With the country still at a fevered pitch over the national health care debate, the next controversial policy may already be in the works - changes to private pensions. Last year the Chair of the House Education and Labor Committee, Rep. George Miller (D-CA), requested a Government Accountability Office (GAO) review of alternatives approaches to the private pension system. In a report released yesterday GAO said (emphasis added):
The private pension systems of the Netherlands, Switzerland, and the United Kingdom represent alternative approaches to address these key risks, but they also pose trade-offs to consider in applying them in the U.S. We selected these countries from a larger group after an initial review indicated that their private pension systems addressed many of the risks that U.S. workers face and had the potential to yield useful lessons for the U.S. !
experience. Their systems offer ideas for mitigating risks in accumulating and preserving benefits, such as mandating coverage, sharing investment risk among workers and employers, restricting leakage, and using annuities to drawdown benefits.
Several proposals for alternative pension plan designs in the U.S. incorporate approaches to mitigate the risks faced by workers, such as incentives to increase voluntary coverage or mandating annuitization. However, these approaches also pose trade-offs and costs for workers and employers, and in some cases the federal government. In particular, important trade-offs arise with mandating coverage and contributions, guaranteeing investment returns, and annuitizing benefits. For example, mandatory approaches reduce risks but also raise concerns about the impact of higher benefit costs, particularly on small employers.
Any of this sound familiar to the current health care debate!
Washington has designated I-5 its "hydrogen highway" in an effort to highlight that emerging technology. A new online tool will help you find filling stations along the highway.
The National Hydrogen Association (motto: "Hydrogen is #1...on the periodic table") has launched a web page that allows you to enter your state and shows you all the filling stations available. So I decided to test it. I entered a search for currently operating hydrogen filling stations in Washington and it said:
This past weekend, The Seattle Times business columnist John Talton opined that as government tightens its belt during this "Great Recession" the layoffs are contributing to further strain on the unemployment system:
"Many citizens applaud when politicians say government must tighten
its belt, but those cutbacks are adding to unemployment, especially in
a downturn that has seen some of the most draconian cuts in decades.
Washington expects to lay off 8,000 state workers. Oregon has an
additional 1,700 state jobs in jeopardy. An estimated 64,000 jobs are
expected to be lost in California. Jobs lost at the county and local
level are even higher.
In the Great Depression, government became the employer of last
resort, providing jobs for millions. So far, the Obama stimulus package
has helped slow the rate of job losses. But the stimulus was too small
to make up for the lost output and jobs of a recession this size (yet
big enough to worry our international creditors)."
My colleague Jason Mercier already touched on the Rockefeller report from last week, which said that, nationally, over 6.9 million private sector jobs have been lost between December 2007 and July 2009, while state and local government employment rose by 110,000.
Ok, but how does that match up with Washington state's numbers? Marples Pacific Northwest Letter (subscription required) from earlier this month shows a chart displaying data from various sectors of the economy in the northwest states.
Some of Washington state's numbers:
Construction -- down 41,100 jobs, or 19.6%
Manufacturing -- down 27,100 jobs, or 9.1%
Trade, transportation and utilities -- down 25,700 jobs, or 4.6%
Education and health services -- up 11,900 jobs, or 3.3%
Government -- up 9,900 jobs, or 1.8%
As Jason pointed out, unemployment numbers are lagging indicators and it is possible that unemployment numbers for government may still go lower because it takes awhile for the lagging tax collections to impact government payrolls.
I also !
think it is interesting Talton points out that the stimulus wasn't large enough to stem job loss yet large enough to make our foreign creditors nervous. Would it have been better to go much deeper into debt to theoretically lose fewer jobs? I have yet to see any evidence that this would have indeed worked. Or perhaps only for the first few weeks until the US would have had to declare bankruptcy or China and other Sovereign Wealth Funds would have simply said "enough!" to buying up all the debt this plan would have required.
The reality is that every private sector job lost only serves to increase the cost amongst the rest of the employed to foot the bill for government and the services government provides. It makes little sense, then, to have government become the employer of last resort even if those jobs are temporary, because the cost must be paid and will decrease future economic growth. Short-term benefits with incalculable future costs are always m!
ore palatable to most politicians and their constituents than !
the philosophy of delayed gratification.
