Loaded Language and Other Matters

Here we go again. This time in Nevada, and this time in regard to the expansion of background checks for private gun sales.   The “gun enthusiasts” are pummeling the Governor’s office with vehement Veto It messages — what else is new? [LasVegasSun]  The Nevada Progressive has been following the course of SB 221 and reports that Governor Sandoval has categorized the bill as “overly broad.”

What might “overly broad” mean?  Here’s yet another reminder that we have only a few classes of individuals who are prohibited from gun ownership in this state — felons, fugitives, dangerously mentally ill, children, undocumented aliens,  and a few who are temporarily  restricted as a result of spousal abuse incidents.   Is the Governor contending that restricting individuals in these classes constitutes an “overly broad” definition of prohibited purchasers in private sales over the Internet or at gun shows?

Senator Heller (R-American Bankers Association) has started to file his amendments to the Senate version of the Immigration Reform bill — The Ralston Report has his initial venture.   Senator Rand “Aqua Buddha” Paul (R-Tea Party Patio) has his own idea about amendments to the bill, such as one to make it all but impossible to declare the borders secure enough to allow immigration reform measures.  [WaPo]  It seems as though immigration reform opponents won’t be satisfied until the U.S. Border Patrol adopts the infrastructure and personnel policies of the old East German regime?

Meanwhile, Senator Schumer (D-NY) has declared an amendment to the bill by Senator John Cornyn (R-TX) a “non-starter” and declines any suggestion that the majority would want to negotiate with the Texas Senator. [TPM]

Another Republican Ladies Day Moment:  Pregnancy as the result of rape shouldn’t be a consideration because it’s really rare… Or, in the words of Arizona Representative Trent Franks:

“Before, when my friends on the left side of the aisle here tried to make rape and incest the subject — because, you know, the incidence of rape resulting in pregnancy are very low,” Franks said.

Franks continued: “But when you make that exception, there’s usually a requirement to report the rape within 48 hours. And in this case that’s impossible because this is in the sixth month of gestation. And that’s what completely negates and vitiates the purpose for such an amendment.”  [WaPo]

What should be negated and vitiated is the troglodyte perspective of throwbacks like Representative Franks?  A bit more at Think Progress. Another day, another splendid example of Republican Outreach to women and ethnic minorities.  Click over to Perrspectives for a lively column on how “Arrested Development” explains today’s GOP.

Representative Franks isn’t the only one channeling his Inner Akin, the Governor of Wisconsin would like to enact requirements for transvaginal ultrasounds and to shut down Wisconsin’s health providers who offer abortion services. [Think Progress] The link back includes this bit of information about the progress of the Wisconsin bill:

Senate debate of the ultrasound proposal came a week after Sen. Mary Lazich, R-New Berlin, introduced it.

“Sara Finger, executive director of the Wisconsin Alliance for Women’s Health, said that gave her less than 24 hours to analyze the bill and prepare her testimony for hearings.

“This speed of passage sends a clear signal that these legislators want to deny any efforts to ensure due process and are refusing to allow sufficient time for medical providers, advocates, women and their partners to truly weigh in on the anticipated damaging effects of this legislation.” Finger said in a statement.” [Twin Cities]

Yes, most anti-abortion bills do tend to move quickly in GOP controlled legislatures.   See also: Ed Kilgore’s post “Back to the Poisoned Well.”

Under-reported:  With all the press attending to the “surprise” revelation that the NSA collects phone numbers, duration of calls, and destinations … is Anyone Really Surprised? — an unheralded report from HUD is receiving scant attention:

Earlier this year, we highlighted how the racial wealth gap tripled from 1984-2009, mainly due to structural barriers to wealth accumulation for households of color, including rampant housing discrimination that constrained where African-American families could live and restricted access to affordable home loans. A new report from HUD shows the extent of housing discrimination against people of color. The report found that people of color looking for homes are told about and shown fewer homes and apartments than their white counterparts. This type of discrimination raises the costs of the housing search for people of color and restricts their housing options.  [Demos Policy]

This wasn’t really all that surprising either.

Why DB hasn’t discussed the NSA flap?  I will when I stop yawning.  Congress approved the FISA Amendments Act of 2008, and the Protect America Act of 2007 — Mr. Snowden’s scenery chewing performance notwithstanding, he simply “revealed” the authorized programs exist. Did anyone think they wouldn’t?

Round Up

Wondering about the level of taxation in Nevada?  The Small Business & Entrepreneurship Council says “We’re Number Three!” (Nationally) for being all sweet and cuddly for businesses disinclined to pay taxes. [NNB] But, we are going to collect sales taxes from Amazon.com for Nevada customers. [NNB] And, all this while Governor Sandoval tells us we don’t need any more taxes since the last batch has been extended. [NNB] So, we don’t have enough taxation to make business owners and corporations howl — and we don’t need any more business taxes — but we’ll happily collect more sales taxes (which obviously have a greater impact on those with lower incomes) on online purchases from the Big A…  The Lesson: It’s Only A Tax Increase If A Special Interest Has To Pay It?

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Washoe County, Nevada is still getting some backwash from the Housing Bubble Debacle.  Short-sales are up, wherein mortgage lenders agree to sell a piece of real estate for less than what is owed.  “In Reno, short sales have been accounting for about a third of all sales in the past couple of years, according to the Greater Reno-Tahoe Real Estate Report. Short sales accounted for 116 units sold in March — 31 percent of all home sales in the area. Foreclosures posted 123 unit sales during the same period, which was 34 percent of inventory sold.”  [RGJ]   Meanwhile, back with those Wonderful People Who Brought On The Housing Bubble With Their Insatiable Appetite For MORE Mortgages –

“In case their (derivatives traders/bankers)  lobbying falls short, the industry — largely dealer banks and commodities firms — has been pushing legislation that would pre-empt the rulemaking process and tie the agencies’ hands. So far, no fewer than 10 such derivatives bills have been introduced in the House; two have passed and several more have cleared committee.

Not satisfied with that, influential lawmakers have been not so subtly warning regulators to go easy on derivatives. This is incredibly intimidating: Congress controls the agencies’ budgets, and the increase in workload mandated by Dodd-Frank leaves them woefully short on funds.

And should a derivatives rule unpalatable to the dealers somehow survive this Beltway obstacle course, the agencies face an explicit threat of a lawsuit. This has had a chilling effect. As Bart Chilton, a CFTC commissioner, told me, regulators fear there is “litigation lurking around every corner and down every hallway.”  [Lowenstein, Bloomberg]

Thus we have bankers, who having been bailed out once, have now decided that there is NO reason for any sentient human being to advocate regulation of their shadow system and their “private placement” activities — which got us into this Mess in the first place.  The only good news is that we may have found the bottom of this market. [Bloomberg]

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The bottom of the housing market may be upon us, but the litigation lingers on.   A judge has denied AIG’s motion in the Bank of America settlement. [Reuters] A federal judge denied Bank of New York Mellon’s motion to dismiss a lawsuit by investors over the bank’s role as a trustee more mortgage backed securities  in the mess made by Countrywide.  [Reuters]

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Maybe the Republicans do have a “health care” plan?

Health care would be “addressed” by disabling the implementation of ObamaCare, which Mitt Romney has repeatedly said he’d do on his first day in office. Even if you believe Romney and other Republicans actually have their own agenda of “health reform,” it’s mostly just a matter of replacing today’s health care deduction for employers with a tax credit for individuals, and then passing one bill allowing interstate insurance sales; the “market” (i.e., the rush of insurers to states with little or no regulation) will take care of the rest, and besides, it’s not the federal government’s job to make sure everyone has health insurance, right? [WashMon]

Yes, and with the rush to those states with little or no restraint on health insurance corporations we can reasonably expect that those corporations will not provide insurance to individuals with pre-existing conditions, not include vaccinations under basic policies, not include wellness screening for prostate, breast, or other cancers, and not include tax breaks for small businesses which provide health care plans for their employees.  It’s the Bush System on Steriods.

