Picks: Privatizing the VA; Regulations Promote Growth; Facebook and the Future of News, and more (2nd Edition)

Date: 23 Apr 2018 | posted in: From the Desk of David Morris | 0 Facebooktwitterredditmail

One man’s perspective on stories that matter.  Look for these posts every week on ILSR.org and the landing page for my work, From the Desk of David Morris.

Big Data, Facebook, and the Future of News

Josh Marshall at Talking Points Memo uses the controversy over Facebook to talk about Big Data and the future of news. Most traditional news sources, he notes, like the New York Times or the Washington Post have three major revenue sources: subscriptions, premium advertisers, and on-line advertising heavily reliant on data and targeting, and adds, “The difference is that Facebook is almost 100% reliant on advertising which is not only reliant on data and targeting but reliant on the most aggressive kinds of data collection, tracking and targeting. That is Facebook’s entire business.” Facebook’s 2 billion users provide the database.

How does this affect existing publications? “The publication’s role as the gatekeeper to an audience is totally undercut because the folks who control the data and the targeting can follow those readers anywhere and purchase the ads at the lowest price…In pure efficiency terms, most of this is great. As an advertiser I don’t have to pay high rates to reach New York Times readers on The New York Times. I can pay Google or Facebook to find them for me elsewhere for much cheaper prices. But as you can see, in this new world of data, tracking and targeting, it’s the Data Lords who have the power and get the money. It’s comparable to the way Apple’s iTunes and Spotify dramatically reduced the amount of money in music sales and took a big, big chunk of the reduced size pie for themselves.”

Marshall observes, “There are significant public questions about whether these uses of data are acceptable in privacy terms and whether society is well served by having news publications bled dry by the social platforms.”

Read the story here…

To Make a More Perfect Union, Don’t Look to the Founding Fathers

Donald Trump’s willful attacks on judges who rule against him have elicited a spirited defense of an independent judiciary, citing its importance to our Founding Fathers. Writing in Lapham’s Quarterly, William Hogeland agrees American founders like Alexander Hamilton, author of Federalist 78, found an independent judiciary “an indispensable ingredient” of the Constitution.

But Hogeland points out, Hamilton’s and his colleagues viewed an independent judiciary as “a mechanism not for promoting democracy but for the reverse: checking what seemed to be potential dangers posed by the lower house of the proposed national legislature.” Hamilton and others of his class feared “the ‘leveling’ impulse: efforts by lower orders to equalize society economically by undermining the value of property and investment, and thus, went the prevailing line of elite thought, destroying liberty itself.”

For more than 130 years, an independent judiciary consistently protecting the rich against the poor. But the end of the Civil War (and the refusal of Congress to seat supporters of the Confederacy) brought us the Thirteenth, Fourteenth, and Fifteenth. These laid the groundwork for change, “For the first time, individuals possessed constitutionally enforceable protections against their state governments.”

It took another 60 years before courts actually began enforcing these protections. Today a state law violating the freedom of the press would be unconstitutional, but it would have been constitutional in 1800. Hogeland quotes Thomas Jefferson’s 1804 letter to Abigail Adams. “While we deny that Congress have a right to control the freedom of the press,” Jefferson wrote, “we have ever asserted the right of the states, and their exclusive right, to do so.”

Hogeland proposes that the Constitutional provision that “Congress shall make no law respecting an establishment of religion” wasn’t inserted to protect individual rights but to protect states from federal interference in religious matters. The Founding Fathers would have translated the words to mean, “Congress shall neither establish a religion nor interfere with the states’ establishing religions.”

But as the courts began to apply the 14th Amendment to states individual rights were given constitutional standing. Hogeland argues that the Founders’ had “hardwired, in part via the independent judiciary,” their antidemocratic impulses. “By rewiring the machine, we’ve made it at least potentially an American democracy.”

Read the full story here…

The Founding Fathers Believed We Could Protect Property Without Glorifying Greed

In his eponymous magazine, Lewis Lapham explains that the elitism of the Founding Fathers was tempered by their understanding of the obligations of that elite.