This morning, I found Walter Backstrom's article in the Tacoma News Tribune in my email box. (Note that we at the Washington Policy Center published Scott Oki's book Outrageous Learning, so I am following commentary on the book.) Mr. Backstrom's article provides a good context for considering possible teachers' strikes in Kent, Mount Vernon and Shoreline School Districts. Te!
achers strikes are illegal and should be condemned by the public. No ifs, ands, or buts about it. Student learning depends upon a consistent and regular start to the school year.
As Mr Backstrom points out, the education establishment has demanded that parents remain silent in the face of teacher strikes and other activities which promote the interests of the establishment and of unions, and which undermine student achievement. Public schools are failing too many students, whether they reside in middle-class suburbs or in the inner city. More than 30% of students fail graduate from Washington's high schools. 2009 results from ACT-tested high school graduates reveal that of those who tak!
e the ACT college test, only 33% of Washington's students are prepared for college in the subjects of English, math, reading and science.
The tone, passion and sense of urgency behind Mr. Backstrom's words are entirely appropriate. Here is his column in full:
Parents, public must lead educational reform
When President Barack Obama rolled out a $4.3 billion stimulus package for education, Washington state’s initial share was 43 cents — the cost of a stamp to remind us that we received an “F.”
We in Washington state have an educational system that has been mismanaged, is inadequate and puts us 37th out of 50 states in educational excellence. Using that as a backdrop, I interviewed what some people consider a true educational reformer.
Some people don’t like him. He is Scott Oki, former vice president of Microsoft and now a self-styled education reformer and philanthropist.
After three cups of coffee, we sat down to discuss his views on education reform and his new book, “Outrageous Learning.” He started the interview by quoting several mind-boggling statistics:
• Washington state’s K-12 education system has more nonteachers than teachers.
• Forty-three percent of minority youth don’t graduate from high school.
• The United States spends $667 billion on K-12 education, but we currently rank last out of 27 industrial countries in the passage rate for math and science tests.
• If you were a scientist at Microsoft, the rules and regulations from Olympia make it impossible to teach science at a local high school.
• The unions have been a major roadblock to real education reform by fighting tooth and nail against merit pay, which would allow school districts to pay great teachers more than they pay lousy ones.
• Washington state’s school districts are governed by a 2,000-page document full of rules, regulations and unfunded mandates.
• Washington state spends $13 billion on K-12 education – and what do we have to show for it?
Oki and I talked for two hours about his life and long-term goals for this state. His goal was simply to revolutionize education in Washington.
I thanked him for his time and drove home. His thoughts and goals took center stage in my mind. It reminded me of the same fights that I have had with the educational establishment. They said I wasn’t an expert in education, and that I should be quiet and stop being so negative. I remembered a teacher urging me not to write that second-graders use calculators on math tests.
That is when I really got angry. What type of system fosters mediocrity? A system that doesn’t believe in students, parents or teachers, that’s what. If you listen to the spin coming out of Olympia, then all we have to do to improve education is have our 201st commission, followed by more diversity classes. Our scores should then shoot through the roof.
I wonder if all these politicians think the public is stupid. Their actions are nothing but a Band-Aid approach, guaranteed that we will come in last at the expense of the next generation.
We know what it will take to change education in Washington, but it will not be found in Olympia. The answers will from outside the educational bureaucracy. The answers will come from parents and other people who are just fed up with the status quo.
It will not be easy, and the entrenched interests will fight us every step of the way. We will need parents to turn off the TV and demand excellence from their children. These parents will have to be more involved with their children’s learning than they are with “American Idol: Season 8.”
Oki suggested that we have a “million mom march” in Olympia to pressure politicians to change education. I don’t know if we will get a million moms, but you will sure as heck get this one dad.
This week The Seattle Times printed a story on an interesting case of voters passing a minimum wage law linked to the cost of living, but then having to deal with the prospect of seeing the minimum wage reduced in 2010 because the cost of living actually went down.
But Colorado's minimum wage law also had a clause t!
hat stipulated the minimum wage be adjustable based on the cost of living, even if it decreased. No one really thought the cost of living would actually decrease.
But it did. Minimum wage workers should have seen a reduction in their hourly pay of about four cents per hour, but the federal minimum wage of $7.25 means the drop will only be three cents.
This again shows that, from an economic standpoint, wages should not be based upon a cost-of-living scale. Even attempting to tie workers' wages to a controversial basket of goods/services, such as the CPI, introduces a variable in the wage/productivity formula that does not belong.
