Bloomberg Takes a Hatchet to Nurses

I was disappointed to see Bloomberg run the following article that superficially looks like objective reporting, but actually is designed to get people mad at nurses working for the State of California. I am sorry, but going after nurses that work in prisons and mental hospitals - especially for something that is not their fault - is just low.

Here is the article, with my comments inserted in [italics in square brackets]:

Million-Dollar Nurses Show California’s Struggle to Cut Payroll

By Michael B. Marois - Dec 16, 2011

California (BCAX) has paid Lina Manglicmot $1.5 million since 2005, an average of $253,530 a year, to work as a prison nurse in the agricultural town of Soledad. [Yes, that is a lot of money. But she is working in a prison. In Soledad. For those unfamiliar with it, Soledad is a small, depressed agricultural/prison community. It is not in the worst part of California, but it is definitely not the best part. The nearest city of significant size is Salinas, a large, depressed agricultural community.]

Manglicmot is one of 42 state nurses who each made more than $1 million in those six years [Why six years? Because it adds up to $1 million?], mostly by tapping overtime [You can “tap” overtime, sort of like tapping a keg? I thought you had to “work” for it.], according to payroll data compiled by Bloomberg News. Together, those nurses collected $47.5 million. In 2008, Manglicmot was paid $331,346, including $211,257 in overtime. [That is a lot of overtime. Why does she work so much overtime? Are they understaffed?]

The extra pay that allows some nurses to triple their regular compensation underscores a broader trend in California, where government workers are paid more than in other states for similar duties [and where it costs more to live than most other states] and civil-service job protections hamper efforts to close budget gaps. [The dysfunction of the legislature has hampered it far more.] Governor Jerry Brown said this week that revenue will fall short of expectations, triggering $1 billion in cuts to school busing, libraries and care for children, the elderly and the disabled, among other programs. [Lina caused that? Bad Lina.]

“California taxpayers should be outraged,” said Lanny Ebenstein, an economics lecturer at the University of California at Santa Barbara and president of the California Center for Public Policy, a research institution critical of public-sector compensation. [It is good that they acknowledge he has an agenda.] “Taxpayers should insist that this is no longer acceptable because what government does is important and it’s important that government run effectively.”

California is home to city managers whose compensation is higher than the governor’s, prison doctors who make more than counterparts elsewhere, Los Angeles firefighters who collect twice the national mean and state workers who reaped $1.7 billion more than their regular salaries last year, from overtime and unused vacation pay to physical-fitness incentives. [Yes, there is too much overtime paid. But much of that is the result of measures designed to look like they save money when they really don’t, like blanket hiring freezes and furloughs.]

Above National Average

Public nurses make far more in California than they do in New York or Texas. Their pay also places them well above the $67,720 national average for registered nurses, according to the U.S. Bureau of Labor statistics.

The highest-paid nurse in New York last year earned $186,909 working in a prison north of Manhattan, according to payroll data from the state comptroller’s office. Seventy-five nurses in California made more than that in 2010, and the top earner was paid $269,810, including $179,800 in overtime. [California probably has more nurses than New York. And again, why is so much overtime needed?]

The director of nursing for the Texas prison system makes $165,000 a year, while rank-and-file registered nurses are paid $68,000 to $72,000, said Owen Murray, vice president of offender health services for the University of Texas Medical Branch. The state’s prison nurses aren’t unionized, and overtime payouts to the penal system’s health-care staff are limited, Murray said. [The Texas penal system is a good example for us to follow?]

‘No Way Possible’

“There might be some overtime opportunities, but it would never be more than a handful of hours in a pay period,” Murray said. “So there is no way possible, even at time-and-a-half, that you would reach the ranges that you are talking about in California.”

An array of union-sought laws and regulations keeps nurses’ pay high in California. A rule limits mandatory overtime, yet doesn’t control how much extra time employees can work voluntarily. California must offer extra hours to state employees first, even when officials estimate that a temporary nurse would be cheaper. The state isn’t allowed to hire new prison nurses to fill in for the 10 percent who are on long-term sick leave. [That is a lot of nurses on long-term sick leave. Maybe because they had to work too much overtime in bad conditions.]