“The prosperous and well-educated gentlemen assembled in Philadelphia in the summer of 1787 shared with John Adams the suspicion that ‘democracy will infallibly destroy all civilization,’” he writes. “They agreed with James Madison that the turbulent passions of the common man lead to reckless agitation for the abolition of debts and “other wicked projects.” Adams thought the great functions of state should be reserved for “the rich, the wellborn, and the able”; John Jay, chief justice for the Supreme Court, observed that “those who own the country ought to govern it.””

“By the word liberty, they meant liberty for property, not liberty for persons, and by the end of the summer of 1787 the well-to-do gentlemen in Philadelphia had drafted a document hospitable to their acquisition of more property.”

However, Lapham adds, “unlike our present-day makers of money and law, the founders were not stupefied plutocrats…they understood that oligarchy was well-advised to furnish democracy with some measure of political power because the failure to do so was likely to lead to their being roasted on pitchforks. The costs of their living they adjusted to sober and practical use in preference to gaudy self-glorifying display.”

…The Constitution joined the life of an organism with the strength of a mechanism, offering as warranty of its worth the character of men capable of caring for such a thing as a res publica, attentively benign landlords presumably relieved of the necessity to cheat and steal and lie.”

Read the full story here…

What Happens If All Overlapping Jurisdictions Simultaneously Go Bankrupt?

In Credit Slips, Adam Levitin notes, “frequently overlapping local government jurisdictions–cities, counties, school districts, water districts, park districts, hospital districts, sewer and sanitary districts, forest preserves, etc. share a common revenue source–the same set of taxpayers. This means that they have correlated exposure to economic downturns. It also means that they face a common pool problem in terms of revenue generation, and they frequently lack coordination mechanisms whether formal or informal (such as political “machines”).”

Who will have priority in bankruptcy courts? Levitin argues, “Existing tools for addressing local governmental insolvency, particularly Chapter 9 bankruptcy, cannot currently address coordination problems among overlapping local governments” and proposes several changes to federal and state laws that would address the problem.”

Read the full story here…

Superintendents Close Colorado Schools to Honor Teacher Protest

On April 26 Colorado school teachers plan to demonstrate for more resources. On her blog, deutsch29, Mercedes Schneider reveals the text of letters several sympathetic school superintendents wrote parents to cancel classes that day.

In his letter, Superintendent Jason Glass explained the background of the protest, “Public education staff, parents, and other supporters have become increasingly vocal in their advocacy for increased funding for our K-12 public schools and the stabilization of PERA (pension fund). There is a belief among these groups that years of low funding is having a significant impact on our ability to attract quality candidates into the teaching profession, and is impeding the ability to effectively deliver the high level of educational experience our students deserve.”

Schneider describes the larger context of the protest. Colorado, the nation’s 12th richest state, ranks 46th in the country for teacher pay and 42nd in how much it spends per student.

The state’s “unemployment rate is just 3 percent. New skyscrapers and apartments are going up everywhere as more and more people throw cash at downtown bars and restaurants, but no one invited Colorado’s public schools to the party.”

Read the full story here…

Corporations. Stop Complaining About Taxes You Rarely Paid

In the American Prospect, Matt Gardner writes, “Since the $1.5 trillion tax cut that took effect in January, Companies from AT&T and Boeing to Walmart and Wells Fargo have announced one-time employee bonuses or minimum-wage hikes, and have strongly implied that they simply couldn’t have made these worker-friendly moves before the new tax law chopped the 35 percent corporate tax rate nearly in half.

In a new report from Gardner’s organization, the Institute on Taxation and Economic Policy, found that 15 profitable Fortune 500 companies, ranging from tech firms like Amazon to financial giants like MetLife and Prudential to cable TV companies like Dish Networks, collectively earned $24 billion in U.S. profits during 2017. Each paid zero, or less, in federal income taxes last year. “The same 15 corporations were almost as successful in their past tax-dodging efforts. In the last five years, these companies paid a collective federal income tax rate of just 1.8 percent on nearly $120 billion of U.S. profits.

