Category Archives: Economy

TANF in Nevada: Myths and Real Numbers

When the Department of Health and Human Services ran the numbers for TANF recipients in a comprehensive FY 2010 study it reported 10,269 “active case” families in Nevada. [DHHS pdf]  20% of those were single individuals, 35.4% were two member households, 23.7% were in three member households, 12.6% were in four member households, another 5.2% were in five member households, and 3.2% were in six member households.  Thus, 59.1% of Nevada’s active TANF cases involved homes with two or three members.   Thus much for the right wing delusion that people on “welfare” lie about just “making babies” for the lack of anything better to do.  The “average” household size for TANF recipients in Nevada is about 2.6 persons.

Who is receiving TANF benefits?  In Nevada about 41.5% of the active cases did not involve an adult. 48.4% involved one adult, and 10% included benefits for two or more adults in the household.

Looking at the numbers for TANF recipients and the percentage distribution of TANF families by the number of recipient children we find that 45.5% included one child, 28.5% two children, 14.4% three children, 6.4% four children, 3.5% five children.  (Table 4)

The same trend is visible if we look at TANF recipient families in Nevada in which there was no adult eligible for assistance, 43.9% of the cases included one child, 29.2% two children, 15.4% three children, 7.3% four children in the household, and 4.1% with five or more children in the family.  (Table 5)

The picture emerging from the Nevada numbers is further illustrated in subsequent tables for TANF recipients in households with one adult (Table 6) and with more than one adult (Table 7) — most cases involve individuals with one child, and the households receiving TANF support declines thereafter.

Those attempting to imply that TANF beneficiaries are “those people in the inner city…” (a well known Dog Whistle) won’t find much support in the Nevada numbers either.

Of the active cases in FY 2010 35.6% were of Hispanic heritage (of any race), 31.8% were White, and 27.1% were African American. 2.1% were Native American, 1.8% were Asian, and 1.6% were Other.  (Table 8)  To put it another way, 67.4% of Nevada’s active TANF cases were NOT African American households.  If we look at the adult TANF recipients the numbers are essentially the same — 23.7% are of Hispanic descent, 42.1% are White, 26.8% are African American, 2.6% are Native American, and 2.8% are Asian. In short, 65.8% of the adult recipients are NOT African American.  [Table 21]

There are 19,518 children eligible for TANF benefits in Nevada, and 42% are of Hispanic descent, 26.3% are White, 26% are African American, and 1.7% are Native American. [Table 35] Again, the face of welfare in Nevada certainly isn’t predominantly black.  Sadly, these are the figures which cause some to complain that the 14th Amendment to the U.S. Constitution should be repealed or replaced with a more stringent test for U.S. citizenship.  However, this argument can’t be buttressed from these numbers alone because the underlying assumption that the parents of the child are necessarily “illegal” can’t be determined from the overall statistics.  Further, the ramifications of repeal or replacement of the 14th Amendment is a societal and legal discussion which deserves its own forum. And, for emphasis on this point — of the 19,518 children included in active TANF cases in Nevada 98.3% are U.S. citizens, and 1.7% are “qualified aliens.” [Table 40]

And then there’s the Teenaged Mother nonsense — also not in evidence if we look at the numbers from Nevada.  There were 3,875 adolescent recipients of TANF benefits of whom 82.9% were NOT parents, meaning the Teen parents comprised 17.1% of Nevada’s TANF recipients.  [Table 10]

What do we know so far?  We know that large families aren’t “on” TANF, and we know that for the most part these families aren’t African American, they aren’t “illegals,” and we know that most of them aren’t the stereotypical adolescent parents.

Why might older adults in the households receiving TANF benefits not be recipients themselves?  64.8% of the “assistance units” (think of a household) had no adults included in the Nevada TANF program. 24% of these were ineligible because they were receiving SSI benefits, and another 75.4% because they could not prove citizenship.  [Table 12]  There goes that whopper again — non-citizens signing up for “welfare.”   Nevada’s rules are simplicity itself: “All persons applying for or receiving TANF must provide satisfactory evidence of citizenship or qualified non-citizenship status.”  Taking a look at the issue from another direction, of the 7,034 adult recipients of TANF benefits 91.7% are U.S. citizens and 8.3% are “qualified aliens.” [Table 26]  “They” are obviously NOT “coming here to get on welfare.”

One of the more depressing numbers shows up in Table 30, in which we find that of the active case adults (7,034) approximately 41.1% are working.  This says perhaps too much about the level of wages and the kinds of jobs available for TANF households that a person could be holding down a job and still be below the poverty line in terms of TANF eligibility.    We’d expect the 52.4% of the unemployed and the 6.5% of the discouraged workers to be earning less than sub-poverty wages, but not necessarily that 41.1%.

49.8% of the male TANF recipients and 38.9% of the women are employed, and still not earning enough to break over the poverty line.  [Table 30]

And, down goes another bit of right wing mythology about families receiving public assistance in Nevada.

Imagine our right wing friend sputtering, “but but but…they don’t work!”  Not. So. Fast.  In bureaucrat-ese the important element is the PRP, or in English — a personal responsibility plan.  Here is the Federal summary of what’s required in a Personal Responsibility Plan:

“The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA) established a framework for creating a time-limited, work-based assistance system that emphasizes a “work first” approach. It requires states to meet federally mandated work participation rates by engaging recipients in federally defined activities. All recipients with a work requirement must participate in one or more of nine “core” activities, of which vocational education is one, for 20 hours per week. Recipients with a child age six or older are required to participate for 30 hours per week and two-parent families are required to participate for 35 hours if they don’t receive federally-funded child care assistance and for 55 hours if they do. For any hours required over 20, recipients can participate in core activities for more hours or in three additional non-core activities, two of which may encompass vocational education — job skills training directly related to employment, and education directly related to employment (for recipients who have not completed high school or the equivalent).”  [DHHS] (emphasis added)

In other words, in order to qualify for TANF assistance the individual must be working, seeking work, in a job training program, or in school.

Now, what do we know?  No, there aren’t any Big Families involved in our major public assistance program, and they aren’t predominantly African American, and they aren’t that stereotypical teen mother, and they aren’t non-citizens or undocumented workers, AND they aren’t allowed to “sit on the stoop drinking beer and listening to boom boxes.”

But wait, how about all those “other benefits” which are commonly tacked on in an attempt to demonstrate that Welfare Queens (not the corporate or ranching variety) are leaching us dry?

