Ezra Klein

The best sentences we read today

Dylan Matthews — Wed, 22 May 2013 23:27:10 GMT

-- "The secret of many charter schools' success isn't a mystery."

-- "I'm Charles Murray, I'm sure that Jason wanted to work with me. I mean, come on."

-- "Asked about it later, Kraig Naasz, Mr. Chandler's spokesman said, 'I can't explain it.'"

-- "To win Ancestry.com's IPO, he created his own family tree and wore a green Hermes tie with leaves to signify the company logo."

-- "Neither side really knows what would happen if you could legally buy a packet of rhino horn in the pharmacy like Tylenol."

Stop celebrating our falling deficits

Ezra Klein — Wed, 22 May 2013 20:04:03 GMT

It's time to stop celebrating last week's Congressional Budget Office report. Our deficits aren't dropping because we're doing something right. They're dropping because we're doing everything wrong.

My initial piece on the CBO report led with the surprising news that the agency had knocked more than $600 billion off its projections for the deficit over the next decade. But as I wrote then, the deficit is following a weird path. It's not a gradual decline. It's not a temporary uptick as we spend to create jobs followed by a sharper decline as the economy recovers. It's a sharp decline followed by a gradual rise -- it looks a bit like a Nike Swoosh.

That's a disaster.

Let's stop talking about the deficit for a minute and simply talk about the demand the government creates for goods and services. The CBO is saying that the federal government will be pulling demand out of the economy in 2013, 2014 and 2015. It will then start adding demand back in again -- meaning we'll be increasing the deficit -- from 2016 through 2023, and presumably beyond.

That is literally the opposite of what we should want. Textbook economics says the government should add demand when the economy is weak and pull back when the economy is strong. The economy -- and particularly the labor market -- will remain weaker than we'd like in 2013, 2014 and 2015. That's when the government should be helping, or at least making sure not to hurt too fast. It should be much stronger from 2016 to 2023. That's when the government should be backing off.

The types of policies matter, too. We want to cut the deficit by reducing spending on programs that don't add much to the economy and raising taxes on people who can afford it. Instead, a lot of our deficit reduction is coming through sequestration, which everyone agrees is pretty much insane, and which focuses on the part of the budget that isn't growing. Basically none of the savings are coming through entitlement reforms that will grow in the second or third decades, or through tax reforms.

It's as if we took all the good ideas people had to help the economy and reduce the deficit and did the opposite. But because Washington myopically focuses on the number that denotes the deficit rather than the policies behind it or how well it matches the likely path of the economy, many in town are celebrating the report and declaring their work pretty much done, at least for now.

Fluoridation fails in Portland by 20-point margin

Sarah Kliff — Wed, 22 May 2013 19:10:28 GMT

For any avid readers who have read our coverage of the fluoride wars, we now have results on the latest battle: Portland has rejected fluoridated water by a 20-point margin, with 60 percent of voters against and 40 percent in favor.

This was, according to the Oregonian, the fourth time the city has voted against fluoridation since 1956. The vote makes Portland one of the largest American cities not to fluoridate its water supply, second only to San Jose. Over-under on when we'll have a Portlandia episode on the subject? I'm guessing next season.

After 37 years, U.S. chemical-safety laws may finally get an overhaul

Brad Plumer — Wed, 22 May 2013 19:08:10 GMT

The current U.S. law on chemical safety is 37 years old, riddled with exceptions, and widely seen as ineffective — so much so that the federal government hasn't even tried to restrict an unsafe chemical since an asbestos ban was overturned in courts in 1991.

Now that law could soon get a face-lift, amid growing concern that ingredients in ordinary consumer products are leading to health problems.

On Wednesday, Sen. Frank Lautenberg (D-N.J.) and Sen. David Vitter (R-La.) announced they had reached a "groundbreaking" agreement to revamp the 1976 Toxic Substances Control Act, ending two decades of gridlock in the Senate over how to test and regulate the tens of thousands of chemicals found in everything from crib mattresses to water bottles.

If the legislation were to pass, it would be the first time that a major U.S. environmental law was updated since the 1990 overhaul of the Clean Air Act.

"This bill proves that bipartisan compromise can still work in Washington," said Sen. Joe Manchin (D-W.Va.), who Senate staffers say was critical in bringing the main authors together. All told, the bill has eight Democratic co-sponsors and eight Republicans onboard.