Shamelessly, MetLife announced in February it will raise its minimum wage to $15, “as a result of tax reform.” But, Gardner wonders, “since the company paid just a 3.4 percent tax rate over the past five years, it’s hard to see how the tax system was ever keeping them from paying a living wage to members of its workforce.”

Gardner also points out that even before the new tax law dramatically reduced statutory corporate rates, American corporate taxes as a share of the economy were below those of most OECD nations.

Read the full story here…

The Disaster of Privatizing Health Care for Veterans and Poor People

“In the wake of a 2014 scandal about wait times and falsified appointment records, Congress allowed certain veterans to visit private providers if their Veterans Health Administration (VHA) hospital is more than 40 miles away, or if their wait time is expected to be more than 30 days,” Jeremy Mohler recalls in the American Prospect. This privatized care is managed by two private health insurers, TriWest Healthcare Alliance, and Health Net Federal Services.”

Mohler surveys the results to date. The Veterans Choice program has now cost the public more than $12 billion. Its insurers have been accused by the VA Office of Inspector General of overbilling by almost $100 million. Providers complain of not being paid on time and having to limit care. And, Mohler adds, “As of March, the number of veterans waiting more than 30 days for an appointment was higher than when the Choice program began.”

No one should have been surprised. This same tragic dynamic has occurred whenever states privatized the administration of public health care coverage for the poor and disabled.

“Almost immediately after Kansas hired contractors to manage Medicaid in 2013, care levels were reduced, payments to providers slowed, and paperwork increased. Within months of Iowa privatizing Medicaid in 2016, a majority of providers said they weren’t being paid on time and their administrative costs were increasing, putting lives at risk.” Complaints about the private insurers increased by 157 percent in 2017.

What should this have taught us? Mohler asks.“Introducing private profit jeopardizes the efficiency and effectiveness of publicly administered health care. It incentivizes limiting and denying care, because the less care for-profit insurers deliver, they more they profit.”

Read the full story here…

Regulation Promotes Economic Growth. Why Won’t Liberals Say That?

A core belief of anti-government conservatives is that regulation reduces employment and growth. As Anne Kim observes in the Washington Monthly, liberals have done a very poor job of engaging that issue. They “defend regulators as guardians of public safety and health. But do not make a full-throated argument for how regulations benefit the economy as a whole. By ceding the economic argument, liberals have effectively allowed the debate on regulation to be framed as one of jobs versus safety, growth versus health. Voters are left believing that they have to choose between the two—a false choice that also gives the advantage to the GOP as the better champion of jobs and economic growth.”

Kim notes that many studies have found little empirical evidence the huge increase in federal spending on enforcing regulation –from roughly $533 million in 1960 to more than $53 billion in 2012—reduces aggregate American jobs or the nation’s total economic output.

Kim goes further, arguing that by spurring innovation, they actually have a positive long-term economic impact. In 2007, the federal government established standards for light bulb that “set off a flurry of experimentation that’s been a boon for consumers. Consumers now have an array of choices, including compact fluorescents, halogen bulbs, and the increasingly standard LED bulbs, which use about 80 percent less energy than traditional incandescent lights, according to Consumer Reports, and can last between 20,000 and 50,000 hours—or up to forty-six years at three hours per day.”

She visits Greentown Labs, the nation’s largest clean technology incubator and finds that many of the roughly 120 companies the incubator has helped or is helping to launch owe their existence or growth to regulation.

“… no one is coming to me and saying, ‘I’m blocked because of a regulation,’ ” said Emily Reichert, the CEO of Greentown Labs. “Regulations are what is setting the market they are pursuing. They serve as market indicators for directions we should go.”

Tragically, according to Kim, the regulatory process has become sclerotic, a result of laws passed first under Democrat Jimmy Carter. The 1980 Paperwork Reduction Act authorized the creation of what would become the most powerful anti-regulatory body in Washington, with veto power over all but the independent regulatory agencies—the Office of Information and Regulatory Affairs (OIRA).

James C. Miller, the head of OIRA under Reagan demanded regulatory agencies jump through many hoops before issuing regulations. They were required to do a detailed cost-benefit analysis and furthermore had to intensity of regulation that maximizes the difference between benefits and costs.