Of the 10,269 active TANF cases in Nevada as of FY 2010, some 99.3% were eligible for medical/health care services.  Assistance slides rapidly down hill thereafter.  73.7% were eligible for SNAP (food stamp) benefits, receiving an average of $425.04.  Zero (0%) were receiving public housing, and only 14% were receiving any form of rent subsidy.  7.9% were receiving some form of federally subsidized child care, and another o.6% received state or locally subsidized child care assistance. [Table 13]

The adults are not, as a rule receiving any disability benefits, because of the 7,034 recipients in the report 99.6% received no disability benefits.  [Table 23]  Those ‘reports’ which lump all the possible benefits together and purport to demonstrate that Welfare is a Great Drain, aren’t drilling down to the actualities of TANF benefits and their distribution.

About 4.8% of TANF households in Nevada have some ‘outside’ resources, but as Table 14 demonstrates, not much.  The average child support contribution is $211.04 per month, and for the 22.3% who have cash resources the average is about $202.76.  We can’t add these together because not all households receiving child support payments are those in which there are other cash resources, and vice versa.

The report does tell us that adults receiving TANF benefits are young, but not necessarily very young.  9.4% are under 20, 50.5% are between 20-29, another 25.3% range from 30 to 40, and 12.5% are between 40 and 49.  Only 2.3% are over 50 years of age.  [Table 18]

The pattern holds by gender as well. 1,369 men were TANF beneficiaries, and most were between the ages of 20-49. Only 27.9% were older than 40 years of age.  [Table 19]  5,639 recipients were women, of whom only 10.8% were under 20.  53.7% were between the age of 20 and 29, 23.9% were between 30 and 39, and 11.6% were over 39. [Table 20]

One part of the common perspective is established in the Nevada figures, adult recipients are predominantly single. 63.9% are single, 23.6% are married, and 6.8% are separated.  Another 5.4% were divorced, and 0.3% widowed. [Table 22]

We should also refrain from making generalizations about the levels of education achieved by TANF recipients.  Of the 7,034 adult beneficiaries 1.7% have no formal education, 37.6% have some education between grades 1 and 11; 54.1% have completed grade 12, and 6.6% have some education beyond high school. [Table 25]

There another myth that need challenging — that those who accept public assistance are dooming their souls to a life time of subservience to the government and destroying their work ethic. Again, the real numbers don’t square with the mythology. The TANF families in active cases including children receive assistance for an average of 17.9 months in Nevada. The state of South Dakota has the highest average in the report, some 50 months.  [Table 41]

Even if we consider the stereotypical (and highly inaccurate) face of welfare as the African American teen mother then her 75.3 years of life expectancy would mean that in Nevada she would spend only 17.9 months of her expected 900 months of life on this planet receiving TANF benefits, or about 1.9% of her life span.

If we look at the tables for children receiving TANF assistance in Nevada the picture remains similar. There are 4,266 children receiving benefits (in homes where the adults are not). The number of months for which benefits are paid averages out to 28.1. [Table 42] Hardly a life time of dependency.  Can we argue that the child who received benefits might at some point in his or her life also require assistance as an adult?  One could, but that would require assuming that children once beneficiaries of assistance will necessarily require assistance as an adult.  Even if we accept this questionable proposition, the numbers dictate that the assistance will not be a life time dependency but a short term benefit of 17 to 18 months on average.

As we examine the active TANF cases for Nevada in FY 2010 there are several issues that should be resolved by the figures.  Welfare in Nevada is NOT  Black, it is not necessarily a teen mother, it is not undocumented workers, it is not a life time subservience, it is not lucrative, and it is not draining the Yankee Work Ethic (whatever that might be) from the souls of the recipients.

Only in the highly generalized, ideological, world of right wing propaganda does the mythology drive the perception of welfare as a trap net.  The real numbers tell a very different story, in which we do provide a safety net for our citizens, and by extension our economy.

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Bundy’s Lazy WQ Socialist Cows

Lazy WQWho knew? Cliven Bundy is a Socialist!  Because who but a banner waving Socialist would presume that public land was theirs for the taking without payment?  And, then there are those Socialist Cows munching on public property at no expense.  The Bureau of Land Management administers about 245 million acres of public land, and manages grazing on approximately 155 million acres by issuing permits — an estimated 18,000 permits for 21,000 allotments on BLM lands. [BLM]

Bundy’s gripe is with the 1934 Taylor Grazing Act which authorized the Bureau of Land Management to create regulated districts.  Further, he wants the use of public lands — but he doesn’t want to pay for the use — like the other 99.9% of ranchers.

“The Federal grazing fee, which applies to Federal lands in 16 Western states on public lands managed by the BLM and the U.S. Forest Service, is adjusted annually and is calculated by using a formula originally set by Congress in the Public Rangelands Improvement Act of 1978. Under this formula, as modified and extended by a presidential Executive Order issued in 1986, the grazing fee cannot fall below $1.35 per animal unit month (AUM); also, any fee increase or decrease cannot exceed 25 percent of the previous year’s level. (An AUM is the amount of forage needed to sustain one cow and her calf, one horse, or five sheep or goats for a month.) The grazing fee for 2014 is $1.35 per AUM, the same level as it was in 2013.
The Federal grazing fee is computed by using a 1966 base value of $1.23 per AUM for livestock grazing on public lands in Western states. The figure is then adjusted each year according to three factors – current private grazing land lease rates, beef cattle prices, and the cost of livestock production.  In effect, the fee rises, falls, or stays the same based on market conditions, with livestock operators paying more when conditions are better and less when conditions have declined.” [BLM]

Not to put too fine a point to it, but what Mr. Bundy wants is a free ride.  While 99.99% of western ranchers include the grazing fees in their accounting as a cost of doing business, Mr. Bundy wants a government subsidy (in the form of non-payment of the grazing fees).

Better still, Mr. Bundy has reiterated his attack on capitalism (which generally accepts that there are costs incurred in doing business) and staunchly declares he will Never Back Down. [ABC]  But wait, there’s more!

“It’s not about cows, it’s about freedom,” Utah resident Yonna Winget told ABC News affiliate KTNV in Las Vegas, Nevada.” [ABC]

Yeah, it’s all about Freedumb!  The freedumb to graze cows free of charge on federal (public) land, while every other rancher in the county pays the required grazing fees and doesn’t trespass his or her cattle on the allotments.

Thus, the Welfare Queen of Clark County, Nevada, wants to avoid paying the grazing fees because he doesn’t agree with the BLM rules and regulations — and I’d like to cut back on the income taxes I pay because I don’t agree with the brackets….

It is truly heart-warming (in the electrification sense of the term) to know that there are people who can get a free ride from the government, who can break the law with impunity, and who can threaten violence when called to account, if they don’t agree with the administration of the laws of the land, and the lands.

Meanwhile back at the Lazy WQ, Mr. Bundy doesn’t have to go to all the effort of moving his Socialist Cattle, because….. Freedumb!

