Romney’s Stupidest Idea Of The Week
One of the signature policy proposals that Mitt Romney outlined in his economic plan and highlighted in his USA Today op-ed last week is a policy that is as pernicious in practice as it sounds unthreatening. On page 61 of his plan, Romney proposes to cap the rate at which agencies would impose new regulations at zero. This means that if an agency is required by law to issue a new regulation, it must offset the costs, presumably by eliminating some other regulations. Essentially, Romney is proposing to adopt pay-as-you-go budgeting to regulations.
It’s not entirely clear if this rule applies to each agency—would the Food and Drug Administration have to eliminate some food inspection rules if they created some new regulations of food?—or if this is government-wide policy, so if the government creates rules in one area, it would be required to undo rules in another, unrelated area. But either way, this policy would have far-reaching negative consequences. Imagine, for instance, if a cap on regulations was in place after the financial crisis, when lack of regulation of Wall Street led to the cratering of the economy. Under this proposal, in order to regulate Wall Street to ensure that economic devastation couldn’t happen again, the federal government would have to eliminate regulations on food or water or air, or some other protections. Where is the logic of undoing clean air regulations because new consumer protections are needed?
Behind this policy response is a simple animosity towards any rules for businesses that come at the expense of profits. Republicans have been arguing that regulatory uncertainty is hurting job growth because businesses supposedly refuse to make hiring decisions when they don’t know what the rules will be. But if anything were going to feed uncertainty, it would be a rule that haphazardly and randomly picks old rules to eliminate once new rules were created. Companies make decisions about their future assuming those regulations stay in place; eliminating old regulations will simply favor some firms over others.
The bigger point to be made, however, is that regulations are not what are ailing our economy now, nor are they hindering growth. McClatchy recently surveyed small business owners on why they weren’t employing additional people—none offered regulation among the barriers to hiring. (That’s why it’s particularly unfortunate that the president recently fed the Republican obsession with his suspension of the ozone rule, citing “regulatory uncertainty, particularly as our economy continues to recover,” as part of his rationale.) In fact, if anything, greater regulation can be correlated with greater growth: Over the last 50 years, the decades of the highest growth rates for our economy saw the greatest expansion of government and its regulations. Growth rates were highest in the 1960s at 4.55 percent for the decade, when we created Medicare, Medicaid, and the Great Society poverty programs—our greatest expansion of government. And growth rates were the lowest in the last decade, averaging only 1.38 percent. I think it is safe to say George Bush was not a friend of regulation.
But if regulations aren’t the culprit, what is? What’s holding up hiring now is that there is not enough demand in the economy. Even bond traders like Bill Gross acknowledge the need for direct federal help for job creation and growth. To actually create jobs, Republicans should come to the table with the president and pass ideas they have supported in the past, like investment in roads and bridges and hiring teachers who have been laid off. But because Republican ideology will not tolerate federal policies that actually help create jobs, they are reduced to pithy sounding policies on regulations that are just another way of getting rid of protections for consumers in order to help corporations.
As a former policy director on a presidential campaign, I am sympathetic to the desire to try to propose “new” policy ideas that sound good in a speech or a press paper. In the back and forth of a campaign, reporters, campaign press staff, and even the candidates can demand new policies in areas that have been well-trodden and don’t typically make for exciting speeches. But a serious candidate has to put forward serious ideas to solve actual problems. And for a candidate trying to distinguish himself from a Texas governor ready to shoot from the hip, Mitt Romney’s cap on regulation does not meet that test.
By: Neera Tanden, COO, Center for American Progress, Published in The New Republic, September 12, 2011
Quality Vs Quantity: Yes, We Need Jobs. But What Kind?
On Thursday, President Obama will deliver a major speech on America’s employment crisis. But too often, what is lost in the call for job creation is a clear idea of what jobs we want to create.
I recently led a research team to the Rio Grande Valley in Texas, where Gov. Rick Perry, a contender for the Republican presidential nomination, has advertised his track record of creating jobs. From January 2000 to January 2010, employment in the Valley grew by a remarkable 42 percent, compared with our nation’s anemic 1 percent job growth.
But the median wage for adults in the Valley between 2005 and 2008 was a stunningly low $8.14 an hour (in 2008 dollars). One in four employed adults earned less than $6.19 an hour. The Federal Reserve Bank of Dallas reported that the per capita income in the two metropolitan statistical areas spanning the Valley ranked lowest and second lowest in the nation.
These workers aren’t alone. Last year, one in five American adults worked in jobs that paid poverty-level wages. Worker displacement contributes to the problem. People who are laid off from previously stable employment, if they are lucky enough to find work, take a median wage hit of over 20 percent, which can persist for decades.