California paid the overtime as the state grappled with more than $100 billion in budget shortfalls since 2008, forcing it to cut spending by 16 percent. The six-year period in which the 42 nurses collected $24.6 million in overtime coincided with the recession that damaged housing markets and curbed tax revenue in California and elsewhere. [No, it does not coincide. The recession started in 2008, not 2005.]

$98.7 Million in Overtime

Last year, the state’s nurses were paid a total of $98.7 million in overtime at one-and-a-half times their normal hourly wage -- an average of $17,692 each. [If a few are getting a lot of overtime, then this shows that most are getting little or none. If you have one person making $1 million and nine people making nothing, the average income is $100,000.] Since 2005, California has paid more than $424 million in overtime for nurses, data obtained from Controller John Chiang shows. [Again, why 2005?]

Most of the overtime is concentrated in prisons and mental- health hospitals, where 83 percent of the more than 6,000 nurses for those two agencies collected extra pay in 2010, according to the data.

Union officials say they have urged the state corrections and mental health departments to consider more efficient scheduling, which they say would reduce overtime.

“We actually have looked at this and tried very hard to get them to understand that mandatory and even voluntary overtime is not the way to go,” said Nancy Lyerla, former chairwoman of the bargaining unit for prison nurses at the Service Employees International Union Local 1000, the largest union of state employees in California. “It’s very expensive. We recognize that and have had lengthy discussions with them about that.”

State officials have taken some steps to curb overtime.

Looking For Fixes

Clark Kelso, the court appointed receiver put in charge of California’s prison health system after inmates filed a legal challenge to the quality of care, sent a management team to prisons with especially high overtime and sick-leave totals to examine the reasons and find fixes, said his spokeswoman, Nancy Kincaid. Kelso has sought lower costs from companies that offer temporary contract nurses to the state, she said. [Kelso is a federally appointed receiver, not a state official.]

Critics such as Ebenstein don’t understand how much the agency has worked to improve prison medical care efficiencies since 2006, Kelso said in a statement.

‘Examples of Mismanagement’

“We have been tackling these examples of mismanagement,” he said. “Over the last several years, we have improved medical care significantly while saving taxpayers more than $400 million. There is still more to do. We focus every effort on improving the system through increased efficiency and reduced costs.”

For example, the department has hired more nurse assistants and licensed vocation nurses to handle duties such as medication management and round-the-clock suicide watches, Kincaid said. In the past, that duty has fallen on the registered nursing staff, boosting overtime costs.

Before 2009, California law allowed personal-leave hours to be counted as time worked in calculating overtime. [This is probably why they go back six years, to 2005. If they just used more recent data, the numbers would be much smaller.] A state audit in 2009 found a worker at the Sonoma Developmental Center who was paid for 160 hours of overtime in a single month, even though the employee took 167 hours of leave during that period.

That rule has since been changed, so that only approved leave and not sick leave can be calculated toward overtime and only if the employee is ordered to work the extra hours. [So why cite to the older data that inflates the numbers?]

While the day-to-day causes of overtime vary, such as when a prison is locked down and a nurse already on duty must remain past her regularly scheduled shift, prison health-care executives are limited by state law in their ability to use contract nurses to cover for employees who are ill or on vacation.

Long-Term Leave

Labor laws also prohibit the state from hiring a new civil- service nurse to fill in for those on long-term leave. [Hiring freezes imposed by governors are likely a bigger problem, but it has not mentioned those.]

“The constitution says that if a civil servant can do the job, we must hire or use a civil servant and not an outside contract,” Kincaid said. “So we’re required to offer the overtime to staff before we can go outside to fill it.” [But statewide hiring freezes mean they cannot hire new nurses, but instead must pay overtime.]

Kincaid said the agency tries to anticipate what staffing level is needed for a given shift based on inmate population and the severity of medical issues. It schedules extra employees in anticipation that the ratio may change because of patient needs or workers who call in sick.

Not Enough

That’s often not enough, she said. During two hunger strikes by inmates throughout the state’s prison system in July and September of this year, nurses had to work an extra 7,000 hours of overtime to ensure proper medical care, Kincaid said. [Ah, there is a lot of overtime because there is a lot of work.] Three-day-a-month furloughs in 2009 through 2011 also thinned the staff, requiring more overtime, she said. [Yes, the furloughs designed to cut costs actually increased costs in some areas. Why so little attention to this fact?]