 

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Financialism at its Finest: The Flash Boys

If you haven’t already picked up Michael Lewis’s “Flash Boys,” please do so: “Now in “Flash Boys,” Lewis reveals how a new crop of investment firms has conspired with the big banks and the stock exchanges to use high-speed computers and complex software algorithms to skim pennies from the real investors who provide equity capital to the economy.” [WaPo]  Get that — about REAL investors?

Back in the not so good old days, the function of investment banking was to assist the distribution of capital from areas of excess (savings) to areas of need (loans) to commercial and industrial enterprises.

If we didn’t learn much else from the Mortgage Meltdown in the Wall Street Casinos of 2007-08, or from the Flash Crash of 2010 — we were given a rather stark reminder that the business of Wall Street is now Wall Street.

Note that in Flash Boys, the object of the game is to game the system and make money by skimming from REAL investors.  Remember those “job creators?”  Real investors buy stock, buy bonds, and otherwise provide the capital upon which our economy rests.  Financialists couldn’t care much less if the American Widget corporation makes a dime in profits from the sales of its products — but they do care deeply about the price of AW Inc’s stock.

In the interest of not giving away the story line, I’ll stop here and let you make up your own mind about the depths to which Wall Street has sunk into its own mire of manipulations.   Before listening to the chatterati on what passes for business news on cable — here’s some recommended background:

James B. Stewart, “Flash Boys, Gone in 0.001 Seconds,” New York Times, April 11, 2014.

Ted Kaufman, Delaware Online, News Journal, “Flash Boys should and will make your blood boil,” April 12, 2014.

Raju Kane, “Cracking the Money Code,” DNA, April 13, 2014.

Will Deener, “Telling the Ugly Truth,” Dallas Morning News, April 6, 2014.

If you’ve checked out these reviews, and are still inclined to accept the chatterati’s rationalizations for the “front-running” — read skimming — then the best advice might be to have the TV turned off, and consider that the explications tend to run toward vapidity like, “this adds liquidity to the markets….”

Any time you hear the word “liquidity” (a) remember that it just means cash/money, and (b) that it’s the standard line tossed out to the uninformed in the hopes that they will stay that way.

The second way to judge the pontification from the pundits is to ask yourself — Do I understand the point being made? If the answer to that question is “no,” then consider why — most likely because you were inundated in a tsunami of Wall Street jargon, and then told if you didn’t understand the mash-up you are obviously NOT a sophisticated investor and should switch to the Cartoon Network as a venue more suitable to your intelligence.

Another common Wall Street retort is that Lewis’s books are “popular,” as if explaining complicated processes in readable vocabulary isn’t “academic,” and therefore of less merit.  This line of petulance is most often associated with faculty commons and the interminable squabbling of the very academics who deplore ‘popular’ writing.  Merely because a person doesn’t douse you with algorithms doesn’t mean you aren’t getting the information.

And, when Senator Sludgepump or Representative Quagmire tell you that the Job Creators need Deregulation to enhance the liquidity of the markets and facilitate investment — remember that the deregulation and the gaming of the system by the financial sector are the elements skimming profits from REAL investors.

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Let Them Eat Pie In The Sky

Pie in the SkySo, the Senate version of a bill to extend unemployment benefits for the long term unemployed will be on the Senate floor on Friday (maybe), if Senate Majority Leader Harry Reid (D-NV) can move through the arcane labyrinth of the Senate Rules. [Roll Call]

The arguments emanating from the GOP side of the aisles would be easier to understand IF anyone from that quarter could explain why it was perfectly acceptable to extend long term unemployment benefits FIVE TIMES during the Bush Administration — but is somehow categorically unacceptable today.

The Incredible Moving Goal Posts

The fact that the Senate Republicans continue to move the goal posts on Senate action serves to remind us why the arguments against the extension are ultimately specious.

The Senate Republicans wanted to add amendments, amendments were allowed, but not enough amendments? Not the right kind of amendments?  The Senate Republicans wanted a Pay For, they got one — on the backs of working people — who would be required to make larger contributions to unemployment insurance programs — that was insufficient, they want MORE… of something.  Whatever. And, whatever is offered by the Democratic leadership we can all bet it will be insufficient to assuage the tender sensitivities of the Ever Outraged GOP.

Right here in the Silver State we have approximately 20,000 individuals who are among the long term unemployed. [LVSun]  They join the estimated 1.3 million [CAP] to  3.8 million now still unemployed or still looking for work in this country. [Guardian]

Let Them Eat Pie In The Sky?

At this point we get to the major question — What’s wrong with extending long term unemployment benefits for people who’ve been out of work for more than 27 weeks?

(1) The incredibly flexible Deficit Argument:

The Republicans won’t vote in favor of extending unemployment insurance benefits because that would increase the federal budget deficit (except the Pay For on offer from the Democrats) unless the Democrats add a provision increasing military retirement cost of living benefits — which would ADD TO THE DEFICIT.  [Roll Call]

Be that bit of illogical thinking what it may, the notion that unemployment benefit insurance payments are swirling into the Black Hole of The Ever Flexible Budget Deficit can’t be sustained when the actual cost to the federal government isn’t increasing. The Congressional Budget Office reported last April:

“Federal spending on unemployment insurance: Annual outlays increased from an average of $33 billion from 2004 through 2007 to $119 billion in 2009 and $155 billion in 2010; they dropped to $93 billion in 2012 and we expect them to decline further over the next few years.”

All you have to do in order to accept the GOP argument that the cost of extending unemployment insurance benefits for 1.3 million long term unemployed people is too much to sustain is simply to ignore the fact that unemployment benefit costs have been declining since 2010.  For those not connected to the Fact Based Universe this should be relatively simple.

(2) Lazy People Argument:  Here they go again!  Somewhere, out there in the Shadow Land of Make Believe there are thousands of lazy shiftless do-nothings who are perfectly happy to be the beneficiaries of public largess — who aren’t members of Congress.  First, this is a Dog Whistle argument, as if receiving unemployment insurance benefits is a form of welfare.  It isn’t, of course, workers have paid into those employment insurance programs.  However, the economic or statutory reality of a program has never stopped the anti-government crowd from splattering the ‘welfare’ label on something, anything, that might remotely help someone.

Secondly, there’s that conception amongst the uninformed that people can make more money not working than by working.  “They” can earn more on ‘welfare,” or “They” can get by not working by simply taking unemployment checks.  The people making these claims have obviously never seriously checked into the eligibility requirements of the Nevada program.

No, in this state, as in most every where else, the Shiftless One cannot refuse employment at a lower rate just because unemployment benefits might be higher — they aren’t and they don’t.   But, we know what the GOP’s thinking?  “They” are those “inner city….. people…..who sit on porch steps….” And, now we’re back at the Dog Whistle.

(3) We’re Just Here To Help You – Have Some Pie From Our Sky.  The problem with pie in the sky is that it is intrinsically  inedible.