To understand the impact of low wages, in the Valley and elsewhere, we interviewed a wide range of people, including two directors of public health clinics, three priests, a school principal and four focus groups of residents. Everyone described a life of constantly trying to scrape by. One month they might pay for the phone, another, for utilities. Everyone knew how long each company would carry unpaid bills before cutting service. People spoke not only of their fear of an unexpected crisis — an illness, a broken car — but also of the challenge of paying for basic needs like school supplies. Many used the phrase “one paycheck away from homelessness.”
Because their parents cannot afford child care, children move among relatives and neighbors. They watch too much TV. They don’t finish their homework. Older children grow up too fast from parenting their younger siblings. As one person observed, “All you think about is which bill is more important.”
Economic stress strains marriages. Parents cannot afford quinceañeras for their daughters. In church youth groups, teenagers ask why they should stay in school if all they can get are low wages.
Many children are latchkey kids. Accidents are frequent; we heard of an elementary school student who badly burned himself in a science experiment, with his older brother watching. Their father couldn’t take time off from work to visit his son in the hospital. Children come to school sick. Parents miss teacher conferences because they can’t afford time off. Type 2 diabetes is a scourge in the Valley. Since Type 2 diabetics can be asymptomatic for years, many don’t buy medicine; as time passes, they become severely ill, often losing sight or a limb.
The director at one clinic, with nearly 70,000 visits a year, estimated that half of its patients had anxiety or depression. Often people can’t get to the clinic because they cannot afford to lose work time or because gas costs too much. When they go, they take their families, because they have no child care.
And yet the Valley is not hopeless. Teachers stay late to help with homework. They make home visits to meet parents. Health clinic employees work overtime. The community organization Valley Interfaith has pushed for training opportunities and living-wage jobs. There is no “culture of poverty,” but the low-wage economy has corrosive and tragic consequences.
Must we choose between job quality and quantity? We have solid evidence that when employees are paid better and given more opportunities within a company, the gains outweigh the costs. For example, after a living wage ordinance took effect for employees at the San Francisco International Airport, in 1999, turnover fell and productivity rose.
Contrary to the antigovernment rhetoric, there is much that the public sector can do to improve the quality of jobs.
A recent analysis by the Economic Policy Institute reported that 20 percent of federal contract employees earned less than the poverty level for a family of four, as opposed to 8 percent of traditional federal workers. Many low-wage jobs in the private sector (notably, the health care industry) are financed by taxpayers. The government can set an example by setting and enforcing wage standards for contractors.
When states and localities use their zoning powers to approve commercial projects, or offer tax incentives to attract new employers, they can require that workers be paid living wages; research shows this will not hurt job growth.
Labor standards have to be upgraded and enforced, particularly for those employers, typically in low-wage industries, who engage in “wage theft,” by failing to pay required overtime wages or misclassifying workers as independent contractors so that they do not receive the benefits to which they are entitled.
Americans have long believed that there should be a floor below which job quality does not fall. Today, polls show widespread support for upgrading employment standards, including raising the minimum wage — which is lower, in inflation-adjusted terms, than it was in 1968. It’s time for the federal government to take the lead in creating not just more jobs, but more good jobs. The job-growth mirage of the Rio Grande Valley cannot be our model.
By: Paul Osterman, Op-Ed Contributor, The New York Times, September 5, 2011
GOP ‘Jobs Agenda’ Revives Ineffective Business Tax Giveaway
This week, House Majority Leader Eric Cantor (R-VA) released a memo outlining the House GOP’s supposed “jobs agenda.” In addition to being an assault on organized labor and recommending the elimination of environmental regulations that save tens of thousands of lives every year, the document proposes reviving some of the GOP’s favorite tax cuts, including the so-called “20% Small Business Tax Deduction.”
This particular idea made an appearance in both an “economic plan” that Cantor and House Speaker John Boehner (R-OH) presented to President Obama in 2009 and the GOP’s 2010 Pledge to America. The policy would allow businesses to deduct 20 percent of their income from their taxes, and in Cantor’s words, “immediately free up funds for small business people to retain and hire new employees, and reinvest in and grow their businesses.”
