency gave us access to a large random sample of case records from the South Carolina Food Stamp Program. The records show how long families participate in food stamps before leaving or being kicked off the program. In earlier research, we found that families were several times more likely to stop receiving benefits at the times they were required to complete new paperwork than at other times.
We've just completed a new paper that goes back to these data and examines the reasons that program administrators entered for why the families left. For example, the system records whether families left voluntarily, whether they moved out of state, etc. All of the cases that we examined involved households with children.
The research shows that one-half of the families who lost benefits were dropped from the Food Stamp Program because they failed to re-apply for benefits. Another sixth of the terminations occurred because of incomplete paperwork or missing information. If you put these together, two-thirds of terminations occurred for reasons related to paperwork.
These terminations would not be bad news if many of the families were soon going to lose eligibility anyway. After all, what incentive is there to fill out paperwork if it's just going to show that you're ineligible? Not surprisingly, we find that the chances of being ineligible are higher among households that let their paperwork lapse than among households that stay on the program. However, we also find that the chances of being eligible are higher than those of being ineligible. So it appears that needy and otherwise eligible families are being dropped from the program. The results take us some way toward explaining why nationally about one-third of eligible families fail or decline to participate in food stamps in any given month.
As is often the case in economics, there are stories here about unintended consequences and about trade-offs in public policy. Clearly, states must check people's eligibility for services. However, they can take steps to streamline their paperwork, reducing it to the minimum necessary. States can also take better advantage of automated data available to them. People shouldn't go hungry because of red tape.
Saturday, September 15, 2007
Yes, NASA revised those numbers, but...
The global warming deniers have recently seized on a story regarding NASA's revisions of its annual temperature numbers as evidence that global warming is baloney. The story appeared in an August 16 column by Cal Thomas and has been blog and letter-to-the-editor fodder since then.
There are parts of the story that Mr. Thomas and others have reported correctly, parts that they have omitted, and parts that they have flat out gotten wrong.
The part of the story that is true is that NASA did revise its numbers. The new and old numbers, as well as NASA's explanation can be found at http://data.giss.nasa.gov/gistemp/graphs/ and by following links on that page.
Mr. Thomas and others claim that the revisions have led to changes in the rankings of the warmest years on record. The implication is that rankings of global averages have changed, but this isn't the case.
NASA's changes in rankings apply ONLY to temperatures for the U.S. and not for the world as a whole. In NASA's revised figures, 1934 is the hottest year on record for the U.S. but not for the world. NASA still reports that the 5 hottest years on record for the world happened in the last decade (in order 2005, 1998, 2002, 2003 and 2006).
Having garbled the facts, Mr. Thomas goes on to ask, "Has any of this new information changed the minds of the global warming fundamentalists?" and helpfully answers his own question, "Nope." He skips the more logical question--should the new information have changed anyone's mind--to which the answer is again, "Nope."
Why is this so? Well, the revisions to NASA's numbers for the U.S. were very slight (the largest change was .15 degrees) as were the revisions to the rankings. Prior to the revisions, 1934 and 1998 had been in a virtual dead "heat" (no pun intended). In both the earlier and later figures, 4 of the 10 hottest years on record in the U.S. occurred in the 1930s and 3 of the 10 hottest years occurred in the last decade.
There were also revisions to the global numbers but these were an order of magnitude smaller (in the thousandths). The revisions did not affect the global rankings at all.
As the scientist who put out the revised numbers explained, "Contrary to some of the statements flying around the internet, there is no effect on the rankings of global temperature. Also our prior analysis had 1934 as the warmest year in the U.S. (see the 2001 paper above), and it continues to be the warmest year, both before and after thecorrection to post 2000 temperatures. However, as we note in that paper, the 1934 and 1998 temperature are practically the same, the difference being much smaller than the uncertainty."