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Some cheese with that whine?  Presumptive nominee Mitt Romney’s saying Life’s Unfair!

“This America is fundamentally fair,” he said. “We will stop the unfairness of urban children being denied access to the good schools of their choice; we will stop the unfairness of politicians giving taxpayer money to their friends’ businesses; we will stop the unfairness of requiring union workers to contribute to politicians not of their choosing; we will stop the unfairness of government workers getting better pay and benefits than the taxpayers they serve; and we will stop the unfairness of one generation passing larger and larger debts on to the next.”  [TPM]

Translation:  We will provide vouchers for parents to subsidize private schooling for their children.  We will stop assisting manufacturing companies with research and development.  We will attack trade unions.  We will further slash pay for government employees.  We will give tax breaks to the 1% and impose austerity on the remaining 99%.  There’s a good piece about privatizing education here.   H/T to Nevada State Employee Focus, there’s another excellent article on the attacks on public employees here.

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Speaking from friends in interesting places: The Soap Opera that’s become the Nevada Republican Party continues apace, and to read the gruesome details click over to The Nevada Progressive.

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More dispatches from the War On Women in the Sin City Siren.   Meanwhile anti-abortion activists are urging a “personhood bill” for the state of Oklahoma, the New Hampshire Senate has 6 abortion bills on its agenda, and a move to defund Planned Parenthood in Ohio is on temporary hold, but could reappear at any time.   More restrictive bills are in process in Tennessee, Louisiana, and Iowa.

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Political items worth the click and read:  “The Koch Brothers Exposed,” Rolling Stone.   “Mitt Romney’s Attack Dog,” (Larry McCarthy negative ad guru), New Yorker 2/2012. “Don’t Let Business Lobbyists Kill The Post Office,” Rolling Stone.   “Campaign Tips from Cicero,” Foreign Affairs.

Coffee and the Papers

Oh my, the story concerning Nevada über-lobbyist Harvey Whittemore has all the Big Names — Ensign, Ernaut, Sandoval, Reid, Heller, Berkley — and a flight of campaign donations returned. [full story Las Vegas Sun] Perhaps leading to the conclusion that Hell hath no fury like a business partner scorned?

Someone might want to tell Senator Rubio (R-FL) that he really doesn’t get to have it both ways.  He can’t devote a full paragraph to his family’s flight from Castro’s Cuba [Rubio] in his Congressional biography, which is a little strange since his parents left in 1956* (and then attempted to return, or visited, or something in ’61),  campaign as one who  “always publicly identified with the exile community and has a strong following within it. In a campaign ad last year, he said: “As the son of exiles, I understand what it means to lose the gift of freedom,” [CSM] [WaPo] and then get touchy when Senator Harry Reid (D-NV) calls him out for stonewalling the confirmation of Mari Carmen Aponte as ambassador to El Salvador in order to pressure the Obama Administration into changing policy toward Cuba and Nicaragua. [LV Sun]  *Fidel Castro did not take over until February 16, 1959.

The Yucca Mountain Breakdown. Another slip of the tongue from Mark Amodei (R-NV2) “While nobody wants a nuclear landfill in Nevada, we probably ought to at least talk about it,” Amodei said. “Well if that is breaking ranks, then yes I did.” At which point former Nevada Governor Richard Bryan came down upon the freshman representative like a ton of toxic dirt. [full story Nevada News Bureau]  Just asking, but if nobody in Nevada wants it — what is the point of talking about it?

No matter how many Democrats jump on board, the cleverly named CPU Act is a bad idea.   The bottom line is that enactment of this legislation would cut tech workers’ pay and allow employers to cut overtime pay. [More at Economic Policy Institute]

A bankruptcy is a bankruptcy… Governor Romney is having some difficulty in Michigan with the auto bailout rhetoric.  And, then’s there’s Bain in the mix:

“The managed bankruptcies that Romney had in mind in early 2009 for the two car companies pretty clearly were liquidations that would then allow Bain Capital or other venture capital firms to buy small parts of these companies, eliminate union workers, and … I’m not sure.  A weird, incoherent ad his campaign’s been running on the local news broadcasts actually hints at the elimination-of-union-workers thing, while actually advertising that “liberals” got “Obama” to save the auto industry.  Seriously.” [Angry Bear]

Not. So. Fast.  Senator Pat Toomey (R-Club for Growth) was incensed that anyone would believe his taxation plan would require tax increases for those earning less than $200,000 annually.  Except Senator Toomey’s tax plan would require tax increases for those earning less than $200,000 annually.

“The math is irrefutable.  Senator Toomey told O’Brien that, while reducing their deductions and credits, he also would cut tax rates for people below $200,000 so that they would face no net tax increase.  But that can’t be.  If the tax plan is supposed to produce a net increase in revenues, and if it loses revenue from people making over $200,000, then it simply must raise revenue from people making less than $200,000.”  [CBPP]

Financialist Follies.  John Paulson, he of the Hedge Fund Titans who helped create the Wall Street Casino, is worried about a Greek default:

“We believe a Greek payment default could be a greater shock to the system than Lehman’s failure, immediately causing global economies to contract and markets to decline,” the hedge fund said in the letter, a copy of which was obtained by Bloomberg News. The euro is “structurally flawed and will likely eventually unravel,” it said.?  [Bloomberg]

Look carefully at Paulson’s terms.  “Shock to the system” as in a shock to the financial markets.  “Causing global economies to contract” as in investment banks particularly in France and Germany will find themselves in another bind.  “Markets to decline,” at this point Paulson isn’t talking about the market for automobiles, homes, refrigerators, or agricultural products — the only “market” in which he is interested is the Stock Market.

In short, we might want to take a deep breath and contemplate what another self-induced panic by the Wall Street wizards might mean for credit access for American consumers and businesses.   Remember: Those investment banks could have invested in plant expansion, infrastructure projects, manufacturing upgrades, or entrepreneurial enterprises — it was THEIR choice to invest in Greek debt.

Brute Force, that’s how a Citigroup whistle blower described the firm’s attempt to paper over its bad loans. [C&L]

“Instead of reporting the defects to the Federal Housing Administration, the bank saddled the agency with losses by falsely declaring the loans fit for its federal insurance program, according to a complaint filed yesterday by the U.S. Attorney’s Office in Manhattan. Citigroup agreed to pay $158.3 million to settle the claims, and admitted that it certified loans for FHA backing that didn’t qualify.”  [Bloomberg]

And, how was this accomplished?

“Efforts to quash negative quality-control reports about mortgages continued into 2011, according to the complaint. That January, at a quarterly staff meeting that Hunt said 1,000 people attended, CitiMortgage managers gave a “Star Players Award” to workers who had successfully challenged negative reviews during meetings with quality-assurance workers and others, according to the complaint.”  [Bloomberg]

The press release from the Department of Justice, USAO Southern District of NY is available here for those who want more details. (pdf)

The Urban legend of those Terrible Health Care Costs.  Oops, the facts just don’t fit the narrative.

“In fact, the recent trends are mildly favorable. As J. D. Keinke of the American Enterprise Institute writes today in the Wall Street Journal, the idea of runaway health spending is a “myth” because “new data show that health spending over the past several years has been normalizing toward the rate of general inflation, rather than growing higher and higher, as had been the case almost continuously since the 1970s.” … [EconView]

Faux New tries and fails to get the author of the book on the Obama Administration to fill in the blanks with misinformation.  Find the entertaining and illuminating video here.