At a prison drug-treatment center in California’s central valley, 160 miles north of Los Angeles, nurse Milacris Andres has been paid more overtime than regular pay in each of the past six years, payroll data show. [Corcoran. That is probably one of the least attractive places to work and live in California. Again, why six years?] In all, she has collected almost $700,000 in overtime pay since 2005, boosting her income during that time to $1.24 million. Through Kincaid, Manglicmot and Andres declined to comment.

“I have never heard of a nurse making that kind of money,” said Lorry Schoenly, a Philadelphia-based prison health-care risk and quality of care consultant. “I’m shocked that they would have any openings left. [There are probably not any openings, due to hiring freezes. If there are openings, it is probably because the work sucks, but requires real training, so the market is setting the price.] California Department of Corrections and Rehabilitation may benefit from a fresh look at their staffing patterns and hiring practices.” [That is probably true. Shrinking the prison population would help reduce staffing costs, but that is never mentioned.]

Nurse Overtime Triples

Overtime pay at the Department of Corrections has declined by 27 percent to $475 million last year since reaching a high of $648.5 million in calendar year 2007, payroll data show. [So why do they keep going back to 2005?] Overtime for nurses more than tripled since 2005, to $54 million last year.

At the Department of Mental Health, also operating under federal oversight, overtime costs have soared about 75 percent to almost $100 million last year, from $56.6 million in 2005, payroll data show. Overtime pay for nurses in the agency more than doubled during that period to $41.2 million.

Maria Theresa Sicad was paid $227,014 last year as a nurse at the state mental-health hospital in Napa, even though her base pay was $86,427. Since 2005, she’s been paid $823,905 in overtime pay. Through agency spokeswoman Beth Willon, Sicad declined to comment.

The agency has been understaffed for years partly because of the difficulty of recruiting nurses in some rural locations, said the agency’s acting chief deputy director, Kathy Gaither. [Ah, market forces. Qualified nurses don’t want to move to the sticks to work long hours with crazy people.] Another factor that taxes the staff is federal oversight of the mental-health department, which requires nurses to spend many hours documenting patient care, she said.

Accumulating Overtime

Labor contracts for the nurses require that overtime be offered first to volunteers, so the agency doesn’t have a choice in which employees work the extra hours. That allows some workers to accumulate large quantities of overtime hours. [There is a problem with a few making a lot more than others? We should close the pay gap?] The agency can’t assign mandatory overtime until there are no more volunteers willing to take the hours. [Why is it bad that the nurses who want to and can work overtime do it? Why would it be better to force those who don’t want to work overtime to do it?]

California has made efforts to curb its payroll costs, include a hiring freeze ordered by the governor in February. [If you have a hiring freeze, and the amount of work doesn’t decrease, the existing workers have to work overtime. This is a big part of the problem, not a solution.] According to the controller’s office, the number of full-time employees of the state payroll has shrunk to 201,408 in October from 205,635 when Brown took office in January. [Yes. If the workforce shrinks, but the amount of work doesn’t, the remaining workers have to do more work.]

He and the state legislature passed a plan to ease crowding in prisons by shifting responsibility for thousands of criminals from state control to county jails and local probation.

The Department of Mental Health recently announced an overhaul that includes ways to make staff-to-patient ratios more flexible and technology and documentation improvements that will move nurses from paperwork duty back to direct patient care, Gaither said.

‘Each Patient’s Need’

“Because we are returning more staff back to the unit, we are able to make improvements in how staff are employed and at lower costs,” she said. “It’s really looking at each patient’s need and staffing based on those needs rather than doing a one size fits all.”

At least 15 states have privatized prison health-care to curb costs. Corizon, Inc., a Tennessee company that provides private healthcare to more than 400,000 inmates in 31 states, keeps a pool of temporary nurses on its payroll to fill in when an additional worker is needed.

Those nurses are paid regular hours instead of overtime wages and are not offered full-time benefits, helping to keep costs down, said Rich Hallworth, Corizon’s chief executive officer. [Saving money by not giving health benefits to nurses – quite ironic.]

