Hospitals kill six times more people than highways.

Yesterday the Obama Administration announced a program intended to reduce medical errors and accidents and save more than 60,000 lives over three years. The program will be funded by $1 billion authorized by the Affordable Care Act ("Obamacare") and is projected to reduce Medicare reimbursement costs by $50 billion over ten years, plus billions more savings for Medicaid and non-government expenditures. How could such a huge payout be possible?

The answer seems to be that deadly but readily fixable hospital practices are endemic. This PBS Newshour segment reports that 98,000 lives are lost each year in America as a result of medical errors and accidents in hospitals, according to a 1999 study. A study covering 2000-2002 estimated that the annual US death toll from hospital errors was 195,000. A November 2010 study estimated that hospital errors cause 180,000 deaths per year just among Medicare patients. To give these death rates context, "only" 32,708 people were killed in traffic accidents in 2010.

The death toll is just the tip of the ice berg; these same reports estimate that 33-40% of patients are the victims of some kind of hospital error that does them harm and increases costs. Perhaps that's the most shocking statistic of all. No wonder hospitals don't want to be held accountable for their negligence.

How Money Polarized Congress And Made It Dysfunctional

I've written here and here about the increasing and corrupting role of money in political campaigns and separately about increasing political polarization and deadlock in Congress. Thomas Ferguson links the two developments; he says it's how both parties have reacted to the tsunamis of campaign contributions that has caused the polarization and deadlock. He lays it out in this New Deal 2.0 interview by Lynn Parramore, How Political Money Drives Deadlock, where there are also links to his scholarly work on the subject.

In What does it mean that the US electorate is "center right?" Nothing, I posted some telling graphs and other data showing that public opinion did not shift noticeably from left to right, or away from the center and toward the extremes either, between 1972 and 2008. Basically, voters' opinions about politics show and have shown a Gaussian (normal) distribution with most voters near the center and not the extremes. This one from a 2008 Time Magazine poll is typical.

In stark contrast, I wrote The US Senate is dysfunctional because there are very few centrists, as is shown vividly in this graph posted there.

Ferguson connects these two phenomena by arguing that the leaderships of both parties in Congress have installed pay-to-play systems for themselves, committee chairs, and Members.

TF: In a word: money. Since the mid '70s, more and more political money has been moving right and center-right. To understand Congressional polarization, though, you have to focus sharply on the crucial moment, which was 1994. That was the second stage of the Reagan Revolution, when Republicans took over both houses of Congress. Notice the key political players then. You have Newt Gingrich, who was organizing the GOP push in the House; Phil Gramm, who headed Senate fund raising for the GOP; and Haley Barbour, who chaired the Republican National Committee. These people weren't 'bowling alone'. They were free market fundamentalists. They wanted to cut taxes, on high brackets especially. They wanted to push deregulation of the financial and telecommunications industries. They wanted to abolish things like the EPA and the Consumer Product Safety Commission and cut back the FDA, the FTC, and just about every other government regulatory agency. The one area where they liked Big Government was defense.

These anti-government, pro-corporate Republicans broke every record for raising political money. Look at Gingrich and his history in particular. When he started attacking the older Republican leaders in the House as timid and too willing to compromise, money came pouring in. Yes, they supported and allied with evangelical religious groups. But those were always secondary to the main objective, which was to deregulate the economy and roll back the New Deal in all its manifestations.

LP: How did the 1994 Republican victory affect Congress itself?

TF: When Gingrich won control of the House, he installed what amounted to a pay-to-play system internally, which forced individual representatives to compete to hold their positions on key committees and leadership posts by raising funds for the party. The effect on the House was far-reaching, because the seniority system was already pretty much dead as a result of reforms in the seventies. The movement to limit the terms of committee chairs also worked in this direction, because it meant that more posts were coming open on a regular basis. What happened was that the entire Congress became money-driven.

Positions on key committees, leadership posts — they were all being sold. The money collected then was poured into election campaigns, especially for so-called "open seats," in which no incumbents were running and in doubtful races. The vast spending and noisy campaigns heated up the political atmosphere in and out of Washington, as the media transmitted the messages.

The Democrats looked at the Republicans' pay-to-play system and basically decided to copy it. They did this instead of mobilizing their old mass constituencies. Today, as my paper documents, both parties are essentially posting prices for influential committee slots and leadership posts.

The Democrats' decision to emulate the Republicans and follow the money shifts the system's center of gravity to the right, as both parties frantically cultivate investor blocs. The result is the weird political world we live in. Behind the scenes, investor blocs and businesses maneuver for advantages in both parties. The system's center of gravity moves to the right, checked only by the diminishing influence of unions and other mass political groups that retain some resources and influence on the Democrats. You end up with two "money-driven" parties. The parties are not identical, but they have this in common: They cannot possibly campaign only on appeals to investor blocs, so each party reaches out to select public constituencies to scrape together enough votes to win elections, in a sea of public cynicism.

Polarized politics is money-driven politics and political parties are first of all bank accounts, whatever else they do. More precisely, the current polarization of the system is the direct result of the Republicans' attempt to roll back the New Deal and the way the Democrats responded. I regret to say I don't see much chance that it will abate any time soon. The Obama administration's failure to deliver "real change" has given the Republicans a new lease on life. Less than three years after the financial collapse, which handed the presidency and both houses of Congress to the Democrats on a platter, free market fundamentalism is back. Today Republicans look closer to rolling back the New Deal than they ever have. They are unlikely to see much reason to compromise; especially when the Obama administration, in the middle of trying to raise a billion dollars for the 2012 campaign, declines to press a strong defense of investments in people and regulation, not even financial regulation.

The fight to reform the banking system is over, and the bankers won.

That's Simon Johnson's conclusion here at Baseline Scenario, where he links to longer pieces he co-authored in the Daily Telegraph and Financial Times.

What’s the market alternative to this big government program?

In our zeal to get rid of Big Government, let's not throw any babies out with the bath water.  For example, as a result of government programs, each mile driven on US streets and highways is 85% less likely to cause your death now than it was in 1949, 80% less likely than in 1966, and half as likely as in 1989, according to unpublished data obtained from NHTSA.

