Month: April 2011

Michael Gerson on budget cuts, malaria, and being pro-life

Lisa Schweitzer

Conservatives get regular pokes around these parts, but there are some columnists I enjoy reading very much, like Michael Gerson.

He has a very nice column in the Washington Post this week about the real-world effects of budget cuts.

I take a bit an extended quote:

But last week, a neon line was drawn by an unlikely administration official. Rajiv Shah, the administrator of the U.S. Agency for International Development, possesses the mildest of manners. Testifying before the House state and foreign operations subcommittee, however, Shah had this to say:

“We estimate, and I believe these are very conservative estimates, that H.R. 1 would lead to 70,000 kids dying. Of that 70,000, 30,000 would come from malaria control programs that would have to be scaled back, specifically. The other 40,000 is broken out as 24,000 who would die because of a lack of support for immunizations and other investments, and 16,000 would be because of the lack of skilled attendants at birth.”

This is the hardest of hardball politics — accusing budget cutters of unwitting complicity in the deaths of children. House GOP lawmakers responded angrily. “Nearly every administration witness appearing before the Appropriations Committee,” said Rep. Jerry Lewis (R-Calif.), “has put forward nightmare scenarios and dire numbers to argue why we should not be reducing spending in any program. Republicans won’t be drawn into a debate over what might happen based on speculations and hype.”

But it is not realistic to take credit for cuts while forbidding a discussion of their consequences. Republicans were drawn into this debate when they proposed major reductions in foreign assistance, believing this category of spending to be an easy political target. Instead, they have stumbled into what one poet called “a problem on the borderline of ethics and accounting.”

Brilliantly noted: you don’t get just turn a blind eye to what the programs are for in your desire to claim that all spending is ineffective and social-welfare-lowering. You have to look at the actual evidence. That’s your job as a legislator (not, actually, to throw a big bootyhoo fit that somebody has confronted you with forecasts you don’t like much.) And the evidence on malaria programs is painfully clear: malaria is cheap and easy to prevent, and we really can, in fact, afford to eradicate it. As Gerson notes, maternal and child heath, and malaria prevention, are two places where there is an established relationship between social benefit and dollars spent–unlike lots of other things we routinely pursue (as in, I’m sorry to say, public transit, where proving the benefits has been analytically much, much more difficult).

Economists are taught to think in margins. Yesterday at lunch, I proposed that our goal should be zero highway deaths and acccidents–we won’t get there, but that’s what we should be thinking. My lunch partner somewhat balked. He, like me, has been raised on the idea that you abate to where the marginal cost=equals the marginal benefit. This is so ingrained in our thinking that it seldom occurs to us that of course the optimality condition still allows for–at least in theory–the corner solution at 0, or perfection. There’s actually pretty good evidence that malaria, given how much benefit comes from a dollar spent, is an arena where we could pursue perfection and not much notice the costs.

Unless you think you have a easy budgetary target on your hands, and your constituents could care less.

Gerson ends with a moral note:

Cuts for global health programs should be of special concern to those of us who consider ourselves pro-life. No pro-life member of Congress could support welfare savings by paying for abortions. No pro-life member of Congress could support Medicare savings by cutting off life support for the sick. And it should give any pro-life member pause to support minuscule budget savings that risk the death of children from malaria.

You mean you actually are supposed to care about a kid’s fate once they are in the world, too, and not just in the baby factory? I’m not sure I can handle this much ideological consistency all at once.

These people are wasting our time

Lisa Schweitzer1 Comment

Wouldn’t it be nice if anybody in our Federal government were a grown-up? Obama wants us to spend billions we don’t have on trains we don’t really need, and the Republicans are treating the Federal budget like their personal playground.

What an incredible mess this country is in.

So apparently we also need to make sure we pass preventative bills for taxes that haven’t been passed: the Energy Tax Prevention Act of 2011. This is a stupid idea.

From the NYT Green blog (with a somewhat histrionic title):

The bill, known as the Energy Tax Prevention Act of 2011, could come up for a vote as early as Wednesday and is almost certain to pass when it does. It has virtually unanimous support among the Republican majority and will probably draw votes from a few Democrats from coal and oil producing states.

The measure, sponsored by Representatives Fred Upton, Republican of Michigan, and Ed Whitfield, Republican of Kentucky, would overturn the E.P.A.’s finding that carbon dioxide and other greenhouse gases pose a danger to human health and the environment. That finding, based on a broad scientific consensus, is the basis for pending regulation of carbon emissions from vehicles and large stationary sources like power plants, factories and refineries.

Grrrrrrrrrrrrrrrrrrrrrrrrrrrrrrrr.

Since when did “protecting consumers from higher energy costs” become a legitimate form of public policy in a market-based system? WHO ARE THESE PEOPLE AND WHERE DID THEY GO TO REPUBLICAN SCHOOL?

Edward Kleinbard on Global Tax Avoidance Dance in the HuffPo

Lisa Schweitzer

One of USC’s own, Edward Kleinbard, writes in the HuffPo:

General Electric’s global effective tax rate for 2010 was 7.4%. Pfizer’s was 11.9%; Cisco came in at 17.5%. The nominal U.S. corporate tax rate is 35%.

Each company has its own tax story, but all — like other multinationals — have for years relied heavily on low-taxed foreign income to drive down their worldwide tax obligations, including those of their U.S. businesses.

Read the whole commentary here.

Evan Ringquist, hotspots, and environmental justice in the New York Times

Lisa Schweitzer2 Comments

Via one of our brilliant PhD students, Noah Dormady.

Evan Ringquist is an environmental economist who does really interesting work in environmental justice. First, he took on one of the major claims in the early environmental justice research: that the EPA did not as rigorously enforce environmental violations in low-income and minority communities as in more affluent and white communities:

Ringquist, E., 1998, A question of justice: equity in environmental litigation, The Journal of Politics, 60(4), pp. 1,148-65.