“Sometime overtime is required,” he said. “But when we do, what we try to make sure is that the number they are working isn’t excessive. It’s a patient quality care issue. If you are working a 24-hour shift how attentive can you be?”

To contact the reporter on this story: Michael Marois in Sacramento at mmarois@bloomberg.net;

To contact the editor responsible for this story: Jeffrey Taylor at Jtaylor48@bloomberg.net.

®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.

The False Promise of Tax Cuts

Let's look at the idea that tax cuts will help the economy recover. Let's go to Small Town USA. Small Town, like the rest of the US, has been suffering from the economic slump. Because they are in California, they get most of their income from property taxes and sales taxes.

Property values took a dive, so property tax revenues are down. Sales at the ten small local stores and one big-box store are down, so sales tax revenues are down, too. Small Town is looking at about a 10% budget deficit, so they decide to do a 10% across-the-board cut in spending.

Small Town lays off one of ten teachers, one of ten police officers, one of ten firefighters, one of ten maintenance workers, one of ten library staff and one of ten office staff. Because of the slump, one of the ten small stores goes out of business, putting three employees out of work. Business at the big-box store and the local factory is slow, too, so they each lay off ten people. So now you have six public employees and 23 private employees out of work.

Following the idea that tax cuts are good for the economy, the City Council of Small Town decides to enact an additional 10% tax cut, divided between property and sales taxes. Accordingly, Small Town lays off another six employees, so there are 12 public and 23 private employees out of work. But wait, shouldn't the tax cut result in more jobs?

Let's look. The small store that closed gets about a $1000 annual property tax break, but no benefit from the reduced sales taxes. Is $1000 and lower sales taxes likely to allow them to open up again? Not likely. The other nine stores get the $1000 annual property tax saving, and about $200 per month in lower sales taxes (assuming that the stores, not the customers, get the tax savings). Are any of those stores likely to hire additional help? Not just from the tax savings - it is not enough. Besides, business is still slow. It might delay them going out of business for a little bit, but that is about all.

The big store gets about a $50,000 annual property tax break, and a $10,000 monthly sales tax (again, assuming the store gets to keep that). That is enough to hire back a few employees, but business is still slow, and they don't need more employees. Besides, the money question is decided in Large Headquarters City, not Small Town. The big store headquarters happily keeps the proceeds of the tax break. When pressed by the City Council why they are not hiring, the big store agrees to hire back two laid off employees.

The local factory gets about a $50,000 annual property tax break, but no significant benefit from the sales tax break, as the bulk of their purchases and sales are made at wholesale. That would be enough to hire back one employee, but business is still bad, and they are worried that they may have to lay off even more employees, so they do not hire anyone.

But there are still 33 more people out of work than before (12 public plus 23 private minus 2 rehired private), and those 33 people (and their families) are not spending money. Since Small Town is not big, having those 33 people and their families not spending more than the minimum to survive makes a difference. Sales at the nine remaining small stores and the big-box store go down, further reducing sales tax revenue. One more small store goes out of business, laying off two employees. Big box store lays off the two rehired employees and three more. Now there are 40 people out of work.

Notice which direction things are going? Tax cuts are not a way out of recession

(For those interested, here are my assumptions: 1) the stores are open 20 days per month, and the pre-cut sales tax rate is 10%. 2) the small stores pay $10,000 per year in property tax before the tax cut, and they do about $1000 a day of business. 3) the big store pays $500,000 per year in property tax, and does about $50,000 per day of business. 4) the factory pays $500,000 per year in property tax.)

Getting Away With Murder (and More)

When I was a kid, my parents would watch a TV show called Murder, She Wrote, starring Angela Lansbury as a mystery writer. She would just happen to be somewhere when a murder occurred, and would help the (usually clueless) local police solve the crime. I figured if she came to my town, I would either leave or kick her out, because someone was going to get killed. Every week, wherever she was, someone would get murdered, and she would be close enough to get involved.

In the real world, this would not happen. If every week you were near to a murder, the police would be hauling you in for some serious questioning. You would be in tabloid headlines ("Murder Magnet!") and people would avoid you like the plague. Unless, of course, you are near the top of the social elite, like Larry Summers.