In the theoretical world of the Club For Growth and other ultra-conservative outlets, unemployment insurance benefits constitute a drag on employment by being a dis-incentive to work.  Anything which supports a person who is not currently working is automatically classified as a dis-incentive because were the support not available the person would have to work to eat, or something like that.

This also requires the corollary concept that there is work for everyone.  Except that’s not the case, there are now three job seekers for every job opening in the country. [politifact] Thus, the Pie in the Sky model of economic theory falls flat because in the real world of real numbers, two of the job seekers (with or without support) are still going to be looking for work whether there’s an incentive or not.

The second problem with this Pie in the Sky argument is that most people are working, seeking work, or getting discouraged in the process.  Consider, Nevada has an unemployment rate of 8.7%, which means that 91.3% of employment aged people ARE working.  The unemployment rate in the Reno area is 9.1%, meaning that 90.9% are working — [DETR] if the mere existence of unemployment insurance benefits, or any other safety net program,  is such a dis-incentive for working people, why are so many people doing it?

Most of the time the arguments from the ultra-right require the acceptance of a negative view of humanity, a perspective which demands acknowledgment of such furtive claims as “They” are undeserving because “They” are lazy, shiftless, bums who want to watch television and drink beer… without having to specify who “They” might be.  It’s also handy to buy into the well debunked Trickle Down Hoax, in which every tax avoided by a corporate employer, every source of funds left untaxed, and every loophole created in the tax code is magically translated into imaginary jobs.  We tried 30+ years of this and all we got was a Mortgage Meltdown compliments of the Wall Street Casino.

If there are no procedural problems other than those manufactured by the obstructionist GOP leadership in the Senate, and there are not statistical reasons not to extend unemployment insurance benefits for those who have already paid into the systems, and there are no rational economic reasons for not continuing to utilize automatic stabilizers such as the unemployment benefit insurance programs … then why not pass the bill?

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Filed under Economy, employment, Politics, Reid, Republicans, unemployment

Work Pay Live?

Want to see what a “recovery” looks like in terms of job openings? Here’s the FRED graph:

Jobs by category 2014 Note the increasing line for total non-farm jobs, and the almost parallel line for total private sector job openings.  What can we tell from the two lines at the bottom — that government employment and jobs in education and health services have not seen the increases indicated in the total job market or in the private sector job market.

What makes the greenish line (education and health care services) line so disturbing is that two health care related sectors — health care support and health care practitioners/technical — are projected to grow by 28% and 22% respectively by 2022.  [BLS]  Education, library/media, and training positions show a projected 11% increase in this decade. [BLS]

As we might expect given a aging population, personal care assistance jobs are projected to increase to 580,800 by 2022, and home health aide positions are projected to increase to 424,200 in the same period. [BLS]  That’s the good news for job seekers, the less exciting news is that personal care aides earn an average of $19,910 per year, while home health aides earn an average of $20,820. [BLS]

The third highest projection for new jobs comes in the retail sales category, 434,700 but with average earnings of $21,110.  The only high projection category which would put an employee in ‘middle class’ territory is that of registered nurses, with a projected need for 526,800 in the next few years and estimated average earnings of $65,470 annually. [BLS]

Federal Poverty Guidelines 2014Unfortunately, what we have here is a situation in which three areas of projected high job growth over the next 18 years (personal aides, retail sales, and home health care) are jobs which would not support a family of four on a single income above the federal poverty guidelines.  The estimated $19,910 a personal care aide is estimated to earn annually would barely keep a three person family at the poverty line.

If we extrapolate the numbers, by 2022 we will have an increased number of home health aides, each earning approximately $20,820.  That’s about $10.00 per hour, or a total contribution of $8,831,844,000 to the national economy.  This sounds nice until we get out MIT’s Living Wage Calculator.

A living wage for a adult + one child in Reno, Nevada is currently calculated at $20.39 per hour. For a family of four it’s about $19.22.  [MIT]  The current estimated wage for home health aides ($10.01/yr) doesn’t come close to either living wage calculation.

How about our retail sales person?  Nationally, we’re projected to need about 434,700 more of them by 2022. The 2012 median wage in retail sales is $21,410 or about $10.29 per hour.  How does this compare to the Living Wage Calculation for Las Vegas, Nevada?  One adult + one child would need an hourly wage of $20.67 and two adults and two children would need earnings of $19.50/hr. The $10.29 isn’t close — again.

There are at least three elements to consider in all these numbers. (1) Those jobs which are now identified as high growth tend to be in low wage positions; (2) Low wage positions don’t meet the Living Wage standards; and (3) If we continue to pay relatively low wages for high growth area jobs then we can reasonably expect to have more families qualify for public assistance.

Oh, but if we raise minimum wages for employees what of the KIDS?  For starters, most minimum wage workers aren’t children. Yes, most young people start out earning minimum wages, however this group only constitutes 19.8% of all minimum wage earners. [BLS table 1]  80.2% of all minimum wage workers are over 25.

If we drill down into the table we find that those “kids” aged 16-19 comprise about 5.4% of the minimum wage workforce, and men over 25 constitute 39.4% of the minimum wage workforce, while women over 25 are 40.8% of that total.   In short, it doesn’t do for us to hide behind the kid’s jeans during any attempt to argue that raising the minimum wage will be “bad for them.”

Well, there’s always that old canard that increasing the minimum wage reduces job growth.  For all the numbers tossed into the speculative pool — the FACTS of the matter don’t match the mythology.

Once more from the MIT economic study:

“Dube’s research looks at the effects of minimum wage differentials across state borders where the minimum wage is higher on one side of the border than the other. His research looks at the service industry, which he said employs the majority of minimum wage workers. According to his findings, both the short and long term effects of the increased wage on unemployment were negligible.”

What does raising the minimum wage do?  The Dube Study looked in that corner as well:

“Finally he added that work done by economists at the Federal Reserve showed minimum wage increase led to significant increases in purchases of durable goods. “From a perspective of stimulating demand, minimum wages will tend to increase demand by increasing the purchasing power of those workers.”

So, on one hand we have negligible impact on employment levels versus significant increases in the purchases of durable goods — which one sounds like a better common sense option?

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The Republican Unicorn: The Replacement Plan

UnicornOH! the horror… more Nevadans are now getting health care insurance thanks to the Affordable Care Act.  The Reno Gazette Journal reports:

“Nevada Medicaid enrollments under federal health care reform have surpassed initial projections and are on pace to reach 500,000 by summer, a mark initially not expected to be reached until the end of the 2015 fiscal year, a state official said.”

Prior to the enactment of the Affordable Care Act there were approximately 642,000 Nevadans without health insurance.  The expansion of Medicaid allows those who are earning  below 138% of federal policy guidelines to sign up for Medicaid.