This dramatic improvement has been driven by regulations and standards (seat belts, air bags, head restraints, infant seats, crash resistance, collapsible steering columns, rollover resistance, tire quality, drunk driving enforcement, etc.) and  by government spending on safer roadways. If there is a plausible explanation for how this might have been accomplished as efficiently (or at all) by market forces, I haven't heard it. Furthermore, the achievement came in spite of concurrent regulatory programs requiring better fuel economy (fuel consumption per vehicle mile traveled is down 40% from 1975) and vastly reduced per-mile pollution. Looks like a very big success to me. 

Government isn't the answer to every problem, but it isn't always the problem either, Ronald Reagan's rhetoric to the contrary notwithstanding. Let's try to get past the slogans and ideology and look at the merits of individual government programs--before we start them and when we consider ending or defunding them.

Update on Thursday, April 14, 2011 at 05:21PM by Skeptic

According to this EPA document, combined tailpipe emissions of HC, NOx, and CO by new cars were about 103.6 grams per mile in the early 1950s. According to this BTS document, the average for the whole fleet of cars and trucks had been reduced to 11.53 grams per mile by 2008, an 89% reduction.  Today's standards for new vehicles require combined emissions be less than 4% of 1950s levels. 

Update on Tuesday, September 18, 2012 at 06:11PM by Skeptic

Today's NYT Science Times has in an informative megagraph showing the jerky year-by-year change in auto fatalities per 100,000 people versus vehicle miles driven per capita.  Strung along the time line are brief summaries of key events that may have influenced the changes, e.g., the muscle car era, followed by Ralph Nader and federal safety regulations, then the energy crises and the nationwide 55 mph speed limit, then universal seatbelt requirements and a crusade against drunk driving, followed by the rising popularity of rollover-prone SUVs, then more safety regulations, and finally the Great Recession. The causations are much more speculation than proven, but the piece provides an excellent starting point in the search for causation of the very real declines in fatalities by more than 50% since the 1960s even as vehicle miles per capita doubled.  

Most read Realitybase posts in March

The American Dream died in February 1973 (with graphs from multiple sources showing stagnation of inflation-adjusted middle class incomes since the 1970s after strong and steady post-WWII growth)

The Dysfunction and Corruption of Our Healthcare System, Its Damage to the National Economy and other Basic Healthcare Matters (Guest Post) (describing a system that is destroying the American business economy and our ability to compete globally, which violates fundamental insurance risk principles, and which has inherent conflicts of interest that prevent quality national health care delivery and cost efficiency, and proposing a solution)

The Citigroup Plutonomy Memos (with key quotations from documents that are being disappeared)

One chart refutes three myths about US foreign trade. (about Smoot-Hawley, the post-WWII export "boom," and "self-balancing" trade)

The history of US per-capita petroleum consumption will surprise you.  (A graph and other data show US per-capita consumption of petroleum is down substantially from the 1970s, has been very stable since 1983 because of CAFÉ standards, and has fluctuated only slightly with retail price changes)

Comparative Advantage—The Unicorn of Free Trade (a collection of sources and analyses demonstrating that the assumptions of classic Ricardian theory rarely if ever align with real-world conditions)

The Recession is Coming! The Recession is Coming! (December 2007 post with charts showing America's middle class had already been in recession for 7 years and asking if we really care about them)

My new political home is the Tea Party?  (the otherwise pro-market Tea Party supports a nationalist trade policy that confronts foreign abuses and fights for American companies)

Is the New York Times editorial board adapting to reality, or is this cognitive dissonance?  (after urging us editorially to “embrace” globalization, NYT acknowledges that globalization is partly responsible for the Middle Class economic decline)

Common Ground for Tea Partiers and Liberals

We are accustomed to thinking of the US political spectrum as a linear spectrum from left to right and the need always to have a center-left coalition or a center-right coalition in order to elect Congressional majorities or to pass legislation. In this framework, left and right are polar opposites in terms of political philosophy. But what if the political spectrum is not a straight horizontal line but is shaped like a horseshoe?

In this configuration, one can imagine a political polarization that is not left-right but is top-bottom based on economic class instead of political theory. The Tea Party representing the far right and socialists representing the far left both have strong populist sentiments, and both are angry that both major parties are effectively controlled by wealthy elites.

The Left has long feared Big Business and Wall Street and has tried to use government to check their power to exploit the lower economic classes. 

On the other hand, Tea Partiers identify Big Government as the biggest threat to their interests.  However, I suggest they react strongly against any powerful institution that intrudes negatively into their lives.  They are anti-Wall Street and were very upset at the 2008-09 Bush-Obama bailout of the financial system.  They are anti-free trade and very suspicious of MNCs and foreign companies and people, which our increasingly open borders largely benefit.  And, despite their anti-government rhetoric, they are strongly in favor of Social Security and Medicare. They seem to feel that their lives are getting worse, not better, and that, rather than having control over their own lives, they are being dictated to and victimized by powerful people and institutions. They feel alienated from these shadowy forces and exploited by them--and that's not so different from how liberals feel.

Update on Tuesday, April 26, 2011 at 12:40PM by Skeptic

My argument here is confirmed by a research paper from Princeton, which I link and quote from in More on the disproportionate political influence of the affluent.

Update on Saturday, May 14, 2011 at 10:59AM by Skeptic

Here is liberal Senator Sherrod Brown of Ohio saying he and libertarian Congressman Rand Paul of Texas tend to vote the same way on staying out of foreign wars, against free trade agreements, and against corporate welfare. (Rachel Maddow’s interview of Sen. Brown comes after the bin Laden porn stash story.)

Update on Saturday, September 10, 2011 at 01:45PM by Skeptic

It looks like Sarah Palin is trying to redefine the political divide in a similar way. As reported by Anand Giridharadas in NYT:

She made three interlocking points. First, that the United States is now governed by a “permanent political class,” drawn from both parties, that is increasingly cut off from the concerns of regular people. Second, that these Republicans and Democrats have allied with big business to mutual advantage to create what she called “corporate crony capitalism.” Third, that the real political divide in the United States may no longer be between friends and foes of Big Government, but between friends and foes of vast, remote, unaccountable institutions (both public and private).

