October 2017 – Sheila Kennedy

Trading On Myths

There is a relatively heated policy debate about the relative impacts of trade and automation on job creation. It’s an argument with rather obvious implications for policymaking, not to mention politics: one of Trump’s most successful campaign themes (a deviation from a longstanding GOP position) was his promise to “renegotiate” or terminate the trade agreements to which the U.S. was a party.

That attack on trade pleased many working-class voters who were–and remain–convinced that changes to America’s workforce and the disappearance of well-paid manufacturing jobs can be attributed to those trade agreements. The reality is more nuanced, to put it mildly.

Whatever the relative impact of trade vis a vis automation, Trump is dangerously wrong about NAFTA, as the Brookings Institution has recently documented. (And yes, I know he’s “dangerously wrong” about pretty much everything, but this post is a discussion of trade policy.)

The title of the post is fairly self-explanatory: The trade deficit isn’t destroying jobs, but tearing up NAFTA will.

Here’s the reality: All advanced economies, regardless of changes in their trade balances, lost manufacturing jobs. The figure below shows the change in the share of workers in industry (which includes mostly manufacturing) versus the change in the trade balance as a share of total output for all Organization for Economic Cooperation and Development countries between 1995 and 2010. The data point for the U.S., indeed, fits the White House narrative: During that period, the U.S. lost manufacturing jobs while its trade balance deteriorated (as all other countries in the lower left panel). However, that is not the story for most countries. In fact, Mexico increased its share of workers in manufacturing even though its trade balance also deteriorated during that same period. But most, importantly, most countries—in the lower right panel of the figure—lost jobs in manufacturing even if their trade balance improved. In short, the White House is trying to sell a fallacy that the trade deficit has destroyed American jobs.

Other research suggests that approximately 100,000 net job losses are attributable to NAFTA; that’s equivalent to about 0.1 percent of the U.S. labor force. On the plus side of the ledger, NAFTA has allowed U.S. companies to access new markets for their exports and reduce their costs of production. That has created more jobs, not fewer.

As the author of this report points out, there are better ways to help American workers–a more robust safety net facilitating transition to other jobs, or to early retirement, for example. We can argue about the approaches most likely to be helpful; what we shouldn’t be doing is basing policy on inaccurate data and (sorry!) “fake facts.”

After this round of negotiations, the likelihood of NAFTA overall surviving this process keeps decreasing. The U.S. government is walking on thin ice by keeping their focus on wrong facts. And if NAFTA collapses, it will bring down those who the administration is allegedly trying to protect: American workers.

TradeFigure

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Women Are Always The Ones Cleaning Up….

The revelations about Harvey Weinstein–not to mention Bill Cosby, Donald Trump and a growing cast of other characters–have seemingly opened floodgates of pent-up female anger. The #metoo hashtag on social media, and the daily reports of confessions and accusations have been accompanied by a veritable tsunami of rage and recrimination.

Sex sells newspapers (or as we say these days, motivates clicks). But the attention paid to the problem isn’t just a way to sell media; the revelations are clearly newsworthy, and the anger is justifiable. Most women–especially those of us who entered the workforce as so-called “pioneers”– can relate. We all have our stories, and I’m not exempt. On the other hand, we’ll be making a big mistake if our focus on sexual predators and harassment stories distracts from the emergence of another important wave of bipartisan feminine activism.

I think it is fair to say that a huge number of American women saw the 2016 election results as an existential threat to women’s equality and the well-being of our children and grandchildren.

The Women’s March was the first signal that–like Howard Beale in “Network”–we were “mad as hell and not going to take it anymore.” It was just the beginning.

Last weekend, I moderated a couple of panels in a day-and-a-half training event called “Ready to Run.” It was geared to women interested in running for public office at any level, and sessions explored the basics of a political campaign: research, fundraising, messaging. A couple hundred women from all over Indiana filled the ballroom at Hine Hall on the IUPUI campus: they were Republicans and Democrats and Independents, white and black and brown, Muslim, Christian and Jewish. Most had never run for or held political office–or thought they ever would.

But they were thinking about it now. Seriously.

What struck me about the attendees and their interactions and questions was a repeated emphasis on what they wanted to accomplish: a government characterized by civility and integrity–two words I heard over and over.

There’s an old saying in political circles to the effect that men run for office because they want to be someone, and women run because they want to do something. That’s obviously an unfair generalization, but the women I met at Ready to Run (like those working through Women4Change, one of the day’s sponsors) clearly want to make government work again. They understand government’s importance; they also understand that making government work properly will require research and knowledge–a familiarity with the operations of the agency or branch they propose to join, certainly, but also an understanding of the “big picture.” They are willing to study, to do the work necessary to acquire what I’ve sometimes called “constitutional competence”–a genuine understanding of our American approach to self-government.

Right now in Indiana, women have announced their candidacies for several Congressional seats and a number of legislative ones. Others are considering running for local school boards and city councils. If even a third of the attendees at “Ready to Run” follow through and win offices, we will see some pretty profound changes in Indiana. Even those who lose, however, will elevate the conversation and hold incumbents accountable.