The American Chemistry Council, which represents manufacturers like Dow and Dupont, hailed the compromise. Environmentalists were split, with some viewing it as a encouraging step and others criticizing it for doing too little.

All sides seem to agree that the current process is dysfunctional. Under the Toxic Substances Control Act, the Environmental Protection Agency (EPA) can only call for testing of a chemical if evidence somehow surfaces that the substance is dangerous. What's more, tens of thousands of existing chemicals were exempt from review when the law was enacted in 1976.

The old law also set a high bar for the EPA to regulate dangerous chemicals — the agency has to prove it's taking the "least burdensome" action possible, a vague and difficult standard to meet. After a court struck down the EPA's efforts to ban asbestos in 1991, the agency effectively gave up trying to restrict dangerous substances.

All told, the federal government has required testing for just 200 of the 84,000 chemicals registered in the United States — and banned just five substances deemed dangerous.

In recent years, however, worries over chemical safety have grown. Several states have moved to ban certain chemicals in everyday products, including Bisphenol A, a chemical widely used in plastics. And in recent years, the flame retardants used in household furniture have come under scrutiny for potential health risks.

Lautenberg has noted that the Centers on Disease Control have found at least 212 industrial chemicals in human bodies, "including at least six known carcinogens and dozens that are linked to cancer, birth defects, and other diseases."

To address those concerns, the Lautenberg-Vitter "Chemical Safety Improvement Act of 2013 would give the EPA a number of new tools:

--The EPA would review all actively used chemicals and label them as either "high" or "low" priority based on their potential risk to human health and the environment. The agency would then subject high-priority chemicals for further review.

--Regulators would no longer have to go through a long, protracted rule-making process to get information from companies about their chemicals.

--The EPA will also have greater flexibility to take action on chemicals deemed unsafe, ranging from labeling requirements to outright bans on things like asbestos.

When previous iterations of this bill were considered, the American Chemistry Council had worried that the EPA approval process for new chemicals would be too cumbersome and slow the pace of new products coming to market. In the new compromise, the EPA would have to affirmatively declare that new products are "likely to be safe" before coming to market.

"We think it's a very fair and very balanced proposal," said Cal Dooley, president of the American Chemistry Council. He added that chemical companies were prepared to comply with the EPA's requests for more information "in a cost-effective way."

Environmentalist reactions were more mixed. Ken Cook, president of the Environmental Working Group, said that the compromise was a scaled-back version of previous bills from Lautenberg, which included stricter health standards for assessing chemicals.

"This bill is basically the least that could be done," Cook said. He expressed concern that it could pre-empt stricter state laws and would allow chemical companies to have their products deemed safe by the federal government under a relatively loose approval process.

By contrast, Richard Denison of the Environmental Defense Fund said the bill was "certainly a net improvement over the status quo," though he worried that the lack of hard deadlines in the legislation could allow delays in the regulatory process if the bill passed.

Co-sponsors included Kirsten Gillibrand (D-N.Y.), Mike Crapo (R-Idaho), Richard Durbin (D-Ill.), Lamar Alexander (R-Tenn.), Charles Schumer (D-N.Y.), James Inhofe (R-Okla.), Tom Udall (D-N.M.), Susan Collins (R-Maine), Mary Landrieu (D-Louisiana), Marco Rubio (R-Fla.), Joe Manchin (D-W.V.), John Boozman (R-Ark.), Robert Menendez (D-N.J.), and John Hoeven (R-N.D.).

You ask, we answer! Can employed people get Obamacare subsidies?

Sarah Kliff — Wed, 22 May 2013 19:01:26 GMT

Welcome to Health Reform Watch, Sarah Kliff's regular look at how the Affordable Care Act is changing the American health-care system — and being changed by it. You can reach Sarah with questions, comments and suggestions here. Check back every Monday, Wednesday and Friday afternoon for the latest edition, and read previous columns here.

Sometimes I use this space to answer questions from readers about how the Affordable Care Act will effect them. Sometimes, those answers lead to even more questions we are, after all, talking about a major overhaul of our health-care system.

Tim Ricchuiti is a schoolteacher in Dallas and had read a previous Health Reform Watch where I noted that employees who were offered insurance plans that met "coverage and affordability requirements" by their employers would not be eligible for tax subsidies on the health exchange.