. . . .

 “This is not the capitalism of free men and free markets, of innovation and hard work and ethics, of sacrifice and of risk,” she said of the crony variety. She added: “It’s the collusion of big government and big business and big finance to the detriment of all the rest — to the little guys. It’s a slap in the face to our small business owners — the true entrepreneurs, the job creators accounting for 70 percent of the jobs in America.”

H/t Charlie for the link.

Update on Thursday, July 5, 2012 at 10:07AM by Skeptic

Professor Luigi Zingales of the University of Chicago Booth School of Business concurs in an op ed in today’s LAT, where he specifically identifies crony capitalism as the common enemy of the Tea Party and the Occupy Movement:

[Both major parties are ignoring] what unites the two movements: their fundamentally anti-elite, anti-establishment attitude.

The tea party and the Occupy movement both arose in response to pervasive frustration. As we've grown accustomed to hearing in recent years, Americans are angry. They're angry at bankers, who helped cause the financial crisis but paid no price for it. They're angry at Washington, which blamed the bankers but deserved as much blame, if not more, for failing to rein them in. And they're angry at an economy that seems to enrich the wealthy while leaving most everyone else standing still or falling behind.

This anger manifests itself in a strong anti-elite bias and a determination to resist an oppressive leviathan — though the monster takes different forms in the two movements. For the tea party, it's the federal government in Washington; for Occupy, it's bailout-addicted big business.

The difference is more apparent than real. The problem is not big business per se but monopolistic and politically powerful business. It is not government per se but intrusive and corrupt government. Is Fannie Mae inefficient, for example, because it is a large monopolistic company or because it is a state-sponsored enterprise? The answer is both.

Does the blame lie with the government or with the private sector? Neither. Their failures are the result of an increasingly corrupt system of crony capitalism, in which businesses succeed not through competitive merit but through government connections and favoritism such as tax breaks, subsidies and other preferential treatment.

For many people, the way big banks escaped the financial crisis with their profits intact (and often enhanced) epitomized American-style crony capitalism. Neither party has had the courage to confront it, for fear of losing campaign contributions and political power.

. . . .

The battle against crony capitalism is foremost a battle against anti-competitive, monopolistic corporations. Antitrust regulation should thus be extended to the political consequences of mergers. When companies become disproportionately big, they become disproportionately powerful, and as we have seen, their influence distorts the political system.

In no sector is this truer than in finance, where consolidation has made banks "too big to fail" and too powerful to combat. A reinstitution of the separation between commercial and investment banking, along the lines of the old Glass-Steagall Act (repealed in 1999), would help contain this excessive power.

It's worth keeping in mind that the patriots who threw English tea into Boston Harbor in 1773 were not revolting against higher taxes (the Tea Act, in fact, lowered the price of tea legally imported in America) but against the privileges granted to the British East India Co.. The American Revolution was a battle for political rights, but it was also a battle for economic freedom — and against an 18th century form of crony capitalism.

Corrupt arrangements of this kind have unfortunately endured to the present day, and their abuses finally sparked protest movements from the right and the left. The two political parties ignore these movements at their peril.

Update on Sunday, July 8, 2012 at 05:56PM by Skeptic

Priorities USA Action, a superpac supporting Obama's reelection, has assigned itself the task of defining Romney in a negative way. After rejecting "flip-flopper," "right wing extremist ideolog," and other approaches, they decided to define Romney as an out-of-touch super-rich elitist.  As reported in the NYT Magazine--

Obama’s opponent was not an ideologue per se, the Priorities team decided, but instead someone who knows and cares only about wealthy Americans. Burton describes the distinction as “a top/bottom rather than left/right approach” — also known in Republican circles as class warfare.

Update on Sunday, August 2, 2015 at 02:46PM by Skeptic

Robert Reich explains it in similar terms here, four years later.  He says this explains the popularity of both Donald Trump and Bernie Sanders.  He predicts that neither will become President this year--

But the revolt against the ruling class won’t end with the 2016 election, regardless. 

Which means the ruling class will have to change the way it rules America. Or it won’t rule too much longer.

Update on Monday, May 16, 2016 at 09:52AM by Skeptic

Rick Smith develops the same top-bottom model here. 

House Speaker Paul Ryan and establishment Republicans like Mitt Romney, and the Bush family seek to cast the battle for the soul of the Republican Party as an urgent rescue of true conservatism, the ideology of the Right. The Democratic establishment vocally fears that Senator Sanders will drag their party too far Left. But at its core, the power struggle in both parties is over control, over who will determine America’s policy agenda  – the party establishment or a disenchanted and now rebellious middle class.

Update on Saturday, May 28, 2016 at 03:11PM by Skeptic

A Salon article criticizes the various explanations given by other pundits for why Trump and Sanders have so much suppport and concludes elites on the left and the right simply detest the underclass. 

The Democratic Party has experienced two major left-wing revolts in the past four decades. The first was led by Jesse Jackson, who mobilized from a strong black base and tried but mostly failed to reach out to white workers. This year came Sanders, who started from a weak white base, expanded it, and tried but ultimately failed to win over enough black workers. There is no reason to think it unlikely that next time a candidacy with more foresight can be built from a youthful and multi-racial  foundation— and then win over large swaths of both constituencies.

“It’s my sisters and brothers who have had their manufacturing jobs taken and pensions cut, who have a perpetual cycle of low wages,” Nina Turner, a former Ohio state senator and prominent black Sanders supporter told Meyerson. “I heard it from the white middle class, too…A white working-class man has the same concerns as a black working-class man.”

And this, I think, is what explains the elite liberal anxiety. If the Jackson and Sanders coalitions can join forces, the liberal elite become politically expendable. But insulting the white working class or trying to render it invisible won’t make it disappear.