WalkerGate gets more interesting as investigators are probing into the possibility of real estate bid rigging in Wisconsin while Scott Walker was Milwaukee County Executive. [BlueCheddar] [MJS 1/25] Walker has asked for two more weeks for reviewing recall petitions. [MJS]  This, while a three judge federal panel excoriated Wisconsin Republican lawmakers and told them:

“…to turn over 84 documents to a group of Democrats in a blistering order that said Republicans had engaged in an “all but shameful” effort to keep its efforts hidden from the public.

The court promptly released the documents that showed, among other things, that Republicans who drew new election maps last year largely orchestrated the public testimony given in support of them.

The three federal judges – two of them appointed by Republicans – were unanimous in their decision. It came after a string of orders against the Republicans and just five days be fore the judges will preside over a trial in Milwaukee to determine whether the maps adhere to the U.S. Constitution. [MJS]

But, the saddest feature of the attacks on Wisconsin citizens and their rights is to be found in this article, including:

“Before Sunday’s sermon in many churches in Milwaukee, ministers and religious leaders will ask those sitting in the pews to pull out their photo identification as a step to make sure that their members can vote in Tuesday’s primary election.” [MJS]

Friday Roundup: New, Views, Bits, and Pieces

Don’t Leave Home Without It — a person might need to charge his Nevada inauguration expenses on it — Sandoval charged expenses on American Express. [LVSun] Great way to “itemize” without itemizing. Renown Nevada lobbyist Harvey Whittemore is under investigation for funneling campaign contributions. [RGJ]

Nevada casinos made  modest revenue gains in 2011. [NNB] Good news for state revenues. While in some other states there are some strange tax proposals being discussed. [CTJ] There’s also some good news for the western states from Brookings West’s 3rd quarter report. (pdf)

Contrary to all the rhetoric about an “entitlement society” 90% of federal benefits go to the elderly, the disabled, and to working families. [CBPP] There’s even a chart for this:

Worried that the Toxic Emissions rules will detract from job growth? Don’t be.

“Taking into account the new data from the regulatory impact analysis (RIA) of the final rule (EPA 2011b), this issue brief finds that the conclusions of the earlier report, based on the RIA of the proposed rule (EPA 2011a), largely stand: The toxics rule will lead to modest job growth in the near term and have no measurable job impact in the longer term.” [full report at EPI]

Meanwhile back at the housing mess… “Despite record low mortgage rates subprime borrowers are still getting screwed,” [Business Insider]  Ben Walsh explains why the CNBC rant about the mortgage foreclosure settlement was dead wrong, in “Five Reasons…“

Careful with the causation.  The situation in Greece is a mess.  Stock prices dropped today when the consumer confidence report showed a downward tick AND there’s some not very good news about the situation in Greece.  [Bloomberg] [Reuters] Here’s an easy prediction: Should the Greeks choose to default on their indebtedness, Wall Street will take a bath. If Wall Street takes a bath, then the charge will be made from some quarters that “Obama’s economic policies have failed.”  Easy. Now. The Administration is responsible for DOMESTIC economic policy, while what happens in the Eurozone depends on the Europeans.  That the Wall Street Wizards waded into those waters isn’t the fault of American politicians, American workers, or American voters.

The Greek Mess may take years to resolve. [Bloomberg]  Four senior Greek members of the government have resigned, further complicating the problems. [BBC] And, the Greek problems continue unabated. [BBC]  There is an excellent background piece from the BBC on how the bankers and the Greek government worked a little magic to make their debt disappear before Greece joined the European Union.  The Germans are demanding Greeks take quick action. [DerSpiegel]  Stayed tuned to this topic.

 

NPRI Throws Mud At Governor’s Shiny New Economic Plan

Nevada Governor Sandoval has a new plan for the state’s economic recovery, [LVSun] by which he hopes to add 50,000 new jobs by 2014.

“The state’s finalized plan was based on a 178-page report prepared by researchers with the Brookings Institution and SRI International. That plan identified seven areas for the state to focus on, based on the state’s strengths. That included a renewed focus on gaming technology and innovation, developing the private aerospace and defense industries, and renewable energy.” [LVSun]

The Brookings Report identified seven economic sectors and 30 “targets” which hold potential for growth: (1) Tourism, Gaming, Entertainment; (2) Health and Medical Services; (3) Business IT ecosystems; (4) Clean Energy; (5) Mining, Materials, Manufacturing; (6) Logistics and Operations; and, (7) Aerospace and Defense.

The report calls for rationalizing the state’s economic development structure, regionalizing it under a general umbrella of state planning, and (a) “bolstering capacity for innovation and commercialization,” (b) “expanding global engagement,” (exports/imports), and (c) “aligning higher education and workforce development resources for innovation and diversification.”  The plan has several features to commend it.

As argued in yesterday’s post, it is far easier to build on existing economic sectors which have growth potential than it is to apply either a shot-gun approach wherein we attempt to attract “anything” that may come our way, or to attempt to dream up “new” areas of economic activity which may or may not fit Nevada’s existing economic situation.

Another feature which hold promise is the regionalization of economic development efforts.  Not only because there are substantial differences between the economic bases in urban and rural Nevada, but also because there are, to some extent, differing interests in northern and southern Nevada.

The third feature which holds promise is that the Brookings Report, and the Governor’s adoption of its general outlines, calls for placing more emphasis on research and development with an eye toward commercializing the results.  This recognizes a shift in focus described last March in a report from the Rockefeller Institute, SUNY:

“For much of the twentieth century, states’ economic development efforts centered on incentives, financial packages, cost comparisons, labor policy, permitting requirements, roads and water systems, and so on — things that state governments are comfortable working with, but that do not suffice to meet key challenges for the new economy. The twenty-first century paradigm, in contrast, is shifting toward putting knowledge first. For states, increasingly, that means connecting their higher education systems more closely to their economic development strategies.”

Nevada has definitely been attempting to function in the 21 century with that old 19th and 20th century approach, a reminder from yesterday:

The State advertises that we have no corporate income tax, no taxes on corporate shares, no franchise tax, no personal income tax, no nominal annual fees, no unitary tax, no franchise tax on income, and no tax on gifts or inheritances.  We have no estate tax, and a minimal payroll tax. Promise to stay in Nevada for 5 years and we will give you a sales and use tax abatement, sales and use tax deferrals, personal property tax abatement, and a modified business tax abatement.  If you are a qualified recycler we’ll toss in a 50% reduction in the recycling property tax. [LCB] [Desert Beacon]

For all intents and purposes, Nevada has been trying to balance its economic development on only one leg of the stool, on the vain and vague hope that “if you keep taxation low enough they will come.”   This would be fine, except that it ignores the four main factors informing the decisions about business location: ” (1) workforce characteristics; (2) transportation infrastructure; (3) research facilities and expertise; and (4) market location.”  [DB 12/14/10]

The NPRI seems equally intent on staking its claim to 19th-20th century solutions to 21st economic challenges. The reported response contains all the right conservative buzz words, without acknowledging the existence of any measures calculated to alleviate economic stagnation:

“It’s a statement of abandoning a belief in free market enterprise,” said Geoffrey Lawrence, deputy policy director for NPRI. He said new industries will be looking for subsidies to get off the ground instead of consumer demands.“Investments will be subject to political factors,” he said. “It’s going to become highly politicized.” He said the state economy is starting to recover, something the report starts out by acknowledging. “This is a big disappointment,” he said. “I think it’s a crony capitalist scheme.” [LVSun]

The Institute may not have heard the venerable line from Dr. Geoffrey Nicholson, the inventor of the now ubiquitous Post It Note, “Research is the transformation of money into knowledge. Innovation is the transformation of knowledge into money.”  The entire idea is that the research results can be translated into innovation by discovering what works and what doesn’t. What does work is the basis for commercialization.