"The 'those that meet the coverage and affordability requirements' that's giving me trouble," he wrote in an e-mail. "Next year, my school district (I'm a teacher working for Dallas ISD) will offer a plan I could use to cover my family of three; but it would cost about $1,000 a month (that's after the district contribution of $300, which is standard for all employees), or about 25 percent of my salary."

So, Ricchuiti's question is this: "Will my family be eligible for subsidies? And if so, can I only access them if I sign up for a health exchange plan?"

Ricchuiti's question hits on one of the more complex parts of the health-care law: the definition of affordable health insurance. This is an area that has actually changed with regulatory guidance from what some health experts thought the law initially would mean.

Let's start with what is in the Affordable Care Act. As I've written previously, the health law puts two requirements on employers that offer health insurance. First, it must cover a specific set of services, like hospital trips and maternity care, known as the essential health benefits. More on that here.

More pertinent to Ricchuiti's question, however, is the requirement that health insurance be affordable. The health-care law defines "affordable" as health insurance that costs less than 9.5 percent of a workers' income. This all comes from Sec. 1401 of the law, which you can see below.

This seems pretty straightforward: If health care costs more than 9.5 percent of a workers' income, it wouldn't count as an affordable health plan. The employer would get penalized for not providing accessible health insurance and the worker would become eligible for federal tax subsidies.

Except there's one crucial issue that the Affordable Care Act did not address, one that has since generated huge debate among health policy experts. Where the law says a plan can't exceed "9.5 percent of the applicable taxpayer's household income," did they mean a plan just for that worker — or for that workers' entire family?

There is a really significant price difference between buying individual and family coverage. Kaiser Family Foundation estimates that premiums for a family plan now cost nearly $10,000 more than an individual policy.

It's a whole lot easier to blow through the 9.5 percent threshold with a family plan that costs $15,745 than an individual plan with a $5,615 price tag.

There was a lot riding on how the administration decided to define the 9.5 percent threshold, whether it would use an individual or family plan as the standard. Economist Richard Burkehauser wrote a paper in 2011 estimating that, if the Obama administration went with the family-based definition, it could mean an additional $48 billion in federal subsidies as many Americans would not have their policies counted as affordable.

Except, the Obama administration did the opposite: In January, it issued guidance that said the health law would use the cost of an individual policy to determine whether an employer had exceeded the 9.5 percent threshold. This has been worrisome to consumer advocates, mostly because of cases like Ricchuiti's, where a family policy could eat up a big chunk of household income.

The cost of a family policy, then, doesn't say anything about whether a worker would be eligible for federal subsidies. The important number is how much it would cost Ricchuiti, or others, to buy an individual plan. If that number is more than 9.5 percent of household income, then it would likely mean eligibility for tax credits on the exchange.

This gets to the second part of Ricchuiti's question: If he is eligible for tax credits, "can I only access them if I sign up for a health exchange plan?" This, fortunately, is a much simpler question to answer: Yes, the tax credits must be used on the new, government-run marketplaces.

KLIFF NOTES: Top health policy reads from around the Web.

Most doctors are now using electronic records. "More than half of U.S. doctors have switched to electronic health records and are using them to manage patients' basic medical information and prescriptions, according to federal data set to be released Wednesday. The Department of Health and Human Services says it has reached a tipping point as it seeks to steer medical providers away from paper records." Louise Radnofsky in the Wall Street Journal.

Colorado's health exchange hits a glitch in plans to release rates. "State insurance officials wanted to offer the public an easy way to check new health policy prices in preparation for 'Obamacare,' but their site wasn't working after launch early Wednesday. The glitch was an ominous sign for those critical of health-care reform as too complex and bound to lose consumers in glitch-prone computer systems. The exchange will start signing up the uninsured and small groups on Oct. 1, for policies taking effect Jan. 1, but numerous technical challenges remain." Michael Booth in the Denver Post.

Everything you could possibly need to know about student loan budgets (with gifs!)

Dylan Matthews — Wed, 22 May 2013 17:13:28 GMT

On Monday, we wrote a post explaining that "No, the federal government does not profit off student loans" (as the original headline put it). A number of people have pushed back at that conclusion, pointing out that it depends on how you do the arithmetic.