Update on Monday, April 23, 2018 at 10:38AM by Skeptic

In his NYT op ed today, David Leonhardt makes a good case for seeing the political world divided top-bottom over economics while social issues are still left-right. 

Update on Tuesday, May 28, 2019 at 01:53PM by Skeptic

It turns out the "horseshoe theory" was first articulated no later than the Weimar Republic, and has been used in writings by others since this post.  "Proponents of Horseshoe Theory argue that the extreme left and the extreme right are closer to each other than either is to the political center."  Wikipedia

Great Wealth and Great Political Power

Justice Louis D. Brandeis said, “We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can't have both.”  Which of these poles is America nearest now?  The 400 wealthiest Americans have more wealth than the bottom 60 percent of Americans combined.  This week, Obama addressed a room full of 450 super donors who will each raise at least $350,000 for his reelection, for a total of over $157 million. 

Most Read Realitybase Posts in February

The American Dream died in February 1973 (with graphs from multiple sources showing stagnation of inflation-adjusted middle class incomes since the 1970s after strong and steady post-WWII growth)

The Citigroup Plutonomy Memos (with key quotations from documents that are being disappeared)

One chart refutes three myths about US foreign trade. (about Smoot-Hawley, the post-WWII export "boom," and "self-balancing" trade)

US job creation has been declining since April 2000 and is now in freefall. (features a dramatic graph)

Comparative Advantage—The Unicorn of Free Trade (a collection of sources and analyses demonstrating that the assumptions of classic Ricardian theory rarely if ever align with real-world conditions)

The Recession is Coming! The Recession is Coming! (December 2007 post with charts showing America's middle class had already been in recession for 7 years and asking if we really care about them)

More and better education is good but is no solution to our jobs and inequity problems. (for decades we've had way too many college grads for the jobs available—with stats showing over half of BAs under 25 and a third of those 25-29 working in low-skill jobs, plus links to supporting posts and articles)

The US trade deficit is tribute paid to foreigners. And it's big. (Nobel laureates Paul Samuelson and Paul Krugman and other prominent economists including Dani Rodrik, Alan Blinder, Martin Wolf, Larry Summers, Joseph Stiglitz, Dean Baker, and even Alan Greenspan have said that the US middle class is net worse off as a result of persistent trade deficits averaging 3% of GDP.)

Cheese heads go better with Koch?

The pending effort of Wisconsin's governor and majority-GOP legislature to bust the the public employee unions has overshadowed the authority in the same bill to sell off, or contract for the operation of, state-owned energy facilities without competitive bids, reviews by the Wisconsin public service commission, appraisals, or any other protections of the public financial interest.  Even the former Soviet Union wasn't this sleazy when it sold out to its crony capitalists.  From Mike Konczal's report (emphasis his): 

16.896 Sale or contractual operation of state−owned heating, cooling, and power plants. (1) Notwithstanding ss. 13.48 (14) (am) and 16.705 (1), the department may sell any state−owned heating, cooling, and power plant or may contract with a private entity for the operation of any such plant, with or without solicitation of bids, for any amount that the department determines to be in the best interest of the state. Notwithstanding ss. 196.49 and 196.80, no approval or certification of the public service commission is necessary for a public utility to purchase, or contract for the operation of, such a plant, and any such purchase is considered to be in the public interest and to comply with the criteria for certification of a project under s. 196.49 (3) (b).

Konczal then quotes from his friend Ed at ginandtacos.com:

If this isn’t the best summary of the goals of modern conservatism, I don’t know what is. It’s like a highlight reel of all of the tomahawk dunks of neo-Gilded Age corporatism: privatization, no-bid contracts, deregulation, and naked cronyism. Extra bonus points for the explicit effort to legally redefine the term “public interest” as “whatever the energy industry lobbyists we appoint to these unelected bureaucratic positions say it is.”

In case it isn’t clear where the naked cronyism comes in, remember which large, politically active private interest loves buying up power plants and already has considerable interests in Wisconsin. Then consider their demonstrated eagerness to help Mr. Walker get elected and bus in carpetbaggers to have a sad little pro-Mubarak style “rally” in his honor. There are dots to be connected here, but doing so might not be in the public interest.

Who do Ed's links go to?  Koch Industies. 

Update on Tuesday, February 22, 2011 at 07:36AM by Skeptic

Yves Smith makes the important point that privatizing infrastructure is a terrible idea even if there are no sleazy crony deals. It mortgages our children's future just as surely as government borrowing. Proceeds of such sales may be completely spent within the first year, and then in every future year the government has to find more cash to pay for the use of the sold asset or its output.  Also, the government is at the mercy of the private owner to make new investments that may be needed, keep up with maintenance, and otherwise operate appropriately. This is the government equivalent of burning the furniture to keep the house warm--it is the last desperate act before the occupants freeze to death. 

The invisible hand takes care of economists who support free markets.

The movie Inside Job is unkind to supposedly neutral economists who take frequently large and frequently undisclosed sums of money from moneyed interests favored by their writings and utterances.  Edward Fullbrook put up some juicy quotes from reviewers here, for example this one from Sean O'Grady in The Sunday Independent:

Yet the most pathetic and fascinating individuals in this film are the economists, whose uncomfortable links with private enterprise and the banks are excruciatingly dragged out of them. Fingering them is a novelty, and they come off badly. Especially enjoyable is a tetchy exchange with Glenn Hubbard, former economic adviser to George W Bush, and current dean of Columbia University Business School. No, he won’t tell us his outside earnings.

Equally relishable is the spectacle of Frederic Mishkin, a professor at Columbia and former member of the US Federal Reserve, looking mortified about the $124,000 he was paid by the Icelandic chamber of commerce to write a paper extolling the stability of their financial system. But best of all is John Campbell, honorary fellow of Oxford University’s Corpus Christi College and chair of the Harvard Department of Economics, who ends up more flummoxed than any mere academic has a right to be.

In comments, noted heterodox economist Paul Davidson relates this bit of personal history (I fixed a few typos):

As someone who has been arguing against them since 1960 when I published my first article in the AER; and in the 1970s when [as] a member of Brookings Economic Panel I was vociferious—and I learned that I was to be ignored.