While the deniers have focused on a handful of numbers (which again hardly changed), it useful to remember that the figures in question come from a 127 year record. Over that time, the U.S. data are more variable and flatter than the global data. Nevertheless, the trend in the U.S. has been upwards. If you look at the average over the last decade, you will see that it is higher than the average for the decade of the 1930s (U.S. temperatures in the 1930s were quite variable and there were a few "low" years along with the "high" years). NASA also provides 5-year averages. It turns out that even in the revised data, the first, second, third, fourth, and sixth highest 5-year averages for the U.S. occurred in the last decade.
The global trends are even more starkly upward.
A cogent critique of the global warming argument needs to address all of the evidence, not just a figure or two. NASA's revisions in this particular series were minor, and the corrected figures continue to show increasing temperatures over the past century and a quarter. NASA's figures are also not the only evidence. As NOAA reports, changes in sea ice, rises in sea levels, the general retreat of glaciers, ice core data, tree rings, and sediment samples provide near- and long-term evidence that global warming is occuring and that human activity is a contributor.
There are parts of the story that Mr. Thomas and others have reported correctly, parts that they have omitted, and parts that they have flat out gotten wrong.
The part of the story that is true is that NASA did revise its numbers. The new and old numbers, as well as NASA's explanation can be found at http://data.giss.nasa.gov/gistemp/graphs/ and by following links on that page.
Mr. Thomas and others claim that the revisions have led to changes in the rankings of the warmest years on record. The implication is that rankings of global averages have changed, but this isn't the case.
NASA's changes in rankings apply ONLY to temperatures for the U.S. and not for the world as a whole. In NASA's revised figures, 1934 is the hottest year on record for the U.S. but not for the world. NASA still reports that the 5 hottest years on record for the world happened in the last decade (in order 2005, 1998, 2002, 2003 and 2006).
Having garbled the facts, Mr. Thomas goes on to ask, "Has any of this new information changed the minds of the global warming fundamentalists?" and helpfully answers his own question, "Nope." He skips the more logical question--should the new information have changed anyone's mind--to which the answer is again, "Nope."
Why is this so? Well, the revisions to NASA's numbers for the U.S. were very slight (the largest change was .15 degrees) as were the revisions to the rankings. Prior to the revisions, 1934 and 1998 had been in a virtual dead "heat" (no pun intended). In both the earlier and later figures, 4 of the 10 hottest years on record in the U.S. occurred in the 1930s and 3 of the 10 hottest years occurred in the last decade.
There were also revisions to the global numbers but these were an order of magnitude smaller (in the thousandths). The revisions did not affect the global rankings at all.
As the scientist who put out the revised numbers explained, "Contrary to some of the statements flying around the internet, there is no effect on the rankings of global temperature. Also our prior analysis had 1934 as the warmest year in the U.S. (see the 2001 paper above), and it continues to be the warmest year, both before and after thecorrection to post 2000 temperatures. However, as we note in that paper, the 1934 and 1998 temperature are practically the same, the difference being much smaller than the uncertainty."
While the deniers have focused on a handful of numbers (which again hardly changed), it useful to remember that the figures in question come from a 127 year record. Over that time, the U.S. data are more variable and flatter than the global data. Nevertheless, the trend in the U.S. has been upwards. If you look at the average over the last decade, you will see that it is higher than the average for the decade of the 1930s (U.S. temperatures in the 1930s were quite variable and there were a few "low" years along with the "high" years). NASA also provides 5-year averages. It turns out that even in the revised data, the first, second, third, fourth, and sixth highest 5-year averages for the U.S. occurred in the last decade.
The global trends are even more starkly upward.
A cogent critique of the global warming argument needs to address all of the evidence, not just a figure or two. NASA's revisions in this particular series were minor, and the corrected figures continue to show increasing temperatures over the past century and a quarter. NASA's figures are also not the only evidence. As NOAA reports, changes in sea ice, rises in sea levels, the general retreat of glaciers, ice core data, tree rings, and sediment samples provide near- and long-term evidence that global warming is occuring and that human activity is a contributor.