If you don't know Larry Summers, as a high official in the Clinton administration, he was part of a unified effort (also including Alan Greenspan and Robert Rubin) to quash Brooksley Born's efforts to regulate derivatives markets. (For a short summary, check out: http://articles.businessinsider.com/2009-10-21/wall_street/30087500_1_brooksley-derivatives-market-stock-market.)

He also was instrumental in the repeal of the Glass-Steagall Act, enacted in the wake of the last great stock market crash, and designed to keep banks from getting too big, too powerful, and too speculative. (This is an interesting account: http://www.nytimes.com/1999/11/05/business/congress-passes-wide-ranging-bill-easing-bank-laws.html.)

By most accounts, these were two major factors that allowed for and exacerbated the 2008 crash and our current recession.

Larry Summers was also a supporter of Enron, willing to lean on California on Enron's behalf. (http://www.thedailybeast.com/articles/2008/11/12/larry-summers-and-enron.html.)

After Clinton left office, Summers became president of Harvard. His tenure there was marred by accusations of racism, sexism, and conflicts of interest, a faculty no-confidence vote, and huge investment losses. (http://en.wikipedia.org/wiki/Lawrence_Summers#President_of_Harvard.)

So what happens to Summers next? Does he slink off into obscurity somewhere? No, he is chosen to be Director of Obama's National Economic Council.

And this is not unique to Obama - there is also Gen. William Boykin, who played significant roles in the failed Iranian hostage rescue attempt, the Waco tear-gas-attack-turned-firebombing, and the "Black Hawk Down" fiasco in Mogadishu, only to be made Deputy Undersecretary of Defense under Bush and get his fingers into the Abu Ghraib torture scandal.

Summers, Boykin, and others at the top levels of American society have been relieved of the burden of having to do a good job. No matter how badly they perform, they continue to be rewarded, and even given higher positions.

The same is true in American business, with top executives being rewarded with "golden parachutes" of millions of dollars when they have failed dismally. Alan Fishman got close to $20 million for running the failing Washington Mutual for 17 days. Leo Apotheker got over $7 million in severance, plus a $2.4 million "bonus," after unsuccessfully heading HP for all of 11 months. Peter Darbee got a $35 million severance from Pacific Gas & Electric despite an expensive failed ballot initiative and a fatal gas pipeline explosion and fire. There are numerous other examples of executives getting obscene payouts for utter failure.

It must be great to be at this Angela Lansbury level - no matter how many dead bodies you leave in your wake, they still want you back, and will even promote you. So how do you get up to this level, where you can get paid huge amounts and get offered ever-higher positions despite spectacular and repeated failure?

The classic American answer is that you do it through hard work and determination. We love those rags-to-riches stories, like Steve Jobs and Oprah Winfrey. And yeah, hard work and determination help. But the best way is to know someone already at the top, who can pull you up.

Let's look at the new Chief Operating Officer of Facebook, Sheryl Sandberg. She is likely a smart and hard-working person. But she got to her exalted position in large part because one of her professors at Harvard took her under his wing, and helped promote her. That professor? Larry Summers. (Check it out here: http://www.newyorker.com/reporting/2011/07/11/110711fa_fact_auletta?currentPage=all)

There were and are undoubtedly other students out there who are as smart and hard-working as Sandberg. But if they did not get to hang with Larry Summers (maybe they were at Northeast Texas Community College or Cal State Bakersfield instead of Harvard) their odds of getting to the top 1% are not so good.

In the real world that most of us live in, failure has serious consequences - we lose our jobs, and perhaps our ability to earn a living. For those lucky enough to get to the very top, despite the huge impacts that their failures have - people dying, thousands losing their jobs, multi-billion dollar costs - they get to walk away with payouts that most of us would associate with winning the lottery. And they get another plum job. And, perhaps most galling of all, they get to choose - like Larry Summers chose Sheryl Sandberg - who gets a shot at getting to the top next.

So maybe Murder, She Wrote was not so unrealistic after all. After all, reality looks even worse. Not only can some (but only a few) people get away with murder (figurative or literal, your choice), they get rewarded for it, and can set up their friends and toadies to be rewarded for it as well. Eat your heart out, Angela Lansbury.

What Does Occupy Want? Part 2 - They Still Want Back What Was Stolen, And Not Just The Dream

While riding in the carpool I was subjected to Ronn Owens on KGO radio criticizing the Occupy movement for not having clear short-term demands, such as calling for specific legislation, or backing a specific presidential candidate.