For example, when I applied for an NSF [National Science Foundation] grant (in 1980) to do a research project on changing the international payments system. My project was rejected by all the inside NSF peers. One even wrote on his rejection report paper that “Davidson has been successful in publishing his research. But he marches to a different drummer and therefore should raise his own money and not ask for a grant from OUR MONEY” [emphasis added by Davidson]. This rejection is filed in the Duke University library archives along with my other professional correspondence, etc.–-under a Duke library project to collect the papers, correspondence, etc of many economists!!

Krugman-Einstein Trade Theory

How did we miss this?  Nobelist in international trade theory, Paul Krugman, has published a paper laying out a theory of interstellar trade that deals, inter alia, with the difficulties of general relativity. Hat tip to Steve Keen, who posts some key excerpts here (the most accessible way to start reading it) and wonders if possibly Krugman is trying to embarrass somebody. 

Chu trying again to get DOE out of hydrogen research.

In a preview of Obama's 2012 budget proposal, DOE Secretary Chu announced that "the Department is reducing funding for the hydrogen technology program by more than 41 percent, or almost $70 million, in order to focus on technologies deployable at large scale in the near term." In the past Chu has explained why hydrogen has poor prospects for being useful in the energy mix and is probably a technological dead end as a transportation fuel. In fact, in the quotation below, he says becoming a saint would require fewer miracles.

Joe Romm, who once headed the DOE research funding office and has written about the problems in his book The Hype about Hydrogen and extensively on his ClimateProgress blog, has posted on this again today and included a link to an interview of Chu by Technology Review in May 2009, from which the following quotation is taken:  

TR: It used to be thought, five to eight years ago, that hydrogen was the great answer for the future of transportation. The mood has shifted. What have we learned from this?

SC: I think, well, among some people it hasn't really shifted [laughs]. I think there was great enthusiasm in some quarters, but I always was somewhat skeptical of it because, right now, the way we get hydrogen primarily is from reforming [natural] gas. That's not an ideal source of hydrogen. You're giving away some of the energy content of natural gas, which is a very valuable fuel. So that's one problem. The other problem is, if it's for transportation, we don't have a good storage mechanism yet. Compressed hydrogen is the best mechanism [but it requires] a large volume. We haven't figured out how to store it with high density. What else? The fuel cells aren't there yet, and the distribution infrastructure isn't there yet. So you have four things that have to happen all at once. And so it always looked like it was going to be [a technology for] the distant future. In order to get significant deployment, you need four significant technological breakthroughs. That makes it unlikely.

TR: So this is an example, perhaps, of picking a technology prematurely. Is there anything we've learned from that in terms of future policy?

SC: I wasn't there when they started making this [decision]. I'm not sure it was deeply understood what was required. Now, having said that, I think that hydrogen could be effectively a "battery" in the sense that suppose you had a way of using excess electricity--let's say a nuclear plant at night, or solar or wind excess capacity, and there was an efficient electrolysis way of turning that into hydrogen, and then we have stationary fuel cells. It could effectively be a battery of sorts. You take a certain form of energy and convert it to hydrogen, and then convert it back [into electricity]. You don't have the distribution problem, you don't have the weight problem. [Editor's note: Storage tanks can be heavy.] In certain applications, you don't need as many miracles for it to happen. If you need four miracles, that's unlikely: saints only need three miracles [laughs].

The last time Obama and Chu tried to cut R&D funding for hydrogen, Congress wouldn't let them. 

How far from Mu*barak to Barack?

After 18 days of massive street demonstrations, yesterday Egyptian president Mubarak abdicated and left the military in charge. Political power has long been highly concentrated in the hands of Egyptian elites, and the young, middle class, and working class demonstrators used the only political tools apparently available to them. Meanwhile, elites in America are consolidating their political power with their economic power, leaving non-elite Americans more and more impotent to make government respond to popular will. As just one example, here's somthing 86% of Americans agree on but our elites are blocking.

Bob Herbert raises the question whether non-elite Americans now have, or soon will have, only Egyptian-type remedies. If so, I doubt that Americans, who are accustomed to thinking they are entitled to effective popular control over their governments and who took to the streets in the Great Depression and during the 1960s, will wait as long as the Egyptians did. Maybe the widespread extreme rhetoric we decry as "uncivil" and harmful to the political process accurately reflects increasing acceptance of extreme ideas. 

From Herbert's op ed:

As the throngs celebrated in Cairo, I couldn't help wondering about what is happening to democracy here in the United States. I think it's on the ropes. We're in serious danger of becoming a democracy in name only.

While millions of ordinary Americans are struggling with unemployment and declining standards of living, the levers of real power have been all but completely commandeered by the financial and corporate elite. It doesn't really matter what ordinary people want. The wealthy call the tune, and the politicians dance.

. . . .

In an Op-Ed article in The Times at the end of January, Senator John Kerry said that the Egyptian people "have made clear they will settle for nothing less than greater democracy and more economic opportunities." Americans are being asked to swallow exactly the opposite. In the mad rush to privatization over the past few decades, democracy itself was put up for sale, and the rich were the only ones who could afford it.

. . . .

As Jacob Hacker and Paul Pierson wrote in their book, "Winner-Take-All Politics": "Step by step and debate by debate, America's public officials have rewritten the rules of American politics and the American economy in ways that have benefited the few at the expense of the many."

. . . .

The Egyptians want to establish a viable democracy, and that's a long, hard road. Americans are in the mind-bogglingly self-destructive process of letting a real democracy slip away.

I had lunch with the historian Howard Zinn just a few weeks before he died in January 2010. He was chagrined about the state of affairs in the U.S. but not at all daunted. "If there is going to be change," he said, "real change, it will have to work its way from the bottom up, from the people themselves."

_______________

* "The word "mu" is actually from Chinese, meaning "nothing"; it is used in mainstream Japanese in that sense."