This type of thinking is exemplified by a worker interviewed in the story:
"They shouldn't be allowed to do that, pull the wage down," said Josette Koger, 34, an out-of-work paralegal looking for a job in Denver. "It's hard enough to get by now. You can't make it on minimum wage,
m>so the minimum wage needs to go up a lot regardless of what !
they say about the cost of living." [emphasis added]
It appears Ms. Koger is attaching the minimum wage, or the price of labor for the most inexperienced workers, to something that cannot be objectively measured -- her opinion of what she needs. The theme of need is cited often in the minimum wage discussion.
The theme of skills or production is conveniently ignored because the reality is that many inexperienced workers, especially teenagers, are not equipped with the skills or experience at this time to warrant a higher wage. However, that reasoning is often thrown out the window in favor of classic bromides such as "pay people what their worth," or "dignity for all," and the erstwhile "living wage = social justice."
One of the concerns over Washington's minimum wage law is that it artificially inflates the cost of labor at the expense of those trying to enter the market, and has!
led to the highest minimum wage in the nation. But if we're really hellbent on coupling wages with cost-of-living indices then minimum wage reductions should be a good thing because for once the cost of living actually went down.
Maria Goodloe-Johnson began work as superintendent of Seattle's Public Schools in July, 2007, amidst high hopes that she would be able to raise student performance in the 46,000 student district, where only 63% of students graduate from high school.
For four months now, since April, the superintendent has been negotiating a new collective bargaining agreement with the Seattle Education Association, the local teachers' union. The Seattle PI reveals that the union has defeated her effort to allow principals to award merit pay to teachers.
The union's reasons for opposition to merit pay is outlined here, and is worth examining and challenging, point by point. This document states "Our members view a merit pay system as divisive. They believe it encourages competition as opposed to collaboration."
What? Are we spending over $10 billion a year on public schools to educate students or to create collaborative work environments for teachers? And where are the voices challenging these union rationales?
Here is my voice. Show me the the evidence that collaboration among teachers works to raise student achievement. The evidence, on the contrary, suggests that current collaborative work environments have not done much for Seattle students.
The New York Times has an interesting story about the growth in government employment across the nation as the recession hit even as the private sector was shedding jobs. From the article:
While the private sector has shed 6.9 million jobs since the beginning of the recession, state and local governments have expanded their payrolls and added 110,000 jobs, according to a report issued Thursday by the Nelson A. Rockefeller Institute of Government.
The report, based on an analysis of federal jobs data, found that state and local governments steadily added jobs for eight months after the recession began in December 2007, with their employment peaking last August. State and local governments have since lost 55,000 jobs, but from the beginning of the recession through last month they gained!
a net of 110,000 jobs, the report found, in part because of the federal stimulus program.
Government jobs are always more stable than private sector jobs during downturns, but their ability to weather the current deep recession startled Donald J. Boyd, the senior fellow at the institute who wrote the report.
“I am a little surprised at the fact that state and local government has remained as stable as it has in the nation as a whole, given the depth of the current recession,” Mr. Boyd said in an interview.
The report offered several possible explanations for the disparity between the private and public sectors. It noted that there can be a short lag between an economic downturn and the time it hits states in the form of lower tax collections, and an even longer delay before the problems hit local governments in the form of reduced state aid and lower property tax collections.
This appears to also be the case in Washin!
gton. As shown by this table from fiscal.wa.gov, full-time equivalent positions at the state level grew rapidly during the previous budget only to be reduced in the current budget once projected revenues began to show the impact of the recession.
Here is one of the most striking tables from the Rockefeller Instituteemployment report.
The Office of Financial Management (OFM) has posted the 2009 Personnel Detail Report listing individual state employee salaries. According to OFM:
"This edition of the Personnel Detail Report includes those employees on the state payroll as of January 2009. The general salary information listed in the Personnel Detail Report is the pay rate effective January 31, 2009 as paid on February 10, 2009.
The report is compiled by the state Office of Financial Management (OFM) from information provided by the state's payroll systems. The information OFM receives from the payroll systems is entered and maintained at the individual agencies."
The regulations governing Race to The Top state eligibility requirements reward close scrutiny. One paragraph, which discusses state eligibility requirements for Race to the To Top funds ($4.35 billion), is worth noting. The paragraph provides as follows:
II. A. Eligibility Requirements
" ...Second, we propose that to be eligible under this program, a State must not have any legal, statutory, or regulatory barriers to linking student achievement or student growth data to teachers for the purpose of teacher and principal evaluation. Research indicates that teacher quality is a critical contributor to student learning and that there is dramatic variation in teacher quality. Yet it is difficult to predict teacher quality based on the qualifications that teachers bring to the job. Indeed, measures such as certification, master's degreees, and years of teaching experience have limited predictive power on this point. (Emphasis mine)" Footnote to studies by Thomas Kane, professor, Harvard Graduate School of Education.