For two person family the members of which are U.S. citizens between the ages of 19 and 65, who are not eligible for Medicare, the income line would be $21,404 per year, the income eligibility level for a single individual would be $15,856. [ME2014 pdf] A person working for $7.50/hr for a 50 week year would earn $15,000.

Since this is an election year, the Republicans will no doubt tell us all that they have an alternative, and indeed they did craft one earlier this year.

A side by side comparison of the Affordable Care Act and the Republican alternative:

ACA and GOP health plansIn the Republican “alternative du jour” people who don’t get health care insurance from their employers would end up paying more because in the GOP proposal the tax credit increases only by age and not by need.  This means that lower income individuals would be paying more for health care insurance.  [See example here]

Would those who have endured some of the questionable practices of insurance administration be protected under the Republican alternative?  Not really.  Under the Affordable Care Act an insurance corporation may only charge a 64 year old person 3 times what they would charge a 21 year old. Under the provisions of the Republican alternative they could charge 5 times more.

Then there’s the issue of a “coverage gap.”  If a person were to lose a job the compensation for which included health care insurance, the subsequent “gap” in coverage would allow the corporation to exclude the person from coverage because of a pre-existing medical condition if the individual did not purchase a private plan immediately.

In sum, the Republican alternative isn’t really “patient centered” a better term might be insurance corporation centered:

“There are many other problematic things the Republican plan does, like eliminate the health law’s taxes on health insurance, drug and device companies; allow insurance companies to sell plans that don’t cover maternity, mental health or other types of care; and allow insurance companies to impose annual limits on benefits.” [NYT]

Before we get too excited about the Republicans actually offering up an alternative to the Affordable Care Act and Patients’ Bill of Rights, we should remember that 2014 is an election year.  A person could waste precious moments in this life counting the number of Republican “working groups” which have developed GOP health insurance reform plans.  However, that exercise would expend synaptic effort unnecessarily because the GOP has yet to form any viable legislative strategy for enacting their ‘reforms.’

Harken back to January 30, 2014 — House Majority Leader Eric Cantor (R-VA) announced to the GOP conclave that “This year, we will rally around an alternative to ObamaCare and pass it on the floor of the House,” Cantor said during a presentation in which he outlined four areas — healthcare, jobs, helping the middle class and creating opportunities — where Republicans would offer “big, bold ideas.” [The Hill]   Now, hold this thought, because something happened to those “big, bold ideas” between January and March.

No sooner did the House Majority Leader pronounce, “This year, we will rally around an alternative to Obamacare and pass it on the floor of the House..” then the silent fog of actual inactivity enveloped the House Republicans.  By February 21, 2014 those big, bold ideas apparently disintegrated into a host of piece-meal bits of proposed legislation: “In a memo to members laying out the House agenda for the remainder of the winter, Cantor noted that the replacement is being finalized, and said that in the meantime, Republicans will work to target parts of the law with which they disagree.” [Roll Call]  Repeal and Replace, appears to be getting fuzzier by the month, a point not lost on columnist Jonathan Chait:

“Carping from the sidelines is a great strategy for Republicans because status quo bias is extremely powerful. It lets them highlight the downside of every trade-off without owning any downside of their own. They can vaguely promise to solve any problem with the status quo ante without exposing themselves to the risk any real reform entails. Republicans can exploit the disruption of the transition to Obamacare unencumbered by the reality that their own plans are even more disruptive.”

Meanwhile, more people are finding affordable private health care plans on the state and national insurance exchanges and more lower income citizens are signing up for the expanded Medicaid program.  And, the calendar marches on:
House Calendar 2014

And so, what has the House been working on?  On January 9 and 10, 2014 the GOP toyed with some headline generating legislation (H.R. 2279) delaying the implementation of the ACA and calling for ‘transparency.’   On January 23rd they launched on the ‘security’ of the health care exchange. (H.R. 3362).  Then they were back to the Ban The Abortion theme in the consideration of H.R. 7 on January 28, 2014, as if the Hyde Amendment has somehow been misplaced.

Do we see all that legislation to Repeal and Replace so avidly promised in January and then all but forgotten by March?  The Health and Technology Committee didn’t even meet during the month. [docs.house]

The lovely thing about a Unicorn is that it can be any color which delights a person’s imagination.  The same can be said of the Republican alternative to the Affordable Care Act — it can contain just about anything the audience wants to hear, because “facts are still being gathered,” or “provisions are still being drafted,” or “committees are still giving it consideration,” or “the dog ate my homework.”

Until the Republicans unveil their comprehensive alternative to the Affordable Care Act the Repeal and Replace slogan is just that — sloganeering.  And until the Republicans can demonstrate their capacity to LEGISLATE (read govern) there is no reason to take their propositions seriously.  While we wait for the Republicans to chase their Unicorn, we can applaud the fact that more of our fellow citizens have health insurance coverage, and wonder what the Republican Party will be able to do for the next five years.

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Filed under Economy, Health Care, health insurance, Medicaid, Nevada politics, Politics

Turning Out, Tuning In, and other Voting Matters

Voter TurnoutNot to be missed: This editorial offering from Cory Farley in the Reno Gazette Journal.   Yes, voters have been operating on auto-pilot.  And there’s that common refrain — elected officials are venal, banal, untrustworthy, ineffective, and analogous with hundreds of varieties of planktonic and filamentous pond algae, BUT I’m going to vote for my version anyway.

The range of voter turnout is interesting — we’ve never dropped below 31% nor have we gotten much higher than 65%. [Nevada 2012 turnout here (pdf)]  So, we can guess that no matter how crucial the election there will be 35% of those eligible to vote who will stay home.  A few will be ill, or otherwise unable to exercise their  rights, more are probably in the realm of extremely low information voters who don’t tend to participate.

There’s a bit of a message for Washoe County Democrats in the Secretary of State’s voting statistics, given that ‘inactive voters’ are among the count in this state.   As of February 2014 there were 95,217 registered Democrats in Washoe County, and 95,819 registered Republicans.  [NVsos pdf]  However, dipping into the Active Voters information we find 79,689 active voter Democrats in Washoe County and 83,766 active voter Republicans. [NVsos pdf] The most common form of “lost (inactive) voter” is the person who has changed residency.  Younger people, and some categories of working people (seasonal employment, lower income, etc.) are more likely to move than those settled in waiting for retirement.

So, what factors affect voter turnout?

(1) Electoral competitiveness:  The hotter the race (especially at the top of the ticket) the more likely there will be a higher turnout.