Tuesday, September 11, 2007
$450 billion spent so far on Iraq
A rational analysis of our future direction in Iraq requires an appreciation of the costs of the current policy. The current debate has rightly focused on the most important and tragic costs--nearly 3,800 American soldiers killed, over 27,000 wounded, additional coalition losses, and somewhere between 70,000 to 650,000 Iraqi civilians killed. The point of this post is to shine light on the less-publicized and perhaps crass topic of the monetary costs of the war.
In July, the Congressional Research Service (CRS) released an analysis of the incurred and projected costs of the wars in Afghanistan and Iraq. The costs of both wars so far has been $610 billion, of which $450 billion has been spent on Iraq. A special analysis was needed because of the bewildering array of "supplemental" appropriations for the wars, the many budgets that end up being tapped, and a lack of transparency in budgeting by the Department of Defense.
For the upcoming fiscal year (FY08), the administration has requested $116 billion for Iraq (however, that figure is predicated on the questionable assumption that our training costs for the Iraqi military and police will go down). Astonishingly, the administration's official projected war costs in all theaters in the following year (FY09) is only $50 billion and its projected costs for future years is zero. So much for playing straight with the American people.
In contrast to the administration's phony number of $50 billion in future costs, the Congressional Budget Office (CBO) estimates that our additional costs over the next decade will be just under $400 billion beyond the amounts requested through FY 08 if combined troop levels in Iraq and Afghanistan are brought down to 30,000 by 2010 or just under $900 billion if combined troop levels are brought down to 75,000 by 2013. The latter figure seems closer to the administration's goals.
Even if we withdraw troops from Iraq, the costs will still be monumental. The CBO estimates that a complete withdrawal by FY 2009 would still cost nearly $150 billion beyond what has already been requested. If we were to draw down troops in Iraq to just 40,000 by 2010, we would incur over $300 billion beyond the requested amount between now and then.
To provide some perspective about the size of the funds, the $116 billion that has been requested for Iraq in FY 2008 is larger than the combined budgets of all federally-funded education, training, and social service programs ($83 billion), energy programs ($1.4 billion), and community and regional development programs ($25 billion). Alternatively, it accounts for roughly half of the projected federal deficit for FY 2008.
In July, the Congressional Research Service (CRS) released an analysis of the incurred and projected costs of the wars in Afghanistan and Iraq. The costs of both wars so far has been $610 billion, of which $450 billion has been spent on Iraq. A special analysis was needed because of the bewildering array of "supplemental" appropriations for the wars, the many budgets that end up being tapped, and a lack of transparency in budgeting by the Department of Defense.
For the upcoming fiscal year (FY08), the administration has requested $116 billion for Iraq (however, that figure is predicated on the questionable assumption that our training costs for the Iraqi military and police will go down). Astonishingly, the administration's official projected war costs in all theaters in the following year (FY09) is only $50 billion and its projected costs for future years is zero. So much for playing straight with the American people.
In contrast to the administration's phony number of $50 billion in future costs, the Congressional Budget Office (CBO) estimates that our additional costs over the next decade will be just under $400 billion beyond the amounts requested through FY 08 if combined troop levels in Iraq and Afghanistan are brought down to 30,000 by 2010 or just under $900 billion if combined troop levels are brought down to 75,000 by 2013. The latter figure seems closer to the administration's goals.
Even if we withdraw troops from Iraq, the costs will still be monumental. The CBO estimates that a complete withdrawal by FY 2009 would still cost nearly $150 billion beyond what has already been requested. If we were to draw down troops in Iraq to just 40,000 by 2010, we would incur over $300 billion beyond the requested amount between now and then.
To provide some perspective about the size of the funds, the $116 billion that has been requested for Iraq in FY 2008 is larger than the combined budgets of all federally-funded education, training, and social service programs ($83 billion), energy programs ($1.4 billion), and community and regional development programs ($25 billion). Alternatively, it accounts for roughly half of the projected federal deficit for FY 2008.
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