The Institute also repeats what is now becoming a common narrative in conservative circles — they’ve rediscovered Demand.  Now, it’s “demand” that should inform all governmental decisions regarding business environment enhancement.   The NPRI is essentially arguing that if there is no existing consumer demand for a product then there is no reason for governments to support basic and applied research.  This is frankly absurd.

The Water Security Corporation commercialized water purification research from NASA, and since 2005 has been manufacturing purification equipment for homes around the world. [WSC] There was no “demand” for Face International’s Wireless Light Switch before engineers at the Langley developed a way to transform mechanical energy into electrical energy.   There was no “demand” for memory foam mattresses and pillows before the foam was developed for the NASA program. [NASA]  Someone is going to find a way to commercialize the “artificial leaf” developed at MIT which makes fuel from sunlight. [MIT]

If we adopt the posture of the NPRI then we’d have no modern home water purification systems, no wireless switches, no memory foam pillows, and no future commercial applications of that “artificial leaf.”  We’d also be without a host of other popular commercial products, the results of university-business research partnerships.  However, the NPRI isn’t through flame throwing:

“The plan calls for government officials to dole out direct state support and other subsidies in order to “incent entrepreneurship.” The incentive for genuine entrepreneurship is profit from serving the public. Unfortunately, what this plan would encourage is corporatist rent-seeking.”

What?  So, government land grants didn’t help build the U.S. railway system?  It was “corporatist rent seekers” (whoever they might be?) who received Small Business Administration loans to finance Greenville, South Carolina’s “Republic Locomotive,” a manufacturer of small industrial locomotives?  “Nationally SBA-backed lending continued the upward trend we saw last year,” SBA Administrator Karen Mills said. “Due to the Small Business Jobs Act and a return to pre-recession lending levels, over 61,000 small businesses had access to capital. ” [SBA]   My goodness! There are 61,000 little “crony capitalists” on the loose in the country — creating jobs?  Oh, however will our free market economy last?

Should the NPRI release its fingers from its pearls, arise from the fainting couch, and join the rest of us in the 21st century, it would see that there is much to be commended in the Governor’s economic plans.   If anything, the Governor’s proposal doesn’t quite go far enough toward developing the physical infrastructure necessary to facilitate commerce.  We could do with even more construction and renovation in our air transportation system, and in regard to our wastewater treatment facilities as well.  [DB]  At least we’re making a start.

Recommended Reading: Shaffer & Wright, “A New Paradigm for Economic Development,” Nelson Rockefeller Institute of Government, SUNY-Albany, March 2011.  PDF format.   See also: Higher Education Alliance, Rock River (Northern Illinois), “The Role of Higher Education in Economic Development,” NIU Outreach 2005. PDF format.

Quick Roundup: Fires, Flashes, and Files

** See the Reno Gazette Journal for updated information on the Washoe Drive Fire in the Reno/Carson City area.  The paper also has an updated map of the fire area. Carson Now has a more detailed map.

** Nevada Republican donors are filling campaign coffers in an effort to wrest control of  the Nevada State Senate. [LVSun report] The Secretary of State’s office has launched “Aurora” a searchable data base for campaign finance information.  [NNB] Assembly Republicans selected Reno Assemblyman Pat Hickey to head their caucus. [LVSun]  Governor Sandoval isn’t sorry he backed Rick Perry. [RGJ]

** The Aurora site is a bit slow loading, but does contain interesting information.  For example, one of the major donors to State Sen. Michael Roberson’s campaign treasure is the Dollar Loan Center, Sioux Falls, SD. [report]  DLC is quick to point out that they are not a payday lender, but an alternative for the “unbanked” or “running short.”  DLC, like Wells Fargo, charges $7.50 per $100.00 borrowed, meaning there’s a 261% annualized interest rate over a two week payment cycle. [LVRJ]

** The Secretary of State’s office also reports: “The elections division reports that 27,933 active Democratic voters and 14,922 active Republican voters were moved to inactive status. At the end of December, 395,845 active Republicans and 446,679 active Democrats are registered in Nevada. In all, the total number of active voters in December is 56,832 less than in November.”  Inactive voters are not disqualified, all that’s required to return to active status is that they vote in the next election or affirm their voter registration information.

** The Secretary of State’s office inserted a handy count down clock on the home page so we can all know that as of today there are 289 days (+ hours, minutes, and seconds) before the November 6, 2012 general election.  Good Grief!.

** And so for 289 days we will have candidate Romney telling us he’s lived on the real streets of America [TP] (as opposed to inside the perimeter of US 495 with the rest of the D.C. villagers).  Those “real streets” would include a $12 million ocean front mansion in California, a $10 million home in New Hampshire, and a lovely townhouse in Belmont, Massachusetts.  [WashMonthly]  Or, do we have another 289 days of the Romney campaign telling us that his tax returns are a “non-issue?” [ThinkProg]Then there’s the possibility of another 289 days of trying to contain the Bain Capital connections….[TPM]

** Speaking of capital gains, Jared Bernstein has more to say today that is well worth a click and read.  Investment isn’t statistically connected to tax rates, but to the tax games played by advisers who tell their clients how to make “everything” a capital gain so as to avoid income taxes.

** Digging out?  Only 26 of the 363 metropolitan statistical areas in the United States have recouped the jobs lost during the recession.  [BusInsider]

** Recommended reading: The San Francisco Federal Reserve has a report on the suburbanization of poverty.

Despite its persistent association with the “inner city,” poverty has shifted toward the suburbs in the San Francisco Bay Area over the past decade. Using data from the 2000 census and the 2005-2009 ACS 5-year estimates, this research brief examines the changing geography of poverty in the Bay Area and its implications for the community development field.

The report (pdf) is worth the 2.07MB download.

Philosophical Stuff: Mortgage Modification in Nevada and the Moral Hazard

There’s always a point at which ideology and reality meet, and if we’re seeking a rational solution to Nevada’s economic problems then reality must inevitably trump ideological concerns.  Nevada governor Sandoval is at this crossroads, and has chosen to direct his administration to explore ways to assist homeowners facing foreclosure.  [LVSun]

One of the problems with supply side “invisible hand” ideology is that it offers only a One Size Fits All to economic issues.   For example, the NPRI’s objections to Governor Sandoval’s suggestion are underpinned by the Moral Hazard argument:

“First, it’s unjust to use taxpayer dollars to subsidize the entities — the individual who can’t pay his mortgage and the bank that made or bought the loan — that are causing the problem. Now, this money is coming from the feds, so at least Sandoval isn’t spending state money. But this interference is still going to make things worse.

By financially rewarding those who are in or near foreclosure, you incentivize other homeowners to flirt with foreclosure and punish those who pay their bills on time. In turn, this depresses home prices, which hurts every homeowner who is doing his best to make on-time payments.”

This argument makes sense, but only superficially.  Yes, people should be responsible for paying off their bills and contracts.  Yes, some individuals made some irresponsible decisions in terms of financing, or refinancing, their homes. Therefore, why should there be any collective response to their individual problems?  To address this question we need to take on some of the illusions of the Almighty Market.

When we strip all the tangential issues away from the troubles in the housing market what we find is that depressed home values have some homeowners “underwater,” if not already drowning in debt.   We’ve come to speak of  value, cost, and price when speaking of the housing market as if these were synonymous.  They aren’t. 