Update on Tuesday, March 22, 2011 at 08:36AM by Skeptic

Matthew C. Klein, a 24 year old research associate at the Council on Foreign Relations, raises these same issues in a NYT op ed in which he concludes:

As governments across the developed world balance their budgets, I fear that the young will bear the brunt of the pain: taxes on workers will be raised and spending on education will be cut while mortgage subsidies and entitlements for the elderly are untouchable. At least the Saudis and Kuwaitis are trying to bribe their younger subjects.

The uprisings in the Middle East and North Africa are a warning for the developed world. Even if an Egyptian-style revolution breaking out in a rich democracy is unthinkable, it is easy to recognize the frustration of a generation that lacks opportunity. Indeed, the “desperate generation” in Portugal got tens of thousands of people to participate in nationwide protests on March 12. How much longer until the rest of the rich world follows their lead?

This will remain unthinkable in America until the moment it happens--and for a long while after that too.

More and better education is good but is no solution to our jobs and inequity problems.

The current issue of American Prospect has a good article by Lawrence Mishel of Economic Policy Institute, The Overselling of Education: We need a better-educated citizenry, but the cure for increasing inequality lies elsewhere. He concludes:

The nation's productivity increased by 80 percent from 1979 to 2009, and good productivity growth can be expected in the future. It is not education gaps that have caused nearly all of those gains to be captured by the top but rather economic policies that redistributed economic and political power.

Mishel explains why our economic and political elites, who have benefited greatly from the policies of the last three decades, want to focus on inadequate education as the supposed cause of our pervasive economic problems and better education as the solution: They don't want attention focused on the real causes of rising economic inequity, grossly inadequate job creation, declining class mobility, decline in prosperity from one generation to the next, and unaffordability of infrastructure and other public goods. I reached a similar conclusion in May 2008 in Education is doing a lot less for the economy than we all thought it would.

Although Mishel makes the arguments well, he didn't have room for the type of supporting data that I included in my post and its addenda where, for example, I documented the following contradictions to the education-as-panacea meme (if that's what it is). Click here for the discussions and links to sources:

In recent decades, the US has not had a shortage of college-educated workers for jobs requiring a college education. At least half of college graduates under 25 are working in jobs that do not require a college degree. This continues a downward trend from a shameful 58% working in jobs requiring college degrees [amended 3/3/11] in the supposedly-tight labor market of 2000. According to OECD, 33% of US college graduates ages 25-29 are in low skill jobs.*

Several studies reported that many college graduates end up in jobs for which college training is not required.  For example, 12% of mail carriers, a quarter of travel agents and retail-sales supervisors, a third of flight attendants, and nearly half of aerobics instructors have B.A. degrees. 

Only 2 of the 10 job categories projected to grow the fastest require college degrees. 

The income gap between high school graduates and college graduates is not widening because incomes of college graduates have accelerated through the last 2 or 3 decades. To the contrary, average incomes of recent college graduates have risen only modestly and not at all since 2001. The widening gap is because the incomes of high school graduates grew at a much slower pace or not at all.

From 2000 to 2007, those with professional degrees (J.D., M.D., MBA, etc.) were the only educational group for which median incomes rose—even Ph.D.s lost ground. 

States and nations that have a high percentage of college educated people do not necessarily have faster economic growth, and at least one study found a negative correlation. 

_____

*Only two OECD nations have higher rates of underutilization of college educations: Spain (44%) and Canada (37%).

Update on Tuesday, March 6, 2018 at 02:58PM by Skeptic

The conventional wisdom continues to be that people without college degrees earn less because they lack the necessary skills; this is true, it is said, because advancing technology increasingly requires skills one cannot get in high school or on the job; therefore, everybody should go to college, get the skills they need, and get better jobs.  Jared Bernstein takes data from the Wall Street Journal and elsewhere to show convincingly that the "skills gap" has not increased since 2000.  Importantly, the earnings gap between HS and college grads has not increased at all in that time.  So, if these is an increasing skills gap, you have to ask why there is not an increasing earnings gap.  Lots to be said for universal college education, but that would not solve, or even mitigate, our income inequality problem. 

Does the US have a productivity problem?

Tyler Cowen says Innovation Is Doing Little for Incomes and speculates as to why that's so.  That generated a good discussion here on Mark Thoma's blog.  The following graph of annual percentage changes is presented to make it accessible to that discussion. 

Most Read Realitybase Posts in January

Recent posts:

"Only the little people pay taxes." (strictly domestic US companies pay nominal high federal tax rates while MNCs effectively pay little or nothing)

Obama names fox to head advisory panel on hen house security. (GE's Immelt, a leading offshorer of jobs and proponent of lower US wages, appointed to head panel on jobs and competitiveness)

Did decline of the American middle class "just happen" or is it political? (Alan Blinder says it just happened, but the work of Jacob Hacker, Paul Pierson, Kevin Phillips, et al. demonstrate it's political)

Oldies but goodies:

The Citigroup Plutonomy Memos (key quotations from documents that are being disappeared)

US job creation has been declining since April 2000 and is now in freefall. (features a dramatic graph)

The American Dream died in February 1973 (includes graphs from multiple sources all showing stagnation of inflation-adjusted middle class incomes since the 1970s after steady and substantial post-WWII growth)

The Dysfunction and Corruption of Our Healthcare System, Its Damage to the National Economy and other Basic Healthcare Matters (Guest Post) (describing a system that is destroying the American business economy and our ability to compete globally, which violates fundamental insurance risk principles, and which has inherent conflicts of interest that prevent quality national health care delivery and cost efficiency, and proposing a solution)

One chart refutes three myths about US foreign trade. (about Smoot-Hawley, the post-WWII export "boom," and "self-balancing" trade)

Comparative Advantage—The Unicorn of Free Trade (a collection of sources and analyses demonstrating that the assumptions of classic Ricardian theory rarely if ever align with real-world conditions)

Obama’s SOTU address may make his re-election more likely but leaves the economy, jobs, and wages to fend for themselves.