Right now, a lot of women have just had it–both with the sexual predators who make it hard to do our jobs, and with the preening and power-hungry politicians who are more invested in their own importance than in making government work for its citizens. And when women have had it, things change.

It’s like that refrigerator magnet says: When momma ain’t happy, ain’t nobody happy.

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Up In The Air…

Every once in a while, the Indianapolis Star actually carries something we can consider news. (Not often: as I skimmed the paper the other day looking for actual information about the city, municipal and/or state government, area schools, or other coverage that could be classified as news, I came across several sports stories and an article–I kid you not–about a local family being reunited with their lost cat….)

One recent article that was newsworthy raised questions about privatization and a living wage.

The article began by profiling one of the baristas who works at the Indianapolis airport, noting that like most of the airport’s workers, she makes 10.50 an hour, and has to work two jobs in order to make ends meet.

In August, the City-County Council passed a proposal that sets a $13 “living wage” for city and county staff members. There are 365 workers earning $9.13 to $12.98 per hour who work for the city and county that will be eligible for pay increases.

But not everyone who works for the City will see a raise.

Reed, and nearly 100 cashiers, coffee baristas, janitors and service workers at the airport, argue that the city’s recent move to increase municipal workers’ minimum wage to $13 an hour should apply to them, too.

However, because the Indianapolis International Airport — ranked the top airport in the country five-straight years — has outsourced its labor to private companies through public-private partnerships, airport workers will not see those wage increases.

The article noted that airport privatization began with former Republican Indianapolis Mayor Stephen Goldsmith in 1995. Ours was the country’s first full outsourcing of an airport. Goldsmith declined to comment on the Star’s report, but was quoted on the subject from a previous article:

“I wanted to market-test whether a private company that specializes in airport management, with access to worldwide technology and best practices, could produce more customer satisfaction, better airline relationships and more net revenue while holding down increases in passenger enplanement costs,” Goldsmith told Governing Magazine in April.

Goldsmith was a major proponent of what is incorrectly called privatization (real privatization occurs when government simply “sells off” a function to the private sector a la Margaret Thatcher in England, and is thereafter not involved). What we call privatization is really contracting out. Government is still responsible for supplying the service, but rather than employing people directly, it hires companies or organizations whose employees provide it on government’s behalf.

One of the arguments for these arrangements–sometimes called “third-party government”–has been that private companies could do the work more cheaply. More recent research suggests the savings are largely illusory when the costs of negotiating and monitoring the contracts are factored in. (Unlike government, private companies bidding on government contracts also have to pay taxes, which adds to their costs.)

To the extent savings are realized, it’s usually because the private sector employees are paid less than their government counterparts.

The public administration literature suggests that actual experience with contracting has diminished its attractiveness to government agencies. Management problems, loss of institutional competence and other unanticipated consequences have taken the bloom off that particular rose, and many services that were enthusiastically outsourced by proponents like Goldsmith are being brought back “in house.”

That national reevaluation isn’t likely to be much comfort to the underpaid airport workers who are doing public jobs that benefit their communities but not making the same wage that they would make if they were on government’s direct, rather than indirect, payroll.

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The Roads Not Taken

The other day, my husband shared a great cartoon with me: a lecturer was standing by a whiteboard containing a list of actions to combat climate change, most of which would also result in cleaner air and water. A man at the back of the lecture hall is asking “But what if we make the world better and it turns out the scientists were wrong?”

It is difficult to understand opposition to efforts to ameliorate climate change, since most of the measures being proposed are things we ought to be doing anyway. (I do understand why people who make their living from fossil fuels pooh-pooh climate change, and “explain away” the unusual number of unusually destructive hurricanes, not to mention the droughts, the fact that it’s the end of October and in Indiana the trees have barely begun to change color…)

The problem with taking a head in the sand approach–or just making outright war on all environmental protection measures, a la Scott Pruitt–is that it is getting costly. Ignore, if you will, predictions of future crop failures and massive numbers of refugees from no-longer-habitable regions. Let’s just look at current costs and those we can predict with confidence.

Thanks to the unprecedented number and severity of hurricanes, FEMA has already had to ask Congress for billions of extra dollars. To the extent the fires in California were connected to that state’s long drought, we can add the costs of that disaster. Those disasters, however, are small potatoes next to the extra costs incurred on otherwise run-of-the-mill projects as a result of climate change.

Take road construction.

When engineers build roads, they use weather models to decide what kind of pavement can withstand the local climate. Currently, many American engineers use temperature data from 1964 to 1995 to select materials. But the climate is changing.

A recent paper in Nature Climate Change asserts that newer temperature figures are needed to save billions of dollars in unnecessary repairs. Using data from the Bureau of Transportation Statistics, Shane Underwood of Arizona State University and his colleagues show that road engineers have selected materials inappropriate for current temperatures 35 percent of the time over the past two decades.

The researchers concluded that a failure to adapt the engineering to warmer temperatures is adding 3 to 9 percent to the cost of building and maintaining a road over 30 years. Those are tax dollars being wasted at a time American infrastructure is desperately in need of repair and rebuilding.