So here's a fuller explanation of what is in dispute in the debate over whether federal student loan programs are profitable for the government or not. And the details show why people can follow the same set of facts to such different analytical conclusions. Of course people disagree all the time about budget priorities. But in budget debates, it also matters quite a lot how you add up what we spend on what -- and student loans are a prime example.

Liberals crunch numbers like this, but conservatives crunch numbers like this

Among the more heated of budget accounting debates has to do with how to deal with loans, and in particular student loans, that the government makes. Like with anything else in the budget, you want to compare what goes out (in this case, the initial money loaned to students) to what comes in (the payment checks sent by previous loan recipients).

For other budget categories, that's easy. It's simple enough to compare, say, the amount we're collecting in cigarette taxes in 2013 to the amount we're spending on preschool in 2013, since you're looking at actual numbers in one year.

But it doesn't make any sense to compare the loans that go out in 2013 to the payments that come in 2013. Those payments are on loans made years, sometimes decades in the past, with different interest rates and histories than the loans being made in 2013. So rather than comparing those two numbers, budgets generally compare the amount going out in the form of an initial loan with how much they expect to come back from students repaying that specific loan. How exactly to do that, however, is very much disputed.

No, seriously, pay attention

This probably sounds super-boring. But it's important. In the student loan case, it's often the difference between federal programs being counted as turning a profit and them being counted as losing money. That matters. If they turn a profit, they're just a business the government runs because the private sector, for a number of reasons, can't do the job properly, and the question becomes whether to reduce that profit by cutting interest rates or to use it for other purposes. If they're operating at a loss, they're a form of government aid to students like Pell Grants, and it's worth asking whether they're the best form that aid could take, and whether raising interest rates might make sense.

That's why the approach that the CBO currently uses, due to the Federal Credit Reporting Act of 1990 (FCRA), is often characterized as liberal, and the alternative, "fair-value reporting," is characterized as conservative, or at least "neoliberal". The FCRA method shows student loans as profitable (as seen in the CAP chart above), which suggests that the government is taking money that could be in the hands of needy students. The fair-value method show, at the very least, lower profits, and in many cases that student loans are a subsidy. That suggests that the programs should perhaps be less generous, that the money would be better spent elsewhere (perhaps on Pell Grants).

That's why NYU Law's David Kamin wrote, in a piece arguing against fair-value accounting, that it "puts a thumb on the scale against government action." If that's true, it's a really important problem with the approach. But if the FCRA method puts a thumb on the scale for government action, that's an equal and opposite problem. So who's right?

How the government calculates loan cost now

The cost of the student loan program in 2013 is currently calculated by taking the net present value (NPV) of every loan issued in 2013. That means taking all the payments you expect to be made on the loan throughout its life, and "discounting" them back to 2013 dollars.

You discount because money that you can only access in the future is considerably less valuable than money you can access right now. I'd be pretty mad if The Washington Post decided to hold onto my paycheck and give it to me in 2043. A dollar in the future is worth a lot less to me than $1 now does, both because a dollar in 30 years will be worth less than a dollar now due to inflation, and because that's 30 years when I could have used the money for other stuff. I could have invested it and earned 30 years of interest, for example, or take a vacation now instead of in the distant future. In short, the government understands the principles of YOLO.

And caring more about my well-being now isn't necessarily irrational, since I know less about what future me will want than about what present me wants. Derek Parfit has a good argument along these lines. Grist's David Roberts has a very good explanation of this stuff if you're interested, complete with pictures of otters to make it easier to swallow.

So first, when determining the cost of these programs, the CBO estimates what cash flows it expects from the loans in question. Those cash flows take into account "the probability of default each year, the recovery rate on defaulted loans, the planned repayment (amortization) schedule of a loan, estimated voluntary prepayments, and the fee schedule." Basically, everything that could possibly affect what money's going out and what money's coming in. So the issue isn't that the CBO isn't taking the risk of default into account -- that's already baked into the picture.

Then, once that's all calculated, you discount. Currently, the government always discounts using the same rate: the interest rate on Treasury bonds.

What that leaves out

That, suffice it to say, is not how discounting works in the private sector. Private firms, as the CBO has explained in arguing against the way Congress currently forces it to evaluate loan programs, generally operate by "discounting those flows using the rates of return on private loans (or securities) with similar risks and maturities."