The Basics

The differences in terminology aren’t merely semantic or academic, they go to the core of what we’ve come to believe about how capitalism should work.

For example, the value of a home is not only its market price but also incorporates the protection it affords the family, including the quality of life which can be attained while living in that residence and location.  Part of the value of a home includes the quality of the neighborhood schools, the proximity of parks and recreational facility, and the networks of social relationships in the community.

The cost of a home isn’t measured purely in dollars and cents either.  Paying off the mortgage is only one part of a home’s cost.  There are expenses for insurance, upkeep and maintenance, and improvements which must also be considered in the total cost of a residence.

Now we’re down to the price.  In terms of the housing market, the price of the home is the best offer from an immediate buyer.  So, how does classical capitalism explain how the price is determined?  Back to Econ 101:  The market price is established by the interaction of supply and demand; and, the equilibrium price is that achieved when the demand is equal to the supply.

Here’s where the rubber starts meeting the road.  If the ‘best’ price is one that can be derived algebraically from quantified inputs like how many houses are on the market, and how many people want to buy them, then we would probably not have created the Housing Bubble in the first place.   However, we did have a housing bubble, just as we had a Stock Market Bubble, just as we had a Dot.Com Bubble, just as we had the Savings and Loan bubble, just as we had a Tulip Bubble, just as we had a South Seas Bubble…

We’re Forever Blowing Bubbles

Why? Without getting into all the particulars of each Bubble created, and then pricked, by our markets, they do have one thing in common: A Failure of Judgment.  If we look back to the Housing Bubble we can see failures on several fronts.  Potential homeowners were attracted into the market by a political decision predicated on the Ownership Society as perceived by the Thatcher government in Great Britain:

“She thought the housing would be better maintained, but more importantly she thought that homeowners would become more responsible citizens and see themselves as having a real stake in the future and in the quality of life in their communities.” [Cato]

U.S. policy since at least 1992 advanced the “better citizens through home ownership” theory.  This amalgam of political and economic theory led to the promotion and marketing of the “Everyone Needs A White Picket Fence Around Their Own Subdivision Home” construction boom.  Construction companies were attracted into the housing market with low interest rates for construction loans; banks got into the act with mortgage origination, more banks got into the act with mortgage servicing, yet more banks got on stage in the secondary mortgage markets, bankers enthusiastically joined in the game securitizing the secondary mortgage instruments, joined again by those making sideline bets on those securities, and we Bubbled right along. Where did the judgment fail?

Let’s take one step back before moving this argument further:  In the bad old days a person buying a home got a 20% down 30 year fixed rate mortgage.  In other words, the loan ratio was 80-20, with the homeowner having a 20% stake in the actual ownership of the residence.  Also, in those bad old days, there was more knowledge than information in the pipeline, and we need knowledge to make good judgments.

Before the housing booms (and busts) in the 1980′s and the 2000′s, local bankers and homeowners were practicing the principles of an Ownership Society.  The local banker knew more about the prospective mortgage seeker, knew perhaps not only the amount of his or her income but also may have had a better sense of the permanency of that employment.  Underwriting standards were higher because the bank, which might have kept a significant portion of the mortgages on its own books, had an ownership stake in the process.

The problem in the early 2000′s was that the knowledge accrued by homebuyers and mortgage providers in a previous era was dissipated and diluted into statistics about “units” and “trends” and inserted into algorithms which sought to reduce that knowledge into formulaic whiz-bang fast fodder for investors.  It was the economic version of observing statistical trends on the productivity of horses and applying the conclusions to automobiles.

Information regarding the statistical probability of defaults in the Fixed Rate Era was unfortunately applied to the probability of defaults in a milieu of subprime, Alt-A, no-doc, adjustable rate, pick a payment, creatively financed, mortgages.  In short, we had Information about mortgages, but no Knowledge about how the new products were going to work.  Judgment fails without knowledge.

The failures of judgment can be set at the doorsteps of not only individuals who didn’t carefully consider the ramifications of their indebtedness in 2005, but also at the steps of the financial institutions which were promoting the direct opposite of ownership — liability.  At this point it’s probably a good  time to repeat the maxim that one man’s liability (debt) is another man’s asset, and by the time we got finished distributing the risk of all these liabilities we created a situation in the Fall of 2008  in which ownership was so diluted that it was all but impossible to discern who actually owned what.  We had lots and lots of “information” about the housing market, but frankly speaking, very little “knowledge.”

Prices, Impulses, and Peril

Now it’s time to ask another question relative to the Moral Hazard so feared by the NPRI:  Why would anyone “flirt with foreclosure” and risk punishing those who pay their bills on time?  Why would banks reduce their underwriting standards to accommodate the financial demands of those who would do so?

A simplistic, but unsatisfactory, answer is They Were All Greedy.  Indeed, they probably were, however even good old fashioned human greed has its limits, which are generally reached as soon as a human being perceives good old fashioned danger.  Why didn’t either side of the mortgage equation see the Danger Signs well before the situation became downright perilous?

The answer may come in two parts.  In the first part, people purchased mortgages they thought they could repay, given the information they had at the time.  Received wisdom, aka common sense, dictated that real estate values, which were defined as assessments or valuations and market prices, always increased.  People were lulled into believing that the market price of their property would increase, because that’s what it had always done before — in the bad old days of the Fixed Rate Era.  The idea that 1 out of every 180 properties in the Las Vegas, Nevada metropolitan area would face foreclosure was not just a Black Swan, but a four legged Black Swan with a teal blue head and pale green beak.

The second part of the answer is that bankers were also operating under the delusion that the statistics of the Fix Rate Era were applicable to the ARM Era.  However, there is another facet to this element of the discussion.  The promotion of adjustable rate mortgages and other financial products contributed to an overall decimation of actual ownership.

How does putting people into homes with 0% down payment “decimate” actual ownership?  Because — 0% means they had Zero actual ownership of the property.  The figures from the Fixed Rate Era showed that individuals who had from 0% to 5% ownership in properties were more likely to default than those who had 20%.   Worse still, homeowners were invited to take out home equity loans — “Pay for Educational costs, Medical expenses, Vacations…” which further eroded the actual ownership of the very real property.  Chickens do come home to roost, and they have in Las Vegas.

The recent CoreLogic report explains:

“released negative equity data showing that 10.9 million, or 22.7 percent, of all residential properties with a mortgage were in negative equity at the end of the first quarter of 2011, down slightly from 11.1 million, or 23.1 percent, in the fourth quarter. An additional 2.4 million borrowers had less than five percent equity, referred to as near-negative equity, in the first quarter. Together, negative equity and near-negative equity mortgages accounted for 27.7 percent of all residential properties with a mortgage nationwide. In the fourth quarter, these two categories stood at 27.9 percent.”

[...] Nevada had the highest negative equity percentage with 63 percent of all mortgaged properties underwater, followed by Arizona (50 percent), Florida (46 percent), Michigan (36 percent) and California (31 percent). The negative equity share in the top 5 states was 39 percent, down from 40 percent in the fourth quarter. Excluding the top 5 states, the negative equity share was 16 percent in the current and previous quarter.

Las Vegas led the nation with a 66 percent negative equity share, followed by Stockton (56 percent), Phoenix (55 percent), Modesto (55 percent) and Reno (54 percent). Outside metropolitan areas in the top 5 negative equity states, the metropolitan markets with the highest negative equity shares include Greeley, CO (38 percent), Boise (36 percent), and Atlanta (35 percent).