(2) The type of election:  Off year elections (mid terms) aren’t as favorable for turnout as Presidential year elections.  We knew this already.  However, one rather startling statistic to come from a study of of 340 mayoral elections in 144 U.S. cities from 1996-2012 is that the average turnout was a meager 25.8% — one election (1999) in Dallas, TX drew a not-so-whopping 5%.  [FVOrg]

(3) Voting requirements:  More people tend to vote if registration is convenient and accessible, and more tend to vote if the voting time is extended.  Further, early voting tends to add to the numbers of people who vote, as does the implementation of policies which call for an adequate number of conveniently located polling stations for all precincts.  Factors which reduce turnout are: Voter ID laws and other restrictions, lack of voting equipment, lack of voting sites, and other suppression tactics.

(4) Age and Income:  In the 2008 national election only 41% of those earning less than $15,000 per year voted, while 78% of those earning over $150,000 cast ballots.  Those 30 years of age and older are 15-20 points more likely to vote than their cohorts who are between the ages of 18 and 29. [FVorg]

(5) Location: Rural voters tend to have higher turnout rates than urban areas.  [DY]

The Turn Out Problems

There’s a tendency among punditry to comment only upon national elections, that’s really picking the low hanging fruit.  It’s always easier to pontificate in generalities and national elections are chock-a-block full of them.  However, most governmental decisions which have a direct impact on our ordinary lives are made by state legislatures, city councils, county commissions, and locally elected officials.

Our state legislatures will determine the tax structure of our communities.  There’s no standard national property tax, and whatever we do for our local schools will have precious little to do with the Department of Education — it’ll be based on the decisions of our state legislature and the local school boards.

Our law enforcement policies will be determined by local officials.  The Department of Justice rarely looks into local affairs, and then only if a constitutional question arises or there is an overlap in jurisdictions.  What is and is not declared criminal behavior is determined at the state level.  What will and will not be funded is determined at the state and local levels.

Zoning restrictions, public health codes, fire codes, and economic development projects are a function of state and local government.  While there may be federal minimum requirements underpinning some of these elements, the enforcement and implementation is accomplished at the local level.

In short, voting matters more in state and local elections.  We may, indeed, have the wrong end of the dog.*  The ‘big’ informational campaigns are nationally funded and highly generalized, while it’s the local election which will have the greatest impact on specific  decisions about zoning, law enforcement, and school district policies.  The national elections seem to suck the money, and the air, out of local elections, which are more significantly related to our everyday activities.

Likewise, local and often state party leadership tends to focus on the Big Ones — as well they should, however the level of effort should be improved in terms of local and state elections.  Not only are local and state officials the ‘farm team’ for national offices, but they are the races with the most immediate effect on most people’s lives. So, when did we last hear of a really big “get out the vote” effort in a mayoral race?  A race for a county commission?…

*For more information on the drop off rate, see EAC Chapter 7 (pdf)

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Filed under Economy, Nevada politics, Politics, Vote Suppression, Voting

Senator Heller’s Happy Land: Retirement Income?

hellerSenator Dean Heller (R-NV) had this to say during the Senate Banking Committee’s hearing on retirement security:

“A growing number today’s workers are preparing for retirement through defined contribution plans, like 401(k)s, and Individual Retirement Accounts (IRAs), that allow families to accumulate financial assets from investments in stocks, bonds and mutual funds.  These retirement accounts, along with the development of rules allowing for increased after-tax contribution allowances in Roth plans, are further expanding individuals abilities to contribute earnings to their retirement plan.  Although these are positive developments, many Americans are still struggling to save for retirement.  Senator Dean Heller (R-NV) March 13, 2014″

True… sort of.  Did we notice the part about “workers are preparing for retirement through defined contribution plans?”   Senator Heller makes this sound like a ‘happy thing.’  In fact, there are some serious disadvantages to those defined contribution plans.

In a defined contribution retirement plan (1) the worker/investor takes all the risk; (2) unless the worker annualizes their account balance they can outlive their benefits; (3) benefits may not bear any relation to the working pay; (4) is more expensive to administer than a defined benefits plan; (5) outside service is not easily translated into a larger retirement account balance; (6) employees are not necessarily rewarded for continuing to work if the account balance is deemed sufficient or they want to transfer to a new employer’s program; (7) there is no post retirement benefit increase; (8) it is difficult to transfer a lump sum account into a steady monthly or annual income stream. [IllinoisMRF pdf]

In other words, for an employee to derive the full benefit from a defined contribution retirement plan that individual has to be a pretty savvy investor, and  has to think of him or herself as a ‘non-career’ employee.  There is also a bit of a calendar game going on.  Imagine the difference between a person’s retirement investment portfolio if the person were to retire in the wake of the Mortgage Meltdown of 2008 when the market closed at a low of 6,594.44 on March 5, 2009, [USecon] and the individual who retired as of 3:00 pm yesterday afternoon when the DJIA was 16,075. [Money]

There’s nothing which seems particularly ‘positive’ about putting family retirement plans into the hand of the Wall Street Casino and hoping they accumulate — and peak at just the right time — unless some ickiness happens like fund managers investing in Enron, or Lehman Brothers, or… whatever.

Timing is crucial. If we look at the real world, and the reality of savings in America then the Work Until You Drop Rule could easily come into play:

“The reality is that many DC plan participants are unable to retire or must find a way to generate additional income because their investments failed to meet their needs. A recent study by Fidelity Investments revealed that workers 55 and older had an average 401(k) plan balance of $233,800 in 2011. If those investors retired and put all of their money into high-risk investments (the only way to generate decent returns), they might be able to generate 6% per year. That’s about $14,000 in income.” [Smith InVest]

To put this in perspective, 2014 federal poverty level guidelines put a two person family at 100% of the poverty level based on an income of $15,730, and that would be if they placed their money in high yield high risk investments.

However, Senator Heller is correct, there has been a shift into the defined contribution plans, as noted in EPI testimony to the panel:

“In the private sector, defined-benefit pensions were largely replaced by defined-contribution plans, shifting costs and risks from employers to individual workers. In 1989, 62 percent of full-time private-sector workers had retirement benefits and these were divided roughly equally between those with defined-benefit pensions and those with defined-contribution plans, including roughly 20 percent of full-time private-sector workers who had both. By 2010, 50 percent of these workers had a defined-contribution plan and 22 percent had a defined-benefit plan, including roughly 13 percent who had both (Wiatrowski 2011).” [EPI]

And here’s the part wherein the rubber of Republican theoretical and ideological rhetoric meets the road of reality:

“In theory, the shift from defined-benefit pensions to defined-contribution plans could have broadened access by making it easier for employers to offer retirement benefits. However, participation in employer-based plans, which peaked at just over half (52 percent) of prime-age wage and salary workers in 2000, fell to 44 percent in 2012. This occurred even though the baby boomers were entering their 50s and early 60s, when participation rates tend to be high (Copeland 2013; Morrissey and Sabadish 2013).” [EPI]

What is the result of this shift?  Can we use the Inequality and Uncertainty tags?