While the U.S. Department of Education now officially endorses Thomas Kane's research, Washington's legislators recently ignored it. The education reform process in Washington has given regulators, the chief defenders of traditional teacher certification, the power to control efforts to raise teacher quality. HB 2261, the big ed reform bill passed in the last legislative session, places the agency regulating teaching credentials, the Professional Educator Standards Board, (PESB) in charge of adopting performance standards for effective teaching.
Regulating teacher quality through teacher credential requirements has simply not worked to raise student achievement. Last week's disappointing WASL results should reinvigorate genuine efforts to raise teacher quality. The way to improve teaching quality is to 1) Remove current regulatory barriers to highly qualified individuals with bachelor's degrees who wish to teach, and 2) Allow Washington's principals the tools they need to assemble a team of highly effective teachers for every classroom and reward them for raising student performance.
Washington state Congresswoman Cathy McMorris Rogers has put together a nifty transparency resource providing details on federal earmarks, stimulus spending and transparency legislation. Here is what her website says about Sunshine.gop.gov:
"I wanted to let you know about a new and cutting edge tool giving you greater access to how the federal government spends our tax dollars. I developed sunshine.gop.gov to allow you to track stimulus dollars, banks that received Troubled Asset Relief Program (TARP) funds, and earmark and authorization requests on one site.
Six months ago, lawmakers rushed through a $787 billion stimulus package and before that a $700 billion TARP program. With all this record spending, you should have the right to see how their tax dollars are being spent. Not only will this website give you more insight but it will ultimate!
ly hold the federal government accountable for how it spends our money."
The section on earmark requests is worth the visit alone. According to the site:
"Each year Members of Congress submit requests to the appropriations subcommittees for specific projects to be funded in bills that keep the federal government operating annually. These provisions are known as earmarks; once they are written into law, federal agencies must carry them out. Earmarks are present in other pieces of legislation as well, but those in appropriations bills have recently been the subject of much controversy.
In the past the information about who submitted these requests was not available to the public. This year all members who chose to submit earmark requests to the Appropriations Committee were compelled to disclose those requests on their Office website. We’ve compiled all of those requests into a searchable database here. Please peruse the database and feel free to share your thoughts in the !
Here are the earmark requests for Washington's Representatives (click on link):
Yesterday multiple members of the Administration, including the President, began to distance themselves from the "public" health plan option. They have been loosing the debate over the issue of the public plan destroying the private health insurance market. Consequently, attention seems to be shifting away from the public option to...the co-op plan.
Although no one is exactly sure what a co-op would look like, the idea is that a group of providers would solicit membership for health care on a state or regional basis. Funding would come from member dues with majority contributions from the government. These would NOT function like energy or food co-ops, however. Instead, a health care co-op would be another form of insurance with pricing and benefits set by the federal government.
So, in point of fact, a co-op would functionally be the same as a government "option" health insurance program. It would set rates less than private insurance companies and the end result would be a transfer of patients to the public plan (because costs are less) and the demise of private health insurance in this country.
The language may have changed, but the health reform debate is still based on government-run vs patient controlled health care.
But while intrusive government regulation can surely dampen entrepreneurship and innovation, an intelligent regulatory environment will seek to maximize innovation and entrepreneurship without abandoning the subjects the regulation was intended to protect.
The best way to do this? According to Ortmans,
"Regulation that utilizes market-oriented approaches rather than direct controls is often more cost-effective bec!
ause it enlists competitive pressures for social purposes, according to an Office of Management and Buget study."
“WHEREAS, all forest products workers who work with sustainable forests and its products consider these green jobs; WHEREAS, forest industry jobs include loggers, log haulers, pulp and paper workers, mill workers and all jobs that lead back to sustainable forests; WHEREAS, annually in the United States unmanaged forest wild fires create carbon footprints equal to 54 million cars; and WHEREAS, there is no greater example of carbon sequestering than a well-managed forest and its products; now, therefore, be it RESOLVED, that the WSLC endorses forest product jobs as green jobs.”