The research analyzed two potential scenarios, one in which global temperatures rose less than current estimates, and one that reflected current predictions. Their results suggest that somewhere between $13.6 and $35.8 billion in extra or earlier-than-normal repairs will be required for roads now being built if the current predictions are accurate. In the lower-temperature warming model, they calculate annual extra costs of between $0.8 billion and $1.3 billion; in the higher-temperature warming model, they predict annual extra costs between $0.8 billion and $2.1 billion.

Other findings included:

A road built to last 20 years will require repairs after 14 to 17 years under these models.
In some cases, government transportation agencies are paying too much for materials to withstand cold temperatures that do not currently (and perhaps no longer) exist.
Because municipal governments in the United States work on tighter road-maintenance budgets than state and federal transportation departments, the extra financial strain will largely impact cities and towns.

There are undoubtedly other expenses that will be generated by our changing climate–some that we can anticipate, and others that will come as unwelcome surprises. Scientists in a number of fields are investigating likely consequences–everything from the loss of hundreds of insect and animal species to the negative effect on coffee beans.

There will be significant and unpleasant costs to taking the road marked “Science Denial.” Unfortunately, these days–at least, in the United States– that road isn’t the “one less traveled.”

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The World’s Worst Cabinet Is Also Corrupt

In the aftermath of Hurricane Maria, people in Puerto Rico are still suffering. Thousands are drinking polluted water, much of the island (they’re American citizens, President Trump, even though they’re brown) is still without power and many are without food and medicine.

To say that the federal government’s response has been inadequate would be kind.

They may not know how government works or what it’s for, but the Trumpsters sure do know how private “entrepreneurs” can use other people’s misery to make money. As Talking Points Memo (among many others) has recently reported,

A tiny Montana utility company that received a $300 million contract to help restore power to Puerto Rico after its electrical grid was devastated by Hurricane Maria is financed by major Trump donors and run by a CEO friendly with Interior Secretary Ryan Zinke, a series of recent reports has revealed.

The Puerto Rico Electric Power Authority’s granting of the huge contract to Whitefish Energy Holdings, a two-year-old company that reportedly had two full-time employees when the hurricane first hit, was first reported by the Weather Channel last week.

Both the Washington Post and the Daily Beast have offered intriguing–albeit nauseating– details on the company’s investors. The Post noted the “coincidence” that the firm is based in Interior Secretary Ryan Zinke’s hometown and that its CEO, one Andy Techmanski, is a friend of the Interior secretary. The Daily Beast reported that Whitefish’s general partner “maxed out” donations not just to Trump’s primary and general election campaigns, but also to a Trump super PAC.

I’m sure those generous contributions were just “coincidental” too.

Gee, why do you suppose that Whitefish–with all of two employees– was awarded the contract to restore electricity to hundreds of thousands of Puerto Rico residents? Zinke’s office and Techmanski both told reporters for the Post that the Interior secretary “played no role in securing the contract.” (And I have a bridge in Brooklyn I can sell you….)

After news of this “arms length” contract emerged, a number of publications pointed out that the type of work Whitefish will be doing is typically handled through what are called “mutual aid” agreements with other utilities, not by for-profit companies. Again, from Talking Points Memo,

“The fact that there are so many utilities with experience in this and a huge track record of helping each other out, it is at least odd why [the utility] would go to Whitefish,” Susan F. Tierney, a former senior official at the Energy Department told the Post. “I’m scratching my head wondering how it all adds up.”

In addition to Techmanski’s relationship with Zinke, Joe Colonnetta, partner at Whitefish and founder of HBC Investments, the private-equity firm that finances the energy company, is a significant power player in Republican politics, according to the Beast.

Colonetta donated a total of $74,000 towards Trump’s presidential victory and $30,700 to the Republican National Committee, the Beast reported. His wife, Kimberly, separately gave $33,400 to the RNC shortly after Trump’s win, and was photographed with Secretary of State Rex Tillerson and Secretary of Housing and Urban Development Ben Carson during inauguration week, per the report.

Daily Kos was–predictably– less circumspect.

In the midst of the disaster in Puerto Rico, it appears that someone may have engaged in graft as large as the hurricane that hit the island. Like other electrical utilities, the state-owned Puerto Rico Electric Power Authority has multiple mutual-aid agreements with other utilities. It can call on these agreements for help in repairing the power grid in an emergency. These are the same kind of arrangements that allowed utilities in Florida to get power there restored so quickly following the passage of Irma. But even though 79 percent of the island remains without power, PREPA isn’t calling on those agreements.

A constellation of companies, including those controlled by Tesla’s Elon Musk, have offered to work with Puerto Rico to transform the island into a model for the nation using a series of micro-grids, distributed solar, and local storage. The resulting system would be clean, flexible, and resistant to large-scale failure. But, so far at least, none of those companies have the nod to proceed.

Instead, PREPA has awarded $300 million to Whitefish Energy

Before getting this contract, Whitefish’s largest contract was to install a single electrical line less than five miles long. They had a year to do it.

This smells so fishy that even our supine Congress is launching a bipartisan investigation.

Is America great again yet?

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