Recently, the New York Times highlighted some new work from Ringquist that looks at one of the most pervasive beliefs in environmental justice: that cap and trade systems cause hotspots. Places near low-income people of color are probably older industries who will simply trade to pollute more or as much as they always have, thereby cleaning up areas far away from the communities that need it most. It’s been one of the most pervasive critiques of Southern California’s RECLAIM, and it’s one of the reasons that some environmental justice folks in California are litigating against a cap and trade instrument for energy producers in climate action in California.

I’ve always been a bit dubious of these ej claims, as at times my economist self overrides my sympathetic-to-communities self. The bottom line is that we can get more overall reduction with cap and trade, and while it’s too bad that the reductions are not even-steven, properly designed cap-and-trade system reduce emissions everywhere simultaneously. The problem is that neighbors want zero emissions or simple regulatory control–understandable enough. The uncertainty created with trades bothers people. However, there are tons of things you can do to make sure you get the local improvements you want:

a) simply disallow trades once local emissions targets are hit; or
b) severely penalize trades with polluters near ej communities; or
c) severely penalize trades with polluters in hotspots.

So functionally, if a local target says you get to trade only to level X, it’s no different than a regulation that says you get to emit to level X.

Cap and trade may change hotspots, but there are already hotspots: polluters cluster for a variety of reasons already, from zoning to industrial agglomeration. So cap and trade can intervene to lessen hotspots as much as they can reinforce spatial patterns, depending on their design.

Moreover, if you are are concerned about equity and the surrounding communities, you can give them a great deal of self-determination and endow them with the permits or credits, and then allow trades with local polluters ONLY with the surrounding communities. That injects some inefficiency–in general, these markets work best when there are enough sellers to produce opportunities for gains to trade, but not so many that information problems become an issue. But it puts communities in the drivers’ seat, and if they want to enforce the maximum, they can, based on their read of their potential risks rather than some scientists at EPA or CARB who don’t necessarily have a stake in the decisions the way the community members do.

The problem is, I think, that all of it sounds less controlled than regulation. Some big-money corporations buying the “right to pollute” is intuitively wrong, as Michael Sandel became rather famous pointing out. And markets. Lord, capitalism brought us all these polluters, now it’s going to fix it? I don’t think so! However, a regulation implicitly bestows polluters with the right to pollute up to a certain amount. There’s no real difference, unless you buy Sandel’s argument. And I don’t–I believe that outcomes matter more (for the environment) than process (a controversial position, I understand, and a conclusion I draw reluctantly).

More tangibly, it’s hard to take the idea that you might have gotten more local reductions with regulation: hey, under the trading system, we only get X reduction, and they got X+Y! (for a total of 2X + Y). If those guys over there abated to X+Y, why didn’t WE get X+Y, but only X? (The fact that X is actually the target means less now that one might have had more.)

I suspect that at least some players would prefer overall we get 2X in the name of equity than 2X+Y. Why should they get Y when we don’t? And under regulation, we are likely to to 2X-E (with E being the an error in negotiation) rather than 2X, but at least then I know we got 1/2*(2X-E) and nobody got more than us. (Not irrational if the argument is made as a reflect of entitlement or respect; why, exactly, should the other place get X+Y simply because they live next to the lower cost abater?)

The big gain you get from cap-and-trade is when you observe the market, you see who trades and you begin to see the real costs of abatement because not abating suddenly as a market cost–what you could sell your permit for. Negotiated levels under regulation often occur in a context of severe information asymmetries between government and industry. Without the market, you have to rely more than you want to on industry claims of regulatory costs, which they may a priori not know or strategically inflate. When we watch the trading, we can figure out how many permits to remove from the trades to reach the cap when we wish to lower the target, and we can figure out fast to remove those permits to get as much emissions reductions as we want–with less of the threats of plant closures and layoffs that inevitably come with regulation.

Ringquists’ new study basically shows that the SO2 trading system did not create hotspots: it had overall benefits, and it benefited low-income communities most. That’s how a well-designed trading system can and should work.

Take your travel advice and stick it in your ear

Lisa Schweitzer1 Comment

Back when I was a bit more of a nervous flyer, I went on a short trip to San Francisco with one of those granola, free-love, Burning-Man-Going types who had to go back for something and left me his baggage to watch in line at the airport.

Our turn came up, and I checked his bag with mine. When he returned, he was *furious* and condescending.

“Don’t EVER check bags. It’s SUCH A WASTE of time. And they lose it half the time.”

I was mortified, and I crept along, shamefaced.

What I should have said: Up yours. You’re the disorganized git that inconvenienced all of us and imposed on me to watch your stupid baggage in the first place.

To this day, I see the “don’t check your luggage” advice all over the web by supposed travel gurus, and you know what: I think that’s nonsense.

First off, I don’t travel with airlines that charge for handling bags.

Second, I hate schlemping bags. I hate taking the bag into the bathroom. I hate trying to put it somewhere if I need to stop for dinner at Chili’s. I hate trying to hoist it over my head.

Certainly, I’ve had luggage go missing. But it’s usually found the next day, delivered to your door.

So here’s my travel advice, from somebody who is a seasoned traveler not because she had parents with the coin to send her off on European jaunts since high school, but from a person who has spent too much of her life on crap airplanes going on trips she doesn’t want to go on in order to attend meetings that she doesn’t want to go to:

When you are traveling, do whatever makes you the most comfortable, if you can possibly afford to do it.

If you prefer to keep your luggage with you and clutter up walkways, delay takeoff, and drag it around because it saves you a few minutes at either end, go for it.

If you are like me, and prefer to check, by all means.