The process of rule making has gotten slower with each successive administration. Kim notes that many of the regulations required by the ACA and Dodd-Frank were still incomplete at the end of the Obama administration, seven years after the laws’ passage.

In 2013, it took OIRA an average of 135 days to review a proposed rule, compared to just thirty days in 1994. It now takes nearly five years on average for agencies to complete an “economically significant” rule—one that could have an economic impact of $100 million or more—.OSHA now takes as long as fifteen years to finalize a major rule, compared to less than one year prior to 1996. As a result, OSHA, whose mandate is to protect the nation’s workers, has only finalized five “economically significant” rules since 1996.

Having made the regulatory process all but unworkable, Republicans are now trying to do away with it altogether. One proposal would give Congress 70 days to take an up-or-down vote on every regulation where compliance costs are estimated to exceed $100 million. Regulations not approved within that window would be presumed disapproved.

Read the full story here…

Public Health May Be Tackled Most Effectively At the Local Level

In the American Journal of Public Health, professors David Bishai, Keshia M. Pollak, and Shannon Frattaroli of Johns Hopkins Bloomberg School of Public Health maintain the importance of the local in protecting public health.

“Most of what keeps populations healthy happens in their homes, cars, communities, schools, and workplaces…the public health policies that matter most are the ones that affect things that people have the most contact with. Safe drinking water, safe food, safe roads, safe air, and the health practices of our neighbors are locally controlled. “More than 3000 state and local health departments assist that effort.

The writers maintain, “Without restaurant inspections, the approximately 33% of meals Americans purchased away from home would come with more risk and threaten the nation’s $783 billion restaurant industry. Local health departments that scale back their comprehensive services have higher county-level sexually transmitted disease incidence.”

For the authors, “A renewed emphasis of the public health community on local action is long overdue.”

Read the full story here…

Stop Slavishly Worshipping Markets and Globalization an Eminent Economist Tells His Brethren

In the Boston Review economist Dana Rodrik takes to task his fellow economists who worship at the altar of neoliberalism.

“(N)eoliberals are not wrong when they argue that our most cherished ideals are more likely to be attained when our economy is vibrant, strong, and growing,” he observes. “Where they are wrong is in believing that there is a unique and universal recipe for improving economic performance to which they have access. The fatal flaw of neoliberalism is that it does not even get the economics right. It must be rejected on its own terms for the simple reason that it is bad economics.

Rodrik points out that the South Korea, Taiwan, Japan, and most recently Chinese economic miracles all resulted from their refusal to embrace free market, deregulation orthodoxies.

Even in mature, richer capitalist Western economies, Rodrik observes, there is a remarkable institutional variation. The public sector “varies from a third of the economy in Korea to nearly 60 percent in Finland. In Iceland, 86 percent of workers are members of a trade union; the comparable number in Switzerland is just 16 percent. In the United States firms can fire workers almost at will; French labor laws require employers to jump through many hoops first. Stock markets have grown to nearly one-and-a-half times national income in the United States; in Germany, they are only a third as large, representing one-half of national income.”

For Rodrik, neoliberal economists who invariably prescribe the same policies forget context.

“Does an increase in the minimum wage depress employment? Yes, if the labor market is really competitive and employers have no control over the wage they must pay to attract workers; but not necessarily otherwise. Does trade liberalization increase economic growth? Yes, if it increases the profitability of industries where the bulk of investment and innovation takes place; but not otherwise. Does more government spending increase employment? Yes, if there is slack in the economy and wages do not rise; but not otherwise. Does monopoly harm innovation? Yes and no, depending on a whole host of market circumstances.”

Read the full story here…

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David Morris

David Morris is co-founder of the Institute for Local Self-Reliance and currently ILSR's distinguished fellow. His five non-fiction books range from an analysis of Chilean development to the future of electric power to the transformation of cities and neighborhoods.  For 14 years he was a regular columnist for the Saint Paul Pioneer Press. His essays on public policy have appeared in the New York TimesWall Street Journal, Washington PostSalonAlternetCommon Dreams, and the Huffington Post.