This is a classic misleading argument - change the other side's position into something that is easier to attack than its real position. Owens is right that Occupy is not asking Congress to pass a bill - but that is because the goal of the Occupy movement is much broader. It is after a fundamental shift in our society's values, to refocus on human needs instead of accommodating corporate greed. Our elected government needs to be a part of that systematic change, so while passing a bill might be good (if it helps people instead of corporations), it is only a little piece of what is needed, a small step in the right direction.

The erosion of human values for the benefit of corporate interests has gone on for years, and is embodied in numerous laws enacted over the last 30-odd years. But those laws are not the disease - they are just a few of the symptoms. The disease is deeper, and more pervasive. So passing a bill or two, no matter how good, won't do it. Repairing the damage will be a longer term, ongoing process. Symbolic gestures are not enough - we need real change.

Changing some laws is part of the process, but how those laws are changed is important. It cannot be a corporate-whore Congress and President grudgingly giving in to a list of demands forced on them by public protest. Congress and the President must be on board, acting willingly and positively to treat our current corporate parasite infestation. If they did that, then passing some bills would be a sign that we might be on the road to recovery.

If Congress and the President took the following steps, I would take it as a positive sign that they are heading in the right direction. This is just my list of things that would relieve some of the symptoms of our malaise. It is not the cure, or the whole treatment, but even so it should make us feel better.

1) Enforce the the anti-trust laws. This would help keep businesses from becoming "too big to fail."

2) Undo the recent changes to bankruptcy that make it easier for corporations to duck out of labor agreements, and that make it harder for people to get relief from credit card debt.

3) Encourage the production of food that is healthy for us to eat, rather than encouraging the industrialization of the food industry. Heavy pesticide use, high fructose corn syrup, and genetically modified crops benefit big agribusiness at the expense of the small family farmer and those of us that eat (last I checked that was everyone).

4) Bring back something like the Glass-Steagall Act (enacted after the last big crash caused by banks getting out of control) that kept banks from becoming too big and engaging in overly speculative practices.

5) Require banks and other mortgage lenders to hold the loans they make, instead of foisting them off on others. Lending practices would suddenly become a lot more conservative - no "liar loans" and other speculative products, and lenders would not want to push people into loans they could not afford.

6) If we won't do #5, then we need effective regulation of derivatives markets (where the mortgages end up after being sliced and diced), which was quashed by the Clinton administration. The meltdown of the derivatives markets based on crappy mortgages was a major cause of our current financial crisis.

7) Stop the vilification of public employees and their pensions. They don't make that much money, and they did not cause our current problems. Wall Street hates the California public employees pension system since it has billions of dollars that Wall Street wants and it demands good corporate behavior.

8) Undo some of the recent limitations on class actions that prevent the thousands of people ripped off by corporations for $5 or $50 or even $500 at a time from having any effective recourse. You can't get a lawyer to help you sue a big corporation for $500.

9) Rein in corporate tax shelters. GE and other big multinationals can avail themselves of tax schemes that allow them to legally pay little or no tax on billions of dollars of income. You and I can't do that.

10) Make health care and higher education accessible and affordable. This should be a no-brainer, and would provide far more benefit to Americans (and our economy) than two wars, and at a lower cost. But no, we chose the wars instead. Something is seriously wrong here.

There are more, but that is a start. Occupy has not specifically asked for these things, but these steps would show that our society is moving in the right direction. Ronn Owens asked for legislation, so here is a sampling. But it is not enough.

New Name

Yes, this blog has a new name. I am no longer running for California Attorney General, so it seemed a bit weird to still have that as the name of my blog. I thought of just starting a new blog, but I wanted to keep the content from my campaign blog. So, a new name.

Why "Hinged?" I like the idea of a hinge - things on opposite sides may move in opposite directions, but they are still connected. And it is the opposite of unhinged. I thought of calling it "Hinge of the World," but decided that might be a bit pretentious. Anyway, it is time to take a fresh swing at things.

Thanks for reading.