“As 401(k)s replaced traditional pensions and the population aged, assets in individual and pooled retirement funds grew faster than income. By 2010, average savings in retirement accounts had surpassed the value of annual household income. However, retirement insecurity worsened as retirement wealth became more unequal and outcomes more uncertain (Morrissey and Sabadish 2013).”  [EPI] (emphasis added)

Here’s what that looks like with real numbers:

Mean household savings in retirement accounts increased from around $24,000 in 1989 to around $86,000 in 2010. However, the growth was driven by a small number of households with large balances. Median savings—the savings of the typical household with a positive balance—peaked at around $47,000 in 2007 before declining to $44,000 in 2010 in the wake of the Great Recession, even as the baby boomers were entering their peak saving years (Morrissey and Sabadish 2013).  [EPI] (emphasis added)

And about those ‘tax incentives’ to which Senator Heller refers as ‘positive developments’ — what of those?

“Retirement account savings are very unevenly distributed. In 2010, a household in the 90th percentile of the retirement savings distribution had nearly 100 times more retirement savings than the median (50th percentile) household, which had a negligible amount. The top 1 percent of households had over $1.3 million in retirement account savings. All told, households in the top fifth of the income distribution accounted for 72 percent of total savings in retirement accounts (Morrissey and Sabadish 2013). Assuming upper-income households receive tax subsidies at least proportional to their share of savings, this suggests that the lion’s share of tax subsidies for retirement savings go to high-income households.” [EPI] (emphasis added)

And so, in Heller’s Happy Land, the rich get richer and the “lion’s share of tax subsidies for retirement savings go to high income households.”   There seems to be something of a theme going on here — Lion’s Shares and Subsidies for the Top 1% — the Republican Concern Core.

Meanwhile, the Wall Street sector enjoys a cut of the savings at every jog and turn.  No wonder Senator Dean “Banker’s Boy” Heller is pleased with the trends?

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Filed under Economy, Heller

Glitches, Gremlins, and the Affordable Care Act in Nevada

DoctorThere are a couple of ways to read the LVRJ’s write up on the Silver State Health Insurance Exchange.   Republicans will ‘rejoice’ that the glitches in the web portal for the exchange have generated a log jam — as if being happy that people haven’t been able to purchase affordable private health insurance plans is something to be applauded.

Democrats will argue the glitches can be fixed, and may argue the proposed extension of the enrollment period will alleviate some issues for those who can demonstrate they attempted to buy an insurance policy before March 31.  Setting aside the initial technical issues for just a moment  (inadequately staffed call center, and software gremlins) it’s important to remember that these health insurance exchanges aren’t a Big Government operation — they are in the business of selling PRIVATE health insurance for major corporations.

Once more — the Silver State Health Insurance Exchange, and other state exchanges throughout the nation, are facilitating the sale of private insurance to people who do not have health insurance subsidized by their employers, and who do not qualify for Medicare.

“Sign-ups kicked off Oct. 1, but technical issues and an understaffed call center hampered enrollments to well below expectations. About 21,000 Nevadans had bought and paid for coverage as of Saturday.” [LVRJ]

Now back to those technical issues.  In short, the good news is that 21,000 Nevadans now have a health insurance plan, the bad news is that there are people having to wait an inordinate amount of time to get one.   Let’s assume for a minute that capitalism works.  If there is a demand for a product there will be sales.  There is obviously a demand for health insurance plans to cover people who are not getting their coverage subsidized by their employers and who do not qualify for Medicare.  We literally have people waiting in line.  The bottom line is the bottom line — there are more people who want to buy private health insurance policies than the current distribution system can manage.

Note, this is NOT an issue involving whether or not people want to buy policies.  It is NOT an issue involving insurance corporations not wanting to sell their policies.  It is a ‘distribution’ issue.  In basic economic terms ‘distribution’ is how producers get their products to consumers.

Anyone who’s run a small business for at least five minutes knows about distribution, and channel or distribution partners.   Most business advisers will inform their clients that having a distribution partner will (1) help increase sales, (2) assist with physical distribution, and (3) add value to the product by providing services to the end-user. [MMDept]  If we are speaking in this context, then the Silver State Health Insurance Exchange is, in essence,  functioning as a Distribution Partner to the health insurance corporations.  It just isn’t functioning very well at the moment.

The fact that there is a Distribution Partner component to the Affordable Care Act should be a giant flapping  flag to free market advocates that the ACA is NOT a government take over of the health insurance sector.  If individuals were to sign up as they do for Medicare, then the government itself acts as the distributing partner for its own product.  Ah, but that would have been “single payer!”

Political Angles

The possibility that the only real problem with the Affordable Care Act lies in perfectly ‘fixable’ distribution issues may be part of the reason we see Representative Joe Heck (R-NV3) all over the map on the associated political issues:

“Obamacare is not going anywhere,” Heck says. “There are parts I agree with and parts that I don’t agree with. I think we need to start concentrating on fixing the things that are wrong with it, as opposed to passing a budget to get $1.4 trillion in deficit reduction by repealing a law that we know we’re not going to be able to repeal.” So why vote for repeal? “That’s the position I ran on, and I will continue down that path as long as I can,” he says.” [NatlJournal]

And then there was the session with a constituent small business owner  told the Representative last August that the ACA was actually helping his profitability.  Crooks and Liars has the video in which Heck, for all intents and purposes, tosses small business owners under the bus while decrying the problems of employers with more than 50 employees.

Meanwhile Representative Mark Amodei (R-NV2) is still peddling horror stories — as per the instructions of the RNC, etc:

“Prior to the ACA they had affordable coverage they liked, noting that they never had a claim rejected. Now, thanks to the ACA, they pay a higher monthly premium and saw their deductible increase from $400 to $5,000 a year. They are in good health and have rarely spent $5,000 a year on medical care, so essentially their future costs will be out of pocket. They were also notified that their coverage will no longer be offered by the end of 2014. Does this sound like health care reform to you? The ACA has made matters worse,” said Amodei.”

Let me guess. Now why would an insurance company pull a policy after the enacting of the Affordable Care Act? [CNN] There were some very common practices which helped insurance corporations sell policies that were not very customer friendly, let’s look at three general examples:

(1) The Carve Out Policy:  Some corporations offered “comprehensive policies” which were anything but comprehensive, and did not cover a broad range of medical procedures or even offer some essential ones.   These were cheap, but they a policy holder couldn’t be assured they’d cover mammograms, prostate exams, and other basic preventative care.

