Sunday, March 27, 2011

NYT’s Expose: But GE Is Doing Exactly What is Expected of Them

President Obama’s appointment of GE CEO Jeffrey Immelt as his job czar signaled his “move to the center.” The pro-business President declared a “government-business partnership” to create jobs, green technology, and other good things. Now a NYT investigation reports that GE paid no U.S. taxes, aggressively lobbied Congress for subsidies and sweetheart deals, and spends millions (billions?) to minimize its tax bill. The NYT was shocked, as was Claude Rains in Casablanca, to find such skullduggery, from GE, no less. The NYT concludes that one of the most striking advantages of GE is not its jet engines and washing machines but “its ability to lobby for, win and take advantage of tax breaks.”

A more realistic interpretation is that GE is faithfully pursuing Obama’s vision of, what is called in other countries, crony capitalism. Under this philosophy, “crony corporations” should follow where government incentives lead them. If Obama wants green jobs, they will build windmills, with healthy subsidies of course. If the government wants more lending, crony corporations will lend with a bailout if the loans go bad. A “green car” should be no problem. The government will pick up most of the price tag for leery consumers. Insofar as crony corporations, like GE, can “negotiate” their tax bill with Congress, they are a ready source of campaign contributions or other perquisites.

Such crony capitalism changes the normal rules of economics. Those who play the “business-government partnership game” better than others win. Those who do not play well lose, even if they are superior entrepreneurs or innovators.
From an economic perspective, it is not even clear that GE is a real “winner.” In pursuing subsidies and tax advantages, GE engages in activities that yield lower returns than other alternatives. The government payoff compensates them for making otherwise unwise economic decisions. The GEs of the world also have to waste enormous resources on the lobbying game. If we factor in all these economic costs and losses, GE may have been better off not playing the crony capitalism game after all.

The NYT’s disclosures, coupled with Obama’s appointment of Immelt, are an embarrassment, but they offer a rare backroom glimpse of crony capitalism in action. Our crony capitalism takes place, respectably and legally, in board rooms, in congressional and executive offices, or “on bended knee” before Charles Rangel. In other less civilized countries, it takes the form of shakedowns, threats of violence, and arbitrary prosecutions, but the game is played with the same results.

In Russia, it is called State-Mafia capitalism. In the U.S., it is corporate welfare.

Thursday, March 17, 2011

Private Editor, No. 5: Media, Chernobyl, Japan Nuclear Disaster, and Mental Health

I have no scientific expertise on nuclear power plants. I followed closely at the time the Chernobyl disaster of 1986 and listened to accounts of a Russian nuclear scientist-friend who worked on the damaged roof of the Chernobyl plant the day after the explosion. He suffered no known health consequences, although he still has to be checked each year. I also know many young Ukrainians who were evacuated from Kiev and whose thyroids had to be monitored through their young adulthood. I also know that the Chernobyl accident, the worst nuclear-power plant disaster in history, claimed (according to the authoritative report issued in 2005 by the Chernobyl Forum) “fewer than 50 deaths directly attributed to radiation from the disaster, almost all being highly exposed rescue workers, many who died within months of the accident but others who died as late as 2004.” In the future, The Chernobyl Forum speculates there may be an additional 4,000 deaths from cancer. They do not explain this estimate, but a quarter century has already passed since the accident with relatively few deaths.

Strikingly, the report labels the mental health impact of Chernobyl as “the largest public health problem created by the accident” and partially attributes this damaging psychological impact to a lack of accurate information. These problems manifest as negative self-assessments of health, belief in a shortened life expectancy, lack of initiative, and dependency on assistance from the state.

The current hysterical press and TV reports are indeed creating a “mental health impact” as large as or larger than that of Chernobyl, despite the free flow of information in this case and Gorbachev’s attempted cover up of Chernobyl. The press feeds upon irresponsible statements, such as from the European Union's energy chief, Guenther Oettinger, who characterized the situation as out of control. "We are somewhere between a disaster and a major disaster…There is talk of an apocalypse, and I think the word is particularly well chosen." The media also pounce on pronouncements like radiation “twenty times normal,” where “normal” is usual background radiation. No one bothers to explain what 20 times more than about zero actually means in terms of health risks.

The scientists whom I found in my own search of the web agree that there is no nuclear fission inside the plants (the fuel rods have been withdrawn) and the problem is the heating up of spent fuel. According to one expert: “We could not have a …nuclear explosion. It's physically impossible in this kind of system."

The worst case scenario would occur if the cooling efforts fail and the fuel rods melt down and break through the thick concrete structure, leading to what today’s New York Times calls “an uncontrolled release of radioactivity.” The New York Times stops at that point and does not explain further. As I understand it, such an uncontained meltdown would place the Japanese disaster somewhere between Three Mile Island and Chernobyl, but closer to Three Mile Island because there has been no Chernobyl-like full-scale explosion and Chernobyl did not even have a containment structure. Those most threatened by this worst case scenario would be plant and rescue workers and residents within a thirty-mile or so radius of the plants.