What Does Occupy Want? They Want Back the American Dream Stolen by Wall Street

Things used to feel fair: if you worked hard, chances were pretty good that you could support your family, buy a house (in most places), get medical care, and maybe send your kids to college. But no more. There are now lots of hard-working Americans who can't buy a house, don't have health insurance, and can't afford to send their kids to college.

This means that the American dream - the dream of opportunity, of getting ahead and earning a better future for your children - is broken. That dream, that hope, for all Americans, however real or unreal it was, kept America going through good times and bad. But now, more and more Americans (and there were always some) are realizing that the dream is empty, and how hard they work does not matter. They see nothing in the future but an endless struggle to stay alive, to feed their family, keep the car running, to pay the rent and the utilities.

Unless you are Peter Darbee, who got a $35 million severance package when he resigned as CEO of Pacific Gas & Electric Company after a gas pipeline explosion killed eight people and the company's stock price took a dive. Or John Paulson, who made billions of dollars from his special deals with Goldman Sachs - deals designed to blow up in others' faces.

No wonder people are pissed off. How did we get to this point? It took a while, and there were plenty of warnings, but both Republicans and Democrats kept us on a steady course toward disaster for working Americans, and enabled the plundering of our future by ruthless Wall Street buccaneers. A craven Congress blinded by money heedlessly gutted the nation's defenses against the sheer greed that would ultimately cost American taxpayers trillions of dollars - and one precious dream.

From Reagan and his "trickle down" economics that blessed the rich keeping more and sharing less, through Clinton's quashing of attempts to think about regulating the derivatives markets, to Bush 2 and Obama, the Republicans and Democrats in the White House and Congress share the blame.

Neither Republican nor Democratic presidents enforced the anti-trust laws designed to keep banks from getting "too big to fail." Both Republican and Democratic congresses willingly - even proudly - eliminated the protections put in place after the 1929 stock crash and the Great Depression. Both Republicans and Democrats ignored the clear warnings: the savings and loan crisis of the 1980s, the failure of Long-Term Capital Management in the 1990s, and the few bold voices telling them "this is a bad idea." Instead they kept listening to the siren song of Alan Greenspan and the big corporations urging them to blindly trust in unregulated markets - regardless of the real-world evidence.

While things were going okay for most people (even if they weren't getting super-rich like the top 1%) they were content to just live their lives. The Occupy movement (and to a lesser extent, the Tea Party movement) is a sign that things are no longer going okay for most people in America. People are pissed off that they got ripped off, and particularly pissed off that the very government that is supposed to protect them from getting ripped off opened the door to the robbers.

Yes, we want the dream back. But now we want back more than just a dream. This time it needs to be real.

Weird Tax Plans

I actually don't have a major problem with a flat income tax. I like the simplicity of it. Yes, I know progressive tax schemes are "fairer" - $2,000 in taxes for someone making $20,000 a year is a bigger burden than $20,000 in taxes on someone making $200,000. Yes, they are both 10%. But one person only has $18,000 left, while the other one still has $180,000. At $18,000, every little bit counts. At $180,000, not so much.

That said, I would only go for a flat income tax if 1) it covered all realized income from all sources, and 2) there are NO tax deductions or tax credits (except maybe a deduction for charitable contributions). This would go a long way to even out the fairness, as wealthy folks could no longer benefit disproportionately from tax avoidance schemes (that only the wealthy can afford). Even the old mortgage interest deduction mostly helps the wealthy (and creates perverse land use incentives).

Rick Perry's flat tax plan (described here: http://www.bbc.co.uk/news/world-us-canada-15451162) does not meet that criteria. It is full of loopholes that would make it meaningless except as a tool for avoiding taxes.

First, his flat rate of 20% is voluntary - you could pay the current rate if you wanted. Great, two different possible tax rates - way to (not) make things simpler. Okay, the poor might be able to choose a lower rate, but the rich get to have their accountants comparison shop between different tax plans.

Second, his plan would still allow for mortgage interest deductions, and would completely eliminate taxes on capital gains and dividends. Who gets capital gains and dividends? No, it is not the poor, or even most of the middle class. Under Perry's plan, the rich get a huge break - a lower tax rate, NO taxes on capital gains and dividends, and they get to keep the mortgage interest deduction. And tax avoidance schemes would still abound, with a focus on shifting as much income as possible to capital gains and dividends.