(2) The Cost Limit Policy:  One classic example of these kinds of policies were the Mini-Meds plans.  Some of these had annual limits of $1,000 per year for out-patient services and $2,000 per year for hospitalization. [CR]  Now, compare this to the average cost for breaking a leg which is about $2,500 or more for a fracture requiring a cast. [HCH]  So, one healthy kid in the family breaks one otherwise fabulous fibula and the insurance runs out for the rest of the family for the entire year.  Cheap but not exactly why people buy insurance. Not even close.

(3) The Fixed Benefit Indemnity Policy:  These plans had an upper limit for medical services, after which the YOYO element kicked in. Once the fixed benefit was set the policy holder paid premiums, some in the $450 per month range for $100 apiece for five trips to a doctor, $50 per year for screening tests, and commonly $30,000 worth of hospitalization at $1,000 per day.  [CR] The average cost per day in a Nevada hospital is about $1,856. [KFF]  Again, these policies might have had cheaper premiums — but that was because they had limited coverage and often coverage well below what would be reasonable in terms of what they paid for.

Little wonder these policies were pulled out of the market. NRS 482.351 forbids me from selling you a motor vehicle using “bait and switch,” or deceptive advertising about the condition of the vehicle or its component parts.  I should also not be allowed to sell ‘defective’ insurance or insurance policies which don’t cover basic and essential services.

Thus our Couple In District 2 is now allegedly paying $416 per month for insurance which must now be comprehensive.  What were average families in the United States paying in health insurance premiums per month in 2011? $414.00. And, the average deductible was $3,879.00. [eIns]  Somehow this doesn’t sound as horrific when put in some context.

And so we have Representative Heck voting to repeal the Affordable Care Act — what is it now 50 times? — just because he said he would, not necessarily because it makes any sense; and, Representative Amodei trying to dig up Scarey Stories of people who bought junk insurance and don’t want to pay for the real thing.

Meanwhile … we have a distribution issue.  We can fix that.

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Filed under Economy, Health Care, health insurance, Politics

Ukraine 101

As Ambroise Bierce once put it, “War is God’s way of teaching Americans geography.” [BQ] It needn’t be a full fledged conflict, in these days of cable media it can be a threat of armed conflict in a volatile region.   Unfortunately, what we learn in the form of geographic knowledge we tend to subsume beneath a pile of pre-existing and often simplistic assumptions.

In the interest of complicating a complex situation further, perhaps it’s time to test a few assumptions.

1.Vladimir Putin wants to rebuild the Russian Empire.” This conclusion has been drawn by former CIA Deputy Director Mike Morell. [CBS] Morell opines that the current problems between Russia and Ukraine stem from the ouster of the former Ukrainian prime minister who sought closer economic ties to Russia.   Yes, Putin has decried the break up of the old Soviet Union, so this line of argument has a kernel of consistency.  However, it also requires ignoring the instances in which Putin has observed that Ukraine is an independent nation. [NPR]  The two notions are not necessarily mutually exclusive, but “nostalgia does not presupposed expansionism.” [IndUK]  A little more thought may be in order before we leap to this conclusion.

2.If Ukraine falls then Moldova, etc. are next.”  Slow down. If Putin’s nostalgia isn’t a ‘plan’ for Russian expansion then the argument falls apart, no matter how many nations formerly affiliated with the old Soviet Union are added to the list.

3.It’s just like Georgia.”  Every analogy, or attempt to argue by analogy, eventually crumbles into absurdity, and this one falls apart more quickly than most.   The European Union sponsored a three volume study on the 2008 conflict in Georgia and concluded the conflict was started by…the Georgians.  [EU vol 1 pdf] Specifically, a “sustained Georgian artillery attack on the town of Tskhinvali.”   Given the vast military superiority of Russian forces, had the Russians wanted re re-annex Georgia it would not have been an insurmountable task.  They didn’t. The Russians didn’t even take the Georgian capital at Tbilisi.   Georgia is still an independent entity, with a prime minister elected from a unicameral parliament. [CIA]  That doesn’t mean there aren’t some hard feelings, “Russia’s military support and subsequent recognition of Abkhazia and South Ossetia independence in 2008 continue to sour relations with Georgia.” [CIA]

Abkhazia has a long history of association with Georgia, but not one without periodic conflicts. [BBC] The problems with South Ossetia are more profound.  Their language is more closely related to Persian than Georgian, and Georgians account for less than 1/3rd of the South Ossetian population. [BBC] While the Russians have formally recognized the independence of Abkhazia and South Ossetia  only  Nicaragua, Venezuela, Nauru, and Tuvalu followed suit.  Abkhazia uses the ruble as its currency and about 50% of its total state budget is financed by the Russians.  The economic situation in South Ossetia is a bit more dire, it has one major asset — the Roki Tunnel, which connects Russia to that portion of  Georgia.  Most of its economy is based on subsistence farming.

In short, it’s one thing to ‘declare’ a region independent and offer it recognition, but quite another to present the world with a fait accompli.  And, we’d also be well advised to note the geographic and economic ties between Russia and the two portions of Georgia upon which it has bestowed recognition are more complicated than a superficial glance would evoke.

4.We have to DO something.”   That would be a good thing, had we major compelling interests in Ukraine.   The major imports (in order) are (1) refined petroleum 13%, (2) crude petroleum, (3) semi finished iron, (4) hot rolled iron, and (5) railway freight cars. [OEC]  32.4% of the country’s imports come from Russia, 9.3% from China, 8% from Germany, 6% from Belarus, and 4.2% from Poland. [CIA]  The amount of refined petroleum imported might suggest that U.S. companies might be able to Drill Baby Drill into relevance.  This, of course, assumes that U.S. petroleum products sold on the international oil market would dominate the Ukrainian market.  However, when a country has a neighbor with an abundance of natural gas and refined petroleum (Russia) readily available at lower cost, then both the cost and the convenience outweigh U.S. capacity to get more involved in that market. [WaPo]  The arguments for the TransCanadian Keystone pipeline and fracking are essentially for our own domestic political consumption, and have little relevance for the petroleum (refined or otherwise) on global markets.

If we aren’t a major trade partner with Ukraine what vested interests are we to protect by involving ourselves in their political turmoil?   The related question is: Are we the global police force?  If we adopt this stance then we have to be ready to assume the costs associated with it.   We are paying approximately $816 billion for our operations in Iraq, another $701 billion for operations in Afghanistan [GP]  how much more are we prepared to pay for incursions into Ukraine…Syria…Libya…?

If we don’t adopt this stance then are we prepared to acknowledge that other nations, specifically members of the European Union, and even more specifically Germany, have greater interests involved in the stability of their relations with Ukraine and Russia?  [CarnegieEurope] [New Yorker]

Might a better American policy on the current issues between Russia and Ukraine be to allow those with more immediate interests take the lead in defusing the situation?  Or, in basketball parlance, should we be the player who makes other players on the court more effective?

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Filed under Economy, energy, energy policy, Foreign Policy, Politics