Obama needs two things to get re-elected: A much improved economic situation (especially employment) and the financial and political support of those big industries that backed him and traditionally back Democrats (Wall Street, media, entertainment, and high tech). He's probably concluded, rightly I think, that there's nothing he can do between now and November 2012 to fix the economy because nothing that might work can get through the Congress. So he's apparently decided to solidify the support of Big Business and just hope for the best on employment, wages, and the economy in general.

To this end, in his State of the Union Address last evening he proposed lowering corporate tax rates and fixing regulations that put "an unnecessary burden on businesses." Most importantly, he reaffirmed as his own premise the MNC/Wall Street doctrine that globalization must continue, that trade liberalization should be accelerated, that exports can be doubled, and that US workers must compete head to head with the rest of the world including low-wage developing nations like China. "The competition for jobs is real," he said.

But his plan for how the US will win the competition is the same as it's been for three decades:

We know what it takes to compete for the jobs and industries of our time.  We need to out-innovate, out-educate, and out-build the rest of the world.  We have to make America the best place on Earth to do business.  We need to take responsibility for our deficit and reform our government.  That's how our people will prosper.  That's how we'll win the future. 

Like second marriages, this is a triumph of hope over experience. We did not lose jobs to Chindia because they out-innovated us, but they are rapidly catching up in innovation. We did not lose jobs to Chindia because their people are better educated—they are not better educated, but they are catching up. We did not lose jobs to Chindia because they had better infrastructure, but they are catching up. We lost jobs to Chindia because labor there is much cheaper and more docile, because health, safety, environmental, and labor regulations do not exist or are not vigorously enforced, because of extraordinarily generous subsidies, and because China in particular requires foreign companies to transfer technology and higher-skill jobs as a precondition to Chinese market access.

The truth is that, while better education, innovation, infrastructure, quality, and fiscal stability can't hurt American competiveness, the major competitive battleground is always price. If the US is going to compete successfully with Chindia, wages and salaries for the bottom 80-90% of Americans must continue to come down, purely domestic businesses must continue to suffer from shrinking demand, and governments at all levels will have shrinking tax revenues. Only MNCs, Wall Street, the owners, managers, and servants of capital, and developing nations benefit from this. I believe Obama knows this, but of course he can't say it if he hopes to be re-elected.

Obama names fox to head advisory panel on hen house security.

From Bloomberg today:

President Barack Obama will name Jeffrey Immelt, General Electric Co.'s chief executive officer, to head his outside panel of economic advisers, replacing former Federal Reserve Chairman Paul Volcker.

Immelt wrote in an op-ed today in the Washington Post that Obama asked him to take the helm of the newly renamed President's Council on Jobs and Competitiveness. The group will reach out to labor and business leaders to serve "as a catalyst for action," he wrote.

Immelt, 54, is an original member of the panel, which was formed as the President's Economic Recovery Advisory Board in February 2009. GE's CEO since 2001, he heads the world's biggest maker of jet engines, medical-imaging equipment and power-plant turbines and gives the White House a corporate heavyweight to help burnish Obama's pro-business credentials.

Multinational corporations, GE foremost among them, have led the globalization movement that has caused US middle class incomes to stagnate and a rapid decline in the percentage of American adults who are working. Immelt has said that US wage levels must continue to decline in order for US manufacturing to be "competitive" with imports.

In Obama Administration happy talk about middle class incomes is not supported by any strategy or plan I said this:

The clear implication [of a then recent Larry Summers speech] is that it is Obama Administration policy to bring middle-class income growth rates up to, or at least nearer to, the growth rates enjoyed by the top few percent. (That they have been lagging since about 1973 is documented here and here.)  Another clear implication is that exporting more and reducing imports of consumer goods is the route to this goal. I suggest the Administration has no plan to achieve either of these goals and that mushy thinking and immense political obstacles stand in the way.

At present, MNCs are the predators, and strictly domestic businesses and labor are the prey.  Making one of the chief beneficiaries of the status quo his chief advisor on such matters pretty well guarantees there will be no important relevant policy changes in this Administration, doesn't it?

Update on Friday, January 21, 2011 at 03:50PM by Skeptic

Many others have had generally the same reaction.  Tobin Harshaw surveys the blogosphere in Obama’s Corporate Makeover.  Several opinions are published in Another Big Kiss for Big Business? Volcker Out, Immelt In at New Deal 2.0. 

Update on Saturday, January 22, 2011 at 07:40AM by Skeptic

As Robert Reich says, hiring more people in the US is likely to be inconsistent with the profit motives of MNCs. Therefore, on the question of US job creation, they have potential and maybe inherent conflicts of interest that ought to be obvious to Obama and the rest of us.

In case you haven’t noticed, the profits of American corporations are soaring. That’s largely because sales from their foreign-based operations are booming (especially in China, Brazil, and India). It’s also because they’ve cut their costs of production in the US (see the first item above). American-based companies have become global — making and selling all over the world — so their profitability has little or nothing to do with the number and quality of jobs here in the US. In fact, it may be inversely related.

Update on Thursday, January 27, 2011 at 10:27AM by Skeptic

Philip Delves Broughton looks at GE's job destruction record using data from GE. Includes a graph. Hat tip to David Ruccio at Real-World Economic Review Blog.

Update on Thursday, February 10, 2011 at 09:21AM by Skeptic

Mike Konczal points out that growth of the US economy and employment is something citizens want but is not a priority for multinational businesses. 

I find it funny that it’s only been a few days and already Cato people like Dan Ikenson are writing non-ironic headlines like “Obama Hasn’t Given Enough Ground Yet To Business To Spark Growth.” We do understand that businesses don’t want growth, right? They want to consolidate, handicap their rivals, rent-seek and guarantee profit streams. Remember that right now fewer small businesses are opening, and they are more likely to fail when they do. This is a great deal for incumbent businesses.

The last time we had a problem this big--in the Great Depression--General Electric proposed and the Chamber of Commerce endorsed the Swope Plan to feather their own nests.

His Swope Plan is considered one of the main documents for the idea of an associationalist economy, or what we would now call a corporatist economy. Let businesses collude and form price-fixing organizations, and in response they’ll hire more workers and even provide a social safety net for those workers. The government will need to suspend all anti-trust laws first, obviously, before all the sweet growth and jobs show up.