Given that those rates of return are generally higher than the rates of return on Treasury bonds, that means a higher discount rate. And a higher discount rate means predicting less money coming into the government in the future. Generally, private sector practices would predict considerably less revenue for loans than the government predicts when it issues loans.

Why are they different? Because private firms generally have to pay investors for what's called "market risk." That's the risk that remains in an investment even if it's well-diversified, even if you're managing the risk of specific investments well. The risk that a recession will send the value of all investments plummeting, for instance, is a market risk. If taxpayers made student loans on their own, they'd demand compensation for that kind of risk, which would push the market price of the loan up.

So the government's current accounting methods use a price below the market price for loans. And it's only for loans. Let's say the government wants to buy your house using eminent domain. They don't get to offer a below-market rate. They have to offer the market price for the house.

That's why many observers want to switch to fair-value accounting, the way the private sector does business, from FCRA, the way the government does now. The Congressional Budget Office, for one, supports the change, as did the bipartisan Pew-Peterson Commission on Budget Reform and the nonpartisan Financial Economists Roundtable.

The Ryan budget backs the change, as did Nobel laureate Peter Diamond and former budget director Peter Orszag in their book, "Saving Social Security". Suffice it to say, Orszag and Ryan don't usually agree on budget matters. It's enough for Kamin to write that there's a "growing consensus among economists, budget experts, and policymakers" behind fair-value.

Is the government special?

A lot of people object to using private sector methods because the government really is special, especially on student loans. For one thing, you can't discharge student loans in bankruptcy. That means that defaulted-on loans actually get paid back at remarkable rates. In fact, the Department of Education finds that defaulted-on borrowers actually pay back more than the principal and interest owed at the time of default. They still lose money on defaults, because of the cost of collection and discounting, but not nearly as much as, say, a bank would lose on a mortgage default.

The cost of collection is also much lower for the government than for private entities. It can hold back tax refunds to pay off loans. It can garnish wages without a court order. If you make it to your 60s with outstanding debt, or get on disability, it can take your Social Security. To quote The New Inquiry's Malcolm Harris, saying the government is better at collections than private lenders is "like if the mob claimed to be better at security for your small business than the guard you hired." It plays by different rules entirely.

But here's the thing: all of these advantages should be reflected in the expected cash flow predicted by the federal government. "That cash flow has any advantages the government has baked into it," New America's Jason Delisle explains. All that changes between FCRA accounting and fair-value is the discount rate. Now, if those cash flows estimates are wrong, that's a problem — and we'll get to that later on — but any inherent advantages the government has over private lenders should already be reflected, and won't bear on which accounting method is better.

Is treating it as special okay?

But, critics of fair-value argue, there are ways in which the government is not like a private business in this regard that aren't reflected in the cash flow, and that need to be reflected in the discount rate. The government doesn't have to be risk averse on behalf of its citizens, just because they are, the argument goes. They therefore don't have to account for risks that would trouble private investors. "The fundamental premise of the argument in favor of so-called fair-value scorekeeping is that, because private markets are (appropriately) loss averse, the government should be, too," Richard Kogan of the Center for Budget and Policy Priorities said. "We disagree."

"Individuals are risk averse in part because their financial assets are likely to be needed at specific times, even when the value of those assets has declined," write CBPP's Kogan, Jim Horney, and Paul Van de Water. "The general fund of the Treasury, in contrast, is rarely or never in that position because, as history shows, when times are bad it can borrow very inexpensively." That means the government can spread risk over generations, which individuals often can't.

But spreading costs more widely definitionally doesn't get rid of market risk, which exists even when portfolios are fully diversified and risks are spread as widely as possible. Even if the Treasury can always borrow at low rates, it still has to pay those loans off eventually. The cost of the borrowing doesn't go away. "Even if the federal government can spread risks widely," the CBO writes, "it cannot eliminate the component of risk that is associated with fluctuations in the aggregate economy—market risk—and which investors require compensation to bear."

Moreover, the fact that individuals are risk-averse should bear on the government. It uses our money. "The federal government is just a passthrough for your money and my money," Delisle explains. "To the extent that they don't use a value that you and I think are legitimate, now you've got a real problem."