Perry's plan is grossly unfair, needlessly complicated, and would only encourage new forms of legalized tax evasion for the most wealthy at the expense of everyone else, especially those Americans that work for a living. A true flat tax on all income, regardless of source, would be simpler and fairer.

Herman Cain's "9-9-9" plan, clearly named by someone with mass marketing experience, is even goofier. It starts with 9% taxes each on personal income, business income, and sales, but after a few years, the income taxes go away, and the sales tax goes way up - to somewhere over 20%. (And that is according to Fox News: http://www.foxnews.com/politics/2011/10/20/cain-adds-to-plan-angering-unions/)

Like it or not, we have a largely consumer-based economy. We depend on people buying things. So putting a high tax on purchases seems really counterproductive. Adding this new federal tax on top of state taxes could result in sales taxes approaching 30%. That makes it much harder to buy a car, or a computer, or pretty much anything. Why would we want to do that? (It perhaps could be better for the environment if people bought less stuff, but that does not seem to be Cain's intent.)

In addition, a sales tax of that level would likely lead to significant black market activity, as buyers would seek to avoid paying huge taxes, and sellers would want to help them in order to make more sales. Large black markets can lead to corruption, as (underpaid) officials can get paid to look the other way. A large black market would also mean that fewer taxes would be collected, and those would be collected in an arbitrary and unfair way, depending on whether a particular jurisdiction suppresses or allows a black market.

Destroying the basis for our economy, creating a black market and disrespect for law, and providing incentives for corruption, does not seem like a good idea, even if it does have a catchy name.

Neither Perry's nor Cain's tax plans make sense.

More Regulation or Less Regulation? That is NOT the Question.

During the 2010 election, a major media outlet presented me with a survey they said was developed by a range of political and policy experts. One of the questions was whether I favored more or less regulation. This is a silly and pointless question. The real issue is not how many regulations you have, but how good they are. Do they do what they are supposed to do?

Healthy competition, which is a fundamental basis for a functioning capitalist economy, requires regulations. Sports provide a good example. How about eliminating the rule against goaltending in basketball? Or the shot clock? (Who remembers the four-corners offense?) What about getting rid of the penalty for pass interference in football? Or limits on the number of players? ("Hey, I have 45 players, why are they limiting me to only using 11 at a time?")

Those are all regulations. But they serve a purpose of creating good competition. Getting rid of them would result in boring or one-sided games. Anarchy, rather than competition.

Going to the regulation of business, you could create one regulation that would completely stifle competition. Here is an example: all laptop computers sold in the United States must be made by Dell. Just one regulation, but suddenly there is no Apple, no Lenovo, no Sony. And how much incentive would Dell have to innovate or cut prices? None. Prices would be high, and there would be little or no innovation, all from just one regulation.

But you could also put in place a series of regulations that would create more competition. For example, US manufacturers complain that foreign manufacturers have a price advantage, which gives them an unfair competitive advantage. So one solution would be to add regulations that say: no laptop computer (or any component in that laptop computer) sold in the US can be made with child labor; no laptop computer sold in the US can be made by a process that results in a discharge of toxic chemicals to the air, water, or ground; and no laptop sold in the US can be made by slave or prison labor. Even though this is three times as many regulations as the previous example, the result would be that US manufacturers could better compete against foreign manufacturers.

Are there stupid regulations that should be eliminated? Yes, of course. Is blindly eliminating any and all regulations a good idea? No. There are fewer things more expensive and inefficient than a sloppy or botched deregulation. The savings-and-loan crisis and the California energy crisis are prime examples.

Most regulations are put in place one or two at a time, to address specific issues, and then they get adjusted as people figure out how to make them work. Deregulation should be done similarly - eliminate one or two regulations at a time that are no longer are effective, and adjust the remaining ones (or maybe eliminate one or two more) as people start to understand the new situation.

The real question is not how many regulations we should have, but rather how good they are. Quality, not quantity, is the right criteria.

Re-Starting Blog

I want to start posting items on my blog again. I know the election is over, so I thought about starting a new blog, but for now at least I think I will just post more to this one. So stay tuned for more posts!

Thank you!

I finished the election in third place, with over 250,000 votes. Thank you for your support and your vote!