No surprise here, the numbers for the Las Vegas, NV area were among some of the worst in the nation.   Thus much for the “common knowledge” that real estate prices never fall.  We had all manner of information about the stock prices of home construction corporations, and copious amounts of data about bank equities, and even more information about default rates than anyone should have needed — but we didn’t use our judgment based on our knowledge of economic bubbles to avoid the Housing Bubble or its collapse.

The moral hazard argument might apply IF home owners and bankers KNEW that the products they were selling and purchasing were inherently dangerous, and were underpinned by dubious information and suspect analysis.  We certainly don’t want to reward irresponsible behavior, but the mortgage purchasers thought they were getting “good deals,” and the bankers thought they were spreading the risk so no one was imperiled — in the end the mortgage product purchasers were underwater, and the bankers had only succeeded in spreading a contagion to everyone in the entire financial sector.

Systemic Problems Need Systemic Answers

It’s entirely too simplistic to insist that the Mighty Invisible Hand of the housing market will magically redress all the issues in the aftermath of the housing bubble collapse.  The Invisible Hand theory assumes a market with accurate information upon which reliable assumptions can be made.  In the recent housing catastrophe there was plenty of information, bits and pieces of data swirling through the bank computer algorithms, but there was obviously a paucity of knowledge about the actual condition of the economy.

The Invisible Hand works best when it’s guided by very human ones.  There is a large difference between a Free Market and an Efficient Market.  What the NPRI is implying is that an efficient market can replace human judgment with statistical manipulation, the “numbers will right themselves” if we are all just a bit more patient.  To argue that financial markets should be free of all government intervention is to ignore the fact that government is one of the financial market’s biggest customers.  Investment institutions on Wall Street were falling like dominos — some, like AIG weren’t “bankrupt” in the classic sense of the term, but they couldn’t prove to other financial institutions that they weren’t what is politely called “insolvent.”

When 10-K reports to the SEC were questionable at best during the Boom and Bust, and almost fraudulent at worst, or when balance sheets were composed of more fiction and hopeful thinking than accurate data, it would have been the height of folly NOT to have the financial sector’s biggest customer (government) step in to restore some sanity in the system.

It can be cogently argued that what failed during the last housing bubble collapse was NOT morality, but judgment.  Consumers, institutions in the financial sector, and government regulators, were all dancing to the same tune.  Unfortunately it was a Siren’s Song.  When we assume that an efficient market bolstered by elegantly scripted algorithms is a better system than relying on good old fashioned and very human judgment we are all headed for trouble.

As if to put a layer of icing on this notion, consider the study of the Housing Bubble Collapse of 2008 by the Cleveland Federal Reserve.  The study debunked ten simplified explanations, or myths, commonly cited as causal factors, and concluded:

“Many of the myths presented here single out some characteristic of subprime loans, subprime borrowers, or the economic circumstances in which those loans were made as the cause of the crisis. All these factors are certainly important for borrowers with subprime mortgages in terms of their ability to keep their homes and make regular mortgage payments. A borrower with better credit characteristics, a steady job, a loan with a low interest rate, and a home whose value keeps increasing is much less likely to default on a mortgage than a borrower with everything in reverse.

But the causes of the subprime mortgage crisis and its magnitude were more complicated than mortgage interest rate resets, declining underwriting standards, or declining home values. The crisis had been building for years before showing any signs. It was feeding off the lending, securitization, leveraging, and housing booms.”

Amen.  No single subject comprises the proximate cause of the entire debacle. No single facet of the situation posed a proximate cause of the collapse.  It seems to have been a failure composed of all the mentioned elements exacerbated by input from the processes themselves — or, again, a failure judgment in contrast to a failure of responsibility or morality.

If we now find the moral hazard argument to be (1) entirely too narrowly focused, (2) unconnected to the systemic issues inherent in the creation of bubbles, and (3) unhelpful in framing a systemic response to a systemic problem, then why not allow Governor Sandoval (or indeed any other agency of governance) to attempt to reintroduce some judgment into the possible solutions?

——-

Recommended reading: Federal Reserve Bank of Cleveland, “Ten Myths about Subprime Mortgages,” 7/23/09.   CAP, “Housing Refinancing Reforms Still Needed,” 11/22/11.  The Economist, “Financial Economics: Efficiency and Beyond,” 7/16/09.  The Motley Fool, “A Stupid Idea That Deserves To Die,” 11/3/11.   Federal Reserve, “Re-Balancing the Housing Market: Lessons Learned,” 9/1/11.  FDIC testimony “Challenging Environment for FDIC Institutions,” 8/16/11.   FDIC, “The Challenge Posed By Short Termism,” 6/24/11.   Senate Permanent Subcommittee on Investigations, “Financial Crisis Report, (pdf) 4/13/11.  Brookings, “Developments in the Housing Market,” 12/12/11.   Brookings, “Telling the Narrative of the Financial Crisis,” 12/14/11. Brookings, “Geographical Differences in Price Changes and Negative Equity, 11/29/11.  EPI, “Wide Impact Of The Housing Slump,” 8/29/06.  CEPR, “Clearing the Air on Too Big To Fail,” 10/17/11.

Coffee and the Papers

##  THIS is what gives state workers and employees a bad name — double dipping members of Nevada’s  Sandoval Administration.   OK, now where’s the conservative outrage?  Interesting that when teachers put in 60-70 hour work weeks — they’re union goons feeding at the public trough.  When highway construction and maintenance personnel take a break from working with asphalt with a 180°F  delivery temperature, they’re shovel leaning goof offs.  When police officers and sheriff’s deputies put in overtime to see that there’s adequate traffic control around the stadium or arena, they’re (hiss) public employees raking it in off the taxpayers.   But, let a member of the Republican Administration double dip — and lo! It’s Simon and Garfunkle Time, or The Sound of Silence.

## Another entrant into the Nevada Congressional races.   Remember back in the day when every candidate for a federal office was running “for Sheriff,” i.e. “LawnOrder?”  “Tough on Crime?”  Now, it appears as though they’d like to be School Board members?

## Nevada saw some modest increases in taxable sales! But, not in the Carson City area where the multitude of automobile dealers felt the Tsunami from across the Pacific.

## Nevada benefits from the energy program Republicans love to hate.  When the Solyndra loan (1.3% of the total program) ran into trouble (and it seems to be the only loan in difficult straits) the GOP promptly forgot that the Bush Administration tried to get conditional approval during the transition between administrations, and that one of the prime investors was Madrone Capital Partners (read Walton Family as in Wal-Mart).  They forgot the loan guarantee was made in 2009, the audit was done in 2010, and the company raised $250 million from private investors after the supposedly “devastating” audit.  [F-S.com] Mesquite and Tonopah will benefit from a program House Republicans cut out of their “job killing” budget.

As Steven Benen explains, when it comes to Solyndra, Gertrude Stein’s oft misinterpreted quote is apt — there’s no there there.”

## Representative Joe Heck (R-NV3) has an interesting take on unions.  His father’s union was “good,” but now current unions are just “all about politics.”  Translation — when his father’s union membership meant that food was still making it to the table, Union membership was a very good thing.  However, now that Heck is running as an anti-union Republican, Union membership is icky.   Bulletin for Representative Heck:  Unions still help secure health benefits, safety rules, and special discounts for their members.

What’s Representative Heck supporting?  H.R. 2587 would:

GOP explanation: “H.R. 2587 would prohibit the National Labor Relations Board (NRLB) from ordering any employer to close, relocate, or transfer employment under any circumstance.  The bill would amend the National Labor Relations Act to prohibit the National Labor Relations Board (NLRB), in future and pending cases, from ordering any employer to close, relocate, or transfer employment under any circumstances.  The legislation would effectively prevent the NLRB from restricting where an employer can create jobs in the United States. The bill would eliminate an extreme enforcement remedy available to the board; more than a dozen alternative remedies remain available to hold employers accountable for unlawful labor practices and make employees whole.  The bill would apply to any complaint for which a final adjudication by the NRLB has not been made by the date of enactment.”