The media and press have indeed created a “mental health impact” that will likely be greater and more long-lasting than Chernobyl, no matter how benign the eventual outcome. This morning at breakfast, my wife (who watches a lot of television news) asked me if we should leave California! Consumers throughout the world will now fear Japanese products. The Japanese people will conclude that they face a life of poor health, in a suicide-prone society. There may be a rash of abortions, such as in the wake of Chernobyl, as expectant parents fear birth defects. Countries like Germany, confronted with a politically powerful anti-nuclear power lobby, will shut down their nuclear power plants at huge costs. Given that we do not have the “green” technology to replace coal-fired plants, we will use more coal-fired plants which have health and mortality costs likely in excess of the health risks of radiation.

I think it is the responsibility of the media and press to present a balanced picture of risks to let their consumers draw reasoned conclusions of their own. Stories of unimaginable catastrophe draw more customers than reasoned accounts. Consumers of media and press should not have to go to the internet (as I did) to find the information needed to draw informed conclusions.

Saturday, March 12, 2011

The Private Editor No. 4; The News Not Fit for the NYT to Print: NPR and Anti-Semitism

The NYT has not shied away from reporting on the National Public Radio scandal, which resulted in the resignation of its CEO and former NYT executive. In its four articles on this subject, the NYT focuses on the NPR fundraisers’ disparaging remarks about the Tea Party and their statement that NPR would be better off without public money. The NYT coverage sweeps under the rug the NPR fundraisers nodding in agreement and laughing in response to the anti-Semitic remarks of the scammers (“Jews do kind of control the media”). One of the NPR fundraisers responds: “That’s good, I like that” after one of the scammers says: “we used to call it [NPR] National Palestine Radio.”

In my view, the NPR fundraisers’ apparent condoning of anti-Semitic remarks is the real story of the NPR scandal, not the Tea Party. If such remarks had come out of the mouth of a right-wing militia member, that would have been the headline, but not if the perpetrator is the genteel NPR.

I guess this was too hot for the NYT to print as well.

Wednesday, March 2, 2011

How To Distort Polls: The NYT/CBS Poll on Public Sector Workers

The big surprises of yesterday’s NYT/CBS national poll on public sector unions were that 61 percent of adult Americans think that public employee salaries and benefits are “too low” or “about right,” 56 percent oppose cutting public employee salaries and benefits to reduce state deficits, and 40 percent prefer increasing taxes to decreasing spending on other things, among them public employee salaries and benefits. (The poll reports that even a slight majority of Republicans said public employee wages and benefits were “too low” or “just about right.”).

These results raise eyebrows. They seem to contradict the November election results. Perhaps the fickle electorate has changed its mind since November? Last night’s political talk shows were abuzz.

These poll results are so out of line with conventional thinking that they require careful scrutiny. My own (admittedly non-expert) examination raises three red flags:

FIRST: Why are there so many public-employee and union households in the sample?

The NYT/CBS pollsters conducted telephone interviews with 984 respondents using procedures that “in theory, in 19 cases out of 20”will “differ by no more than three percentage points” from an interview of all American adults. Their procedures include adjusting for under- or oversampling of various demographic characteristics. There are no adjustments for public employment, labor union membership, or political identification.

Twenty five percent of the NYT/CBS respondents are from households that had a public employee (versus 17 percent for the U.S.) and twenty percent had a union member in the household (versus 13 percent for the US). If we combine the two (while avoiding double counting as best we can), some 34 percent of the sample are either public employees or union members (versus 23 percent for the US population).

If we assume (rightly or wrongly) that all public employees and union members responded in the most pro-public-employee way to the survey questions, the pro-public-employee majorities wither away without them. The survey therefore shows that Americans who do not have a union member or public employee in the household think public-employee wages and benefits are too high, oppose raising taxes to cover deficits, and favor reduction of collective-bargaining rights.

(To adjust for the oversampling of public employees and union members alone, one should subtract some eleven percentage points from the more favorable public-employee response rates, as I see it).

SECOND: Are Republicans underrepresented?

The NYT/CBS poll asks questions about today’s most politically heated issue. It would therefore seem appropriate to weight the sample to make it 29 percent Republican, 31 percent Democrat, and 38 percent independent (according to recent Gallup reports) before reporting results that are supposed to capture the “national” mood. At a minimum, the NYT/CBS pollsters should provide the breakdowns of their respondents by political affiliations so that users can make their own adjustments if one group is underrepresented. The high public employee and labor union share already suggests an oversampling of Democrats. There is also the fact that Republican response rates to telephone surveys tend to be lower, requiring that their share be adjusted upwards for this reason alone.

Let the NYT/CBS pollsters release these results. I went to and failed to find any of these details.

THIRD: Why are results not broken down by political affiliation?

The NTYT/CBS pollsters clearly have results in their hands broken down by political affiliation. They proudly report that “61 percent of those polled — including just over half of Republicans — said they thought the salaries and benefits of most public employees were either “about right” or “too low” for the work they do.” Later they report “there was also strong opposition from independents: 62 percent of them said they opposed taking bargaining rights away from public employee unions.”

If we have the results and respondent shares broken down by political affiliation, we can calculate ourselves the “national” responses adjusted for political affiliation.

The NYT/CBS poll is an example of the not-so-subtle use of polling to support a political cause. This practice is not limited to the left. My suggestion is that next time, NYT/CBS put much more detail on their website (including the cross tabulations that I find sorely missing). Skeptics can therefore examine the results for themselves so that they can draw proper conclusions from the survey.