Today's Seattle Times has a graphic outlining the environmental impacts of plastic bags. It says "Here’s a look at the environmental costs of bags," noting water use and CO2 emissions would be reduced. It indicates that water use for bag production will be reduced by 39 million gallons each year and it will reduce CO2 emissions by 6,000 tons each year. The estimated annual cost to achieve these goals is $10 million.
It is useful to put those numbers in context and relate the costs to the benefits.
One key question for any environmental policy is whether we could achieve the same environmental benefits for a lower cost. This is not only a concern about keeping taxes low (which in a tough economy should be reason enough), but it also asks whether we could do more for the environment with the same amount of money.
With regard to water and CO2 and even trash, the answer is "yes." Even if the bag tax performs as supporters promise, it wastes resources and misses opportunities to make real environmental improvements.
While 6,000 tons of CO2 sounds like quite a bit, it is actually a very small amount. In Europe it currently costs $20.52 to reduce one metric ton (2,204 lbs) of CO2. Reducing 6,000 short tons of CO2 would cost $111,731.40, or 1 percent of the cost of the bag tax.
When it comes to water, the Seattle Times' graphic notes that the tax would reduce the water used to make bags but doesn't put the number in context. Each day, Seattle uses about 130 million gallons of water. Reducing water use by 39 million gallons a year is less than one one-hundredth of one percent of water used in Seattle. Even that number is probably too high. Many of those 39 million gallons are used outside the city limits of Seattle, so reducing water use for bags doesn't reduce Seattle's direct water use. So, the amount of water saved by this tax is infinitesimal.
How much is that amount of water worth? Using residential rates, which have the highest marginal rates, the cost for 39 million gallons (5,213,904 cubic feet) is between $169,452 and $553,716 depending on the amount used, assuming use during peak times.
In other words, the bag tax will cost $10 million to create environmental benefits that could be acquired for $281,183.40.
Finally, the focus of most of the argument is on the reduction in trash in landfills. The Times estimates that plastic bags cost about $3.85 million annually to manage, about 2.5 percent of the total trash budget. Assuming that the bag tax reduces bag use by 50 percent, it could save $1.9 million each year. There are two things to understand about this number.
First, this number is high because it is unlikely that the City will reduce staffing or overhead costs because they still have to deal with all the other trash. Thus, a reduction of one percent in load does not equate to a one percent reduction in cost.
Second, it should be remembered that we already pay to collect that trash. While the bag tax increases costs for bags, it does not reduce the garbage taxes already being paid. So, Seattle taxpayers are unlikely to see any savings despite a reduction in trash volume. The Times does estimate that the City would use 47 fewer railcars of trash. Based on a rough estimate of cost per railcar, that amounts to less than $200,000 per year.
Adding the reductions in trash, water and CO2, the bag tax creates about $500,000 of benefit for $10 million in taxes.
Some will respond by saying that it is worthwhile to reduce our environmental footprint and that while the cost may be high, the need is great. But this argument is simply incorrect. Proponents of the bag tax claim to be concerned about waste of resources. Waste of money is waste of resources and the City could receive more environmental benefit by spending $1 million to reduce CO2, water and trash. The ironic conclusion is that the bag tax creates more waste by missing opportunities to reduce environmental impact.
Until environmental activists do a more rigorous analysis of the policies they propose, they will continue to support efforts that not only have little impact but are actually counterproductive.
"The problem with socialism is that eventually you run out of other people's money." -Margaret Thatcher
This is a helpful phrase to keep in mind when thinking about the pending health care reform proposals being considered in Congress. John Mackey, CEO and founder of Whole Foods Market, had a nice article in The Wall Street Journal on the reality of the financial conundrum we find ourselves in as a country as we consider a serious overhaul of our health care system. He offers up eight things we can do to improve health care in the U.S. without adding to the deficit in this August 11th article.
1. Remove the legal obstacles that slow the creation of high-deductible health insurance plans and health savings accounts (HSAs)
2. Equalize the tax laws so that employer-provided health insurance and individually owned health insurance have the same tax benefits
3. Repeal all state laws which prevent insurance companies from competing across state lines
4. Repeal government mandates regarding what insurance companies must cover
5. Enact tort reform to end the ruinous lawsuits that force doctors to pay insurance costs of hundreds of thousands of dollars per year
6. Make costs transparent so that consumers understand what health-care treatments cost
7. Enact Medicare reform
8. Revise tax forms to make it easier for individuals to make a voluntary, tax deductible donation to help the millions of people who have no insurance and aren't covered by Medicare, Medicaid or the State Children's Health Insurance Program