A budget is a budget is a budget is a budget

The more serious argument against fair-value accounting is that while market risk is a cost, it's not a budgetary cost, since it doesn't necessarily reflect money that the government is going to have to pay out. As CBPP writes, "the federal budget is supposed to record the amount that the Treasury disburses on spending programs and the amount it receives in revenues, and to show the difference as a surplus or deficit."

They argue that just because the additional riskiness of some loans poses a cost to taxpayers upon whose behalf the government is making them doesn't mean that that cost should necessarily be reflected in the actual budget. That's why the Center for American Progress and former CBO director Robert Reischauer oppose using fair-value for budgeting.

But here's the thing. Even the most student critics of fair-value accounting admit that the costs it identifies are real social costs, that need to be taken into account in any cost-benefit analysis of a policy. As the CBPP authors write, "The concept of a risk aversion cost can and should play a part in the cost-benefit analysis that policymakers should undertake in deciding whether a government program constitutes wise public policy." Kamin agrees, writing, "Policy tradeoffs should be made based on a cost-benefit analysis that fully incorporates social costs and benefits."

The dispute, then, is over the rather technical point of whether this cost should be in the budget or in subsequent analysis. No one disagrees these are real costs that need to be taken into account. For policy analysis purposes, fair-value accounting includes both what everyone agrees are budgetary costs, plus costs that everyone also thinks are important. It's hard to argue, then, that it doesn't give fuller information than the current accounting approach. "My understanding is that it's pretty much a slam dunk for the fair value approach," Matthew Chingos, an education expert at the Brookings Institution, concludes.

Does the metric you use really matter?

Maybe all this is for naught, though. As Malcolm Harris pointed out on Monday, the latest CBO numbers show that even under a fair-value estimate, the loans originated in fiscal year 2013 will turn a profit. A much smaller profit, to be sure — the difference between the two types of estimates is about $31 billion — but a profit nonetheless. The subsidized Stafford loan still costs the government money, amounting to a 11.5 percent subsidy, but the subsidy rate on unsubsidized Stafford loans and PLUS loans is negative for that year. That doesn't mean that the government's actually turning a profit, not least because it doesn't take into account administrative costs, but it's notable.

It also contradicts previous years' numbers. In 2007, the CBO found that Stafford loans started in 2006 were subsidized at an average of 8.3 percent. In 2010, it estimated that directly provided loans would provide an average subsidy of 12 percent a year from 2010 to 2020, and that the since-discontinued guaranteed-loan program would offer a 20 percent subsidy. But now the average subsidy is negative.

There are two things going on here. One is that these programs vary from year to year. Returns on all kinds of assets are depressed at the moment, owing to the recession, which means that even discounting using market rates will produce high paybacks in the future. That suggests that when interest rates get to a more normal place, these programs are going to start showing up as subsidies again.

Another is that the cash flow estimates could be wrong. "I'm at this student loan conference now, and was talking to lenders in the hallway, and asked, "What do you think of the expected default rate?" Delisle tells me. "They say, 'they're outrageously low.' My suspicion is that they're outrageously low because they want to record a good number." If the default rate is, indeed, outrageously low, then even a fair-value estimate would show too much money coming in in the future, and show a profitable student loan program where none exists.

It's hard to say whether this is the case, since there's no research independent of the Department of Education on the default rate, and DOE has a clear interest in making it look low. But it matters. "When you want to figure out the cost of the program, you're basing your models on repayment behavior, you're trying to guess what the repayment behavior will be on loans originated today," Chingos says. "So even fair value stuff you have to take with a grain of salt."

One thing that isn't affecting this much at all is the transition to all direct loans that happened in Obamacare. Recall that in 2010 even the direct loan program showed a big subsidy. It follows that in years with similar interest rates to 2010, the current policy regime will show up as a big subsidy. But there is another policy change that affects this picture

Why income-based repayment (IBR) will change everything

However, one reason to believe that repayment rates being forecast now are almost certainly too low is that a ton of student loans are set to be forgiven in coming decades. That's because of a bevy of programs that allow graduates to pay back loans based on their income rather than their loan amount.

"Pay as you earn," for instance, lets borrowers pay out 10 percent of their disposable income, if that amount is less than their normal student loan burden, for 20 years, and then have their loan forgiven. People in public service organizations get their loans forgiven after 10 years.

That's only for people with loans started after 2007, but other folks can do income-based repayment, which charges 15 percent of disposable income, and forgives after 25 years (10 for public service). There's also the income-contingent repayment program and the income-sensitive repayment program, which operate similarly for other categories of borrowers.