(translation: any time workers want to organize, or organized workers want to discuss any negotiable topic, the corporation doesn’t have to listen to them, and if the NLRB wants to try to make the corporation listen — then the corporation can shut down or “move” the jobs somewhere else.  And, the NLRB can’t do anything about it.)

The bill passed the House on September 15, 2011.  A more apt title for the bill might have been “Protecting Boeing Incorporated from having to comply with NLRB Rulings.”   What the bill really does is to allow a company to “move” (outsource, offshore, etc.) jobs when employees want to organize, want to bargain, want to address safety issues, or want to protest unfair pay for women. [Trumpka pdf] H.R. 2587 isn’t just an NLRB bashing bill — it’s a frontal assault on unions…period.

## I am not at all certain how this qualifies as prudent public fiscal policy: “Washoe County commissioners will not tax vehicle owners more to pay court-ordered tax refunds for Incline Village homeowners — a decision that risks the county not having enough cash if it should be hit with a big lawsuit or some other calamity.”  [RGJ]  There might be a limit to “we don’t raise taxes in a recession” thinking … oh, say, earthquakes, fires, flooding….?

## Those discussing the environmental impactof the Nevada Test Site weren’t numerous, but some points were made:

“Launce Rake, a former Las Vegas Sun environmental writer, representing the Nevada Conservation League, was concerned over the 52 million cubic feet of radioactive waste that would be disposed of at the NNSS under the expanded operations alternative. “We’re also concerned about the transport. The urban area of Las Vegas would only have a small amount affected by transport on the existing routes. We don’t want to see those routes expanded to include downtown Las Vegas, because the population would be much greater,” Rake said. “We’re also concerned about our friends in Pahrump. First responders should be well trained.”

## Here a puzzler: How many times have Republicans charged that something coming from a Democratic source is “The Largest Tax Increase In HISTORY?“  Now, the notion that billionaires should share a bit of the cost of running the government that protects their corporate interests is The Largest Tax Increase…you get it.

## Another day another GOP attack on Planned Parenthood.   The organization is 95 years old, they provided approximately 11.4 million medical services to 3 million people in 2009.  In 2009 they had 2,327,662 “reversible contraception female clients,” and 140,648 “reversible contraception male clients.”  They tested 3,419,965 men and women for sexually transmitted diseases, and when we add in the HIV testing program a total of 3,955,000 individual were tested.  The organization provided 1,830,811 cancer screenings.  [PPH pdf] [FactCheck]  The Republicans seem to have missed the June polling from Time in which only 24% of Americans believe a woman should never have the right to choose, and the May polling done by Gallup indicating that only 22% believe that abortion should always be illegal. [TPP]

## The Drum Major Institute has an interesting, and recommended report on immigration policy and the American middle class.

Sandoval Plays In The Sunset With State Budget

“Sandoval thinks that extending the sunsets must come with changes in how government spends money in the long term.  “It’s a last resort to go there. They have to come with reforms,” he said.”  Sandoval adviser Dale Erquiaga [LVSun]

Now that the Nevada Supreme Court has voided the Governor’s money grab from various and sundry solvent funds to plug holes in his budget,  allowing the extension of current levels of taxation is a “last resort.”   The Gleaner explains eloquently: “The court blew a hole in the budget and the Sandoval/Republican flip-flop will do little more than fill that hole. Teachers will still get fired, the higher education system will still get thrashed, and Nevada’s inadequate and underfunded network of social and public health services will still be even less accessible and less effective.”

Let’s assume “they” means Democrats, and “reforms” mean the wish list from the Chamber of Commerce in Nevada.  And, what might those “reforms” be?  Let’s review.  From the Las Vegas Chamber of Commerce Governmental Relations page:

“It is difficult to adequately adjust public employee pay without reforming the rules governing public employee collective bargaining for state and local government employees – Nevada Revised Statutes Chapter 288. NRS 288 requires binding arbitration, shifting decision-making and budget control from the officials elected to make those decisions to an arbitrator often from outside Nevada. Binding arbitration should be eliminated and final decisions should be left with those elected to make them.

Reforming NRS 288 to allow for collective bargaining agreements to be opened in the event of a fiscal emergency would bring flexibility to managing fiscal challenges while continuing to deliver public services. Additionally, evergreen clauses in all newly negotiated collective bargaining agreements should be prohibited.”

The “reforms” the Chamber has in mind aren’t that difficult to decipher:

(1) Eliminate binding arbitration, and allow employers to determine what the final result will be.  Eliminating arbitration by an outside party absolves the employer from having to bargain at all.  There would be little to prevent an employing agency from playing stall ball until it could announce its acceptance of its own last best offer.   It’s hard to call a discussion over issues “negotiations” when one side has a hammer and the other a fire axe.

(2) Allow all negotiated contracts for public employees to be reopened unilaterally by the employer in the event of a “financial emergency,” and eliminate evergreen clauses.  Shorter translation: We can break the contract anytime we declare an emergency and all bets are off.

The Chamber isn’t quite finished with its Wish List — they want to “reform” the public employees retirement system:

“Those potential methods include moving to a defined contribution system (although this option is admittedly difficult to implement), allowing our employees to participate in Social Security (we are only one of seven states in which employees don’t participate), and providing a much smaller PERS benefit or provide what is often called a cash-balance program in which contributions made on behalf of each employee, plus a guaranteed return on that investment is used to purchase one in a series of optional annuities. All of these systems would allow much greater portability for employees.

Also, a key to real reform of PERS is requiring all employees to participate in funding their own retirement through payroll withdrawals.”

Notice the two key terms in this proposal, “defined contribution” and “optional annuities.”   The Nevada system as currently framed is a defined benefit program.  Funds that go into the program come out as a stated percentage of the average income earned.    Under the terms of a “defined contribution” program the employee knows what is going in but doesn’t know what’s coming out.  And, those optional annuities — that’s another name for a private retirement investment account.  (Quick Translation = You’re On Your Own)

Educators beware, the Chamber has its sights on teachers as well; the so-called “reforms include:

“Those great teachers should be compensated for their performance. But when we grant tenure to teachers after just a year or two and virtually no teachers have, in recent years, been removed for poor performance, we also must admit that some teachers may not be in the right profession. We need to eliminate tenure for K-12 teachers and ensure high quality teachers by requiring student improvement be a significant portion of teacher evaluations.

Additionally, there should be available solutions if entire schools are not performing and parents should be able to choose which school is best for their children. Expanding opportunities through enhanced charter school programs, open enrollment and, potentially, a voucher system should be pursued.”

Quick translation:  No negotiated  salary schedules, teacher evaluation based on test scores, and school voucher plans.

Nor are K-12 schools the only ones to be “reformed” higher education comes under the Chamber’s spotlights for “improvement:”

“Nevada’s higher education system’s funding is centered around the number of students enrolled at each institution. As a result, each school has a strong incentive to enroll as many students as possible, regardless of whether the school is a good fit for a student that will result in the student graduating. This is a waste of both the student’s and taxpayers’ money. In addition, the per pupil funding system makes it difficult for our research universities to provide advanced, and expensive, programs that are necessary to generate advanced research that will fuel new companies and jobs.”