However, as Citizens for Tax Justice pointed out in 2009, there is little reason to think this tax break would be anything but a boondoggle:
The Republican plan proposes to allow a “small business” to take a tax deduction of 20 percent of its pretax income, whether the small business is a corporation or a sole proprietor. The plan defines a “small business” as one with 500 or fewer employees. It makes no distinction based on income. A “small business” making $100 million would get to deduct $20 million of its income right off the top. (Apparently, a company with slightly more than 500 employees would have an incentive to lay off staff to qualify for the tax break!) […]
A business tax cut is just about the least effective stimulus measure Congress could possibly enact. The tax cuts put more money in the hands of business. But there is very little correlation between a corporation’s cash position and its plans for investment—whether expanding capacity or hiring new employees. Businesses invest in expansion when they believe there will be an increase in the demand for the goods and services they provide. If they don’t anticipate a sales increase, they won’t expand no matter how many tax breaks the federal government gives them.
And the Center for American Progress’ Christian Weller noted in 2010 that, while the credit is restricted to business with fewer than 500 employees, it’s still “an ‘upside-down’ tax break that gives the largest benefits to those who already have the highest incomes” because the amount of the deduction is contingent on which tax bracket a business files in (the higher the tax bracket, the more the deduction is worth):
A deduction reduces the taxable income and thus the taxes that somebody has to pay. A business owner with lots of business and other income will thus get a government subsidy of 35 cents for each dollar in deduction, while a small business owner in the 15 percent tax bracket will get 15 cents for each dollar in deductions…Larger businesses could easily use this windfall to outcompete smaller businesses. A larger business owner with a 35 percent marginal tax rate will get a benefit that is 133 percent greater than the benefit that a smaller business owner with a 15 percent marginal tax rate gets for each dollar in tax deduction.
But for the GOP, this idea is so good that it’s worth bringing up over and over again.
By: Pat Garofalo, ThinkProgress, September 3, 2011
Drug Testing Welfare Recipients Could Line Florida Gov Rick Scott’s Pockets
When Florida Gov. Rick Scott (R) signed the law requiring welfare recipients to pass annual drug tests to collect benefits, he justified the likely unconstitutional law by saying it would save the state money by keeping drug users from using public money to subsidize their drug habits. Drug use, Scott claimed, was higher among welfare recipients than among the rest of the population.
Preliminary results from the state’s first round of testing, however, has seemingly proven both of those claims false. Only 2 percent of welfare recipients failed drug tests, meaning the state must reimburse the cost of the $30 drug tests to the 96 percent of recipients who passed drug tests (two percent did not take the tests). After reimbursements, the state’s savings will be almost negligible, the Tampa Tribune reports:
Cost of the tests averages about $30. Assuming that 1,000 to 1,500 applicants take the test every month, the state will owe about $28,800-$43,200 monthly in reimbursements to those who test drug-free.
That compares with roughly $32,200-$48,200 the state may save on one month’s worth of rejected applicants.
Net savings to the state: $3,400 to $5,000 annually on one month’s worth of rejected applicants. Over 12 months, the money saved on all rejected applicants would add up to $40,800 to $60,000 for a program that state analysts have predicted will cost $178 million this fiscal year.
While the state will save little, if any, money on the drug testing racket, Scott’s family could stand to gain financially. A former health care executive, Scott founded Solantic Corp., a chain of walk-in health care clinics that provides, among other services, drug tests. Scott maintains that he has no involvement in the company, but he does have $62 million worth of the company’s shares contained in a blind trust under his wife’s name. Though there is no conflict under Florida law unless the company deals with the governor’s office directly, the company, and thus Scott’s investment, could benefit from the increased traffic from drug tests.
Meanwhile, the state’s already-small annual savings could be wiped out entirely by the cost of implementing the program and issuing the reimbursements. And as Derek Newton, the spokesman for the Florida chapter of the American Civil Liberties Union, told the Tribune, the cost of the program could skyrocket if the state has to defend it in court. The ACLU is still considering a lawsuit challenging the law’s constitutionality, Newton said.
If the ACLU or anyone else were to challenge the law, the lawsuit would likely succeed. As UCLA law professor Adam Winkler wrote after Scott signed the law, “Random drug-testing is what is known as a ‘suspicion-less search,’” and outside of a few limited instances, courts have “generally frowned upon” drug testing that occurs at random and without probable cause. “Indeed, courts have stuck down policies just like the ones put in place by Florida,” Winkler wrote, citing two cases to back up the claim.
As for Scott’s second claim, that drug use is higher among welfare recipients, the test results also show that to be false. While only 2 percent of welfare recipients failed drug tests, a 2008 study by the Office of National Drug Control Policy found that approximately 8 percent of Floridians age 12 and up had used illegal drugs in the last month, and 9.69 percent had smoked marijuana in the last year.
By: Travis Waldron, Think Progress, August 24, 2011
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