Robert Reich: The Real Economic Lesson China Could Teach Us

Republished below with permission is a post from Robert Reich's blog, www.robertreich.org. His latest book AFTERSHOCK is now available.

Highlighting today's summit between Chinese President Hu Jintao and President Obama is China's agreement to buy $45 billion of American exports. The President says this will create more American jobs. That's not exactly right. It will create more profits for American companies but relatively few new jobs.

Nearly half of the deal is for two hundred Boeing aircraft whose parts come from all over the world. The rest involves agricultural commodities that don't require much U.S. labor because American agribusiness is highly automated, and chemical and high-tech goods that are even less labor-intensive.

General Electric and other companies are signing up for deals with China involving energy and aviation manufacturing. But much of this will be done in China. GE's joint venture with Aviation Industries of China, to develop new integrated avionics systems (which presumably will find their way into Boeing planes) will be based in Shanghai.

Here's the real story. China has a national economic strategy designed to make it, and its people, the economic powerhouse of the future. They're intent on learning as much as they can from us and then going beyond us (as they already are in solar and electric-battery technologies). They're pouring money into basic research and education at all levels. In the last 12 years they've built twenty universities, each designed to be the equivalent of MIT.

Their goal is to make China Number one in power and prestige, and in high-wage jobs.

The United States doesn't have a national economic strategy. Instead, we have global corporations that happen to be headquartered here. Their goal is to maximize profits, wherever they can make the most money. They'll make things in America for export to China when that's most profitable; they'll make it in China and give the Chinese their know-how when that's the best way to boost the bottom line. They'll utilize research and development wherever around the world it will deliver the biggest bang for the dollar.

Meanwhile, Republicans and deficit hawks are cutting publicly-supported R&D. And cash-starved states are cutting K-12 education, and slashing the budgets of their great public research universities, such as the one I teach at.

No contest.

And no hyped-up trade deals are going to change this fundamental imbalance.

Some say all we need to do is put our currencies in better balance. But even if the Chinese upped the value of the yuan and the US (courtesy of the Fed) reduced the value of the dollar – so everything they bought from us was cheaper and everything we bought from them, far more expensive – they'd still win. We'd have more jobs than now because our exports would be more attractive in world markets, but those jobs would summon fewer goods from around the world. In other words, we'd be poorer.

Let's get real. We're losing ground. The U.S. labor force is now smaller than it was before the Great Recession began and most American families are worse off. December's unemployment rate dropped to 9.4 percent from 9.8 percent but almost half the improvement was due to 260,000 people dropping out of the labor force.

Average hourly wages grew by three cents in December; weekly wages, by $1.02. And almost all the gains in income occurred at the top. The major assets of rich Americans are financial – whose values have increased as corporate profits have grown. The major assets of the middle-class asset are their homes, whose values continue to drop.

The President now says the answer is to help American business. "We can't succeed unless American businesses succeed," he said recently. "And I'm going to do everything I can to promote their ability to grow and prosper."

But the prosperity of America's big businesses has become disconnected from the prosperity of most Americans.

Republicans say the answer is to reduce the size and scope of government. But without a government that's focused on more and better jobs, we're left with global corporations that don't give a damn.

China is eating our lunch. Why? It has a national economic strategy designed to create more and better jobs. We have global corporations designed to make money for shareholders.

The plan is for US and Chinese incomes to continue “converging.”

The US has had a decade of declining rates of employment, stagnant wages, and flight of talent and innovation. Meanwhile, China enjoyed the opposite. In the bilateral talks going on Washington this week, the US intends to push (again, for the umpteenth time) for China to phase out its FOREX interventions that keep the value of its renminbi low versus the dollar because, we say, that gives Chinese companies and workers an unfair price advantage versus US companies and workers in foreign trade. This is not the only mercantilist policy that China has pursued and may not even be the one most damaging to US interests, but it has gotten the most attention. Yesterday, The News Hour broadcast a Paul Solman interview with two professors who explain the Chinese position on the currency issue.

Professor Geng Xiao, Director of the East Asia Global Center in Beijing, and an honorary Professor at the University of Hong Kong, explains the Chinese view that there is an ongoing natural convergence between the US and Chinese economies in terms of incomes, wage rates, employment rates, growth, inflation, etc.:

GENG XIAO: Basically, the Chinese income is rising. Chinese price levers are rising. And the U.S. income is stagnating, right? So the two are converging. And that's what we expect. And this is what will happen, no matter what the Chinese government wants or not. So, if we just have a little bit more patience, everything will actually fall into places.

Professor Yasheng Huang of the MIT Sloan School of Management says the only problem is that Americans have a borrow-and-spend mentality that would persist no matter what the exchange rate is. American consumers must change their profligate ways, and there is no good reason for China to make any policy change.

PAUL SOLMAN: So, if China's goods were more expensive than they currently are, you think the United States would still be borrowing money?

YASHENG HUANG: From India, from Vietnam, from Brazil. I'm not saying I agree with the Chinese completely. All I'm saying is that it is very difficult to make the argument with the Chinese and say, you do something about your exchange rate, but, by the way, we can spend the way we want, right? So, that's a -- that's not a winning argument with anybody.

It isn't only the Chinese who think US wages should decline to the level of rising Chinese wages. Neoclassical economists see the world this way too and see the solution to chronic US unemployment, trade deficits, and the hollowing out of the middle class as still lower US wage rates. As long ago as 2008, top Democratic economic policy guru Robert Rubin was reported to be troubled by the human effects of convergence, but not troubled enough to suggest US policy changes.

How much does the US wage level need to decline according to this view? Edward Hadas, Martin Hutchinson, and Anthony Currie say:

American workers are overpaid, relative to equally productive employees elsewhere doing the same work. If the global economy is to get into balance, that gap must close. . . .  It's possible to run the numbers to show that American manufacturing workers should take average real wage cuts of as much as 20 percent to get into global balance. 

The fact that our US government keeps moving in this direction with bipartisan support makes my blood boil.