Surely the Chamber doesn’t mean to imply that Nevada shouldn’t seek to educate as many of the young people in this state as it possibly can?  Is the Chamber arguing that the University System should “weed out” those who don’t provide strong evidence  — we’d guess Test Scores — that they could complete a four year program?  What of the vocational/technical programs offered by our community colleges?  The Chamber explains: “Our higher education schools need to be incented to be entrepreneurial, to work in cooperation, to place students where they best fit, and to be aligned with our economic development plans.”  To which one might ask — Whose economic plans?   It rather seems like in the Chamber’s view all departments are equal, but some are more equal than others.

Are these the “reforms” the Governor seeks which might cause him to think more positively about continuing the current tax structure?  These, by the way,  aren’t NEW taxes — they would be the same old taxes we paid last year.

The litany of anti-union, anti-teacher, anti-education, anti-tax, anti-government “reforms” is not anything close to a Plan for Progress — it’s a Methodical March to Mediocrity.   We’ll see very shortly from whom Governor Sandoval is getting his marching orders.

>The 50% Solution Misses 100% of the Problems

>Nevada Governor Sandoval (R) has a magical solution to Nevada’s educational problems, a 50% solution. [LVSun]  If we base 50% of a teacher’s evaluation on test scores we will rid ourselves of poor teachers, and if we rid ourselves of poor teachers, then we will have kids who score better on standardized tests. 

The 50% solution is currently all the rage in Republican circles. In addition to Nevada, the idea has caught on in Georgia [AJC], New Jersey [NJC], Minnesota [Mgage], Florida [OJS], and it’s being pushed by business leaders in Massachusetts. [BG]  The 50% solution is also being introduced in Missouri and in Michigan. [QES]  The quick fix is popular because (1) it’s cheap, (2) it puts a target on the backs of groups at variance with the Republican Party — i.e. teachers’ unions, and (3) it offers an instant solution to seemingly intractable problems.  We’re highly likely to be disappointed with the 50% Fix, as we have been with other Instant Formulas — the Madeleine Hunter seven step lesson plan, the teacher-proof Carnegie Mellon teaching materials, and other commercial products sold to school districts as “silver bullets” for educational achievement.

Instant answers don’t address protracted societal problems. One topic rarely addressed by the advocates of the 50% Solution is: What do we want our educational system to accomplish? If all we want are youngsters who are capable of performing basic level arithmetical computations, and whose vocabulary level is such that they can comprehend polysyllabic sentences; then we can test for those elements.  However, do we also want young people to be able to imagine solutions to practical problems? Do we want youngsters who are able and willing to revise and improve classroom (and life) work? Do we want youngsters to leave school with an appreciation of music and the arts? Do we want youngsters to develop healthy lifestyles, based on the best knowledge we currently have about the benefits of exercise and nutrition?  Do we want youngsters to leave our schools fluent in at least two languages?  Do we want our high school graduates not only capable of conducting age level appropriate research, but also to be able to read and evaluate research findings presented to them later on life?  Do we want our students to be able to recognize and evaluate flawed logic, and to evaluate the use of propaganda in advertising and other commercial messages?  Do we want to develop youngsters who leave school with a sense of team-work, and who can work well with others in a variety of settings to complete a variety of tasks?   This list could go on for days — because we’d like our schools to accomplish all these things — and possibly more.

In short, the 50% Solution narrows our educational aspirations down to a minimalist set of measurable skills, assuming that our educational goals will be accomplished if we have teachers who can inculcate, and students who can learn, these measurable elements.  We ought to caution ourselves that because a young person can calculate the percentage increase of sales year over year that skill, it turn, doesn’t predict if that same person will be able to devise a sales program to reach new consumers. We ought to be aware that merely because a student can read and comprehend a paragraph about how bees pollinate alfalfa, this doesn’t predict if that student can later evaluate research findings concerning how best to protect hives.

Perhaps the 50% Solution is illustrative of the old saw, You Get What You Pay For?  If we aren’t prepared to pay very much, then we can attempt to function on a cheap school system which churns out students who can operate at a basic level, taught by those whose job it is to drill for measurable skills?  Unfortunately, an engineer without imagination will try to put the same bridge over every river, regardless of the qualitative differences in site and function.  An architect without creativity will design the same building time over time. A sales representative without interpersonal and communication skills will likely never make her quota.  Rather than a recipe for success, the 50% solution is an admission that we have lowered our sights and reduced our horizons.


The 50% solution doesn’t address crucial issues in teacher evaluation. What is it, exactly, that we want teachers to do in a classroom?   One of our problems is that we’ve apparently not settled on a definition of what “good teaching” really is.  A check list load of items like “students are on task,” “there is evidence of cooperative learning,” and “group activities are properly organized,” does specify if (a) there is a well managed way for those students who have completed tasks to transition to another productive activity, or (b) if the cooperative learning is actually one youngster leading four others, or if (c) the group activity is likely to achieve the educational outcome desired.

Another issue that the 50% solution conveniently leaves untouched is the spectrum of professional development evident in every field of social and economic endeavor.  We don’t expect a rookie ball player to achieve the same level of skill on the base paths as a veteran player. We don’t expect a newly hired engineer to be in charge of a project to design a complex communication technology. We don’t expect a newly hired receptionist to have the same level of competence as an experienced executive secretary.  However, the 50% solution seems to assume that a first year teacher’s performance can be gauged by the same measure as that of a 25 year veteran in the classroom.

One of the major problems with the 50% solution is that it is proscriptive rather than prescriptive. The personnel evaluation policies of well-run businesses focus on training employees to perform company tasks at the highest level possible, retaining the best and most productive personnel, and developing a sense of loyalty within the company which promotes the company’s goals and enhances the brand.  The 50% solution infers that evaluation is a negative activity, based on only those elements which are quantifiable, and that those who cannot achieve an artificially devised level of competence should be immediately dismissed.  In this format a sales director would retain only those members of the force who invariably achieve quota, those who contributed to the economic activities of the company in other ways like  bringing feedback concerning the economic situation of the customers, the need to revise or improve the product to increase sales, or who ventured advice about new ways to approach consumers would find their jobs in peril.  Well run corporations and smaller firms don’t function on 50% solutions, and if we are to approach education in business terms then the 50% solution doesn’t apply in that instance either.

The 50% solution depends on statistical information that has not been demonstrated to be stable over time.  The accuracy and reliability of student test scores, even in some of the most statistically sophisticated forms, aren’t really appropriate for high stakes decisions about the retention of teachers. [SeaEd] An EPI analysis revealed the following concerning the “Value Added” elements with regard to testing results:  “Analyses of VAM results show that they are often unstable across time, classes and tests; thus, test scores, even with the addition of VAM, are not accurate indicators of teacher effectiveness. Student test scores, even with VAM, cannot fully account for the wide range of factors that influence student learning, particularly the backgrounds of students, school supports and the effects of summer learning loss. As a result, teachers who teach students with the greatest educational needs appear to be less effective than they are. Furthermore, VAM does not take into account nonrandom sorting of teachers to students across schools and students to teachers within schools.” [Full Report, pdf]

Those who advocate using standardized testing, whether norm referenced or criterion referenced, as a predominant measure of what is happening in American classrooms seem not to have take Albert Einstein’s advice to heart: “Everything that can be counted does not necessarily count, and everything that counts cannot necessarily be counted.”

If the predominant goal we post for our educational institutions is that they turn out students who can perform tasks demonstrating basic knowledge of numeric and reading literacy — that’s what we will get: A minimally educated work force.  When other nations, more concerned with higher goals and aspirations, take the lead we will have no one to blame but ourselves.  And, we are no closer to answering Thomas Jefferson’s question: “If ignorance is bliss, then why aren’t more people happy?”