What all this means is that the government is going to be taking in less in monthly payments going forward, and then forgiving a whole lot of debt. There are a few cases where people will pay more interest under these programs, as a result of the longer repayment period, but it's almost certainly going to make loans more costly going forward.

"It dramatically increases the subsidy rate on the loan. Even under the official rules, OMB and DOE will tell you that there's a 15 percent subsidy rate on these loans if they use income-based repayment," Delisle says (update: the exact subsidy rates for Stafford loans using income-based repayment were around 17 percent in 2012 and are projected at 10 percent this year, not even using fair value). The true, fair-value subsidy rate is significantly larger than that.

Conclusion

We've come a long way at this point from "how does arithmetic work." But the short version is that (a) fair-value accounting is a better way of tracking the true costs of these programs and (b) even if the CBO numbers show a profit in 2013 for student loan programs under fair-value, that doesn't mean there's actually a profit.

The effects of income-based repayment, the possibility that default rates are higher than CBO predicts, and administrative costs all means that it might well have taken a loss this year, and will most likely take losses going forward. IBR, especially, represents a massive subsidy to students that didn't exist before.

The takeaway, then, is that student loan programs aren't just businesses the government happens to run. They're subsidies that spare students the true market cost of loans. Maybe those subsidies are a good idea. Maybe paring them back in favor of increased grants would be a better plan. Maybe IBR is a good subsidy, but interest rates should be higher.

The point is that the conclusion that student loan programs are subsidies doesn't necessarily tell you what policy is best. It just means that they're not a free lunch. Understanding that is crucial for making good policy in this area.

Robert Kaiser on Dodd-Frank: 'This example of Congress working also illuminated why it works so rarely.'

Neil Irwin — Wed, 22 May 2013 17:10:17 GMT

Almost three years ago, the Dodd-Frank Act was enacted, a sweeping piece of legislation aimed at overhauling regulation of the financial system. And now our colleague Robert G. Kaiser is out with a book reporting the inside story of how the law came to be. Kaiser's "Act of Congress: How America's Essential Institution Works, and How it Doesn't" uses the long battle over Dodd-Frank--and the unique access to Christopher Dodd, Barney Frank, and their staffs that he was afforded--to show how 21st century legislating really works. Here, Kaiser, an associate editor and senior correspondent for the Post, explains what he found.

Neil Irwin: Your book uses the battle over the Dodd-Frank Act to explain how Congress works, when it works. On one hand, this seems to be a story of the American political system proving particularly resilient—U.S. financial regulation was deeply flawed in ways that contributed to a gigantic crisis, and legislation, imperfect as it may be, was enacted to try to fix those problems. But you see a darker lesson in the Dodd-Frank saga. Why?

Robert Kaiser: The lesson, sadly, is that something like Dodd-Frank can only happen when the stars align in an almost magical way, something that rarely happens. This required a national catastrophe, big Democratic majorities in both houses plus a like-minded president, and two highly talented legislators, Chris Dodd and Barney Frank. And even then the bill barely scraped through. So this example of Congress working also illuminated why it works so rarely.

NI: One of the basic tensions in your book is over whether this could be a bipartisan bill in the Senate that got 80 or 90 votes, or if it would be a more strictly partisan affair, which it ended up being. Major financial bills in the past like the Gramm-Leach-Bliley Act and the Sarbanes Oxley fit the first model. For the first 282 pages of your book, it looked like this financial reform could be the same. But Chris Dodd's months of negotiations with Richard Shelby came to naught. Why? What has changed?

RK The biggest change in American politics in my lifetime has been the transformation of the Republican Party, still an ongoing process. The 2010 elections made the GOP still more conservative, still less inclined to reach compromises with today's Democrats. In this case, Shelby wanted to make a deal, I am convinced of that. But too many of his Republican colleagues did not. He couldn't do it without more support from them.

NI: Ironically, though, Republicans could have won a lot of policy concessions if they had been willing to throw their support behind the bill en masse (only Scott Brown, Susan Collins, and Olympia Snowe voted "yea"). Meanwhile, your book details how Dodd had to go to great lengths to keep every single member of the Democratic caucus on board, which pushed the final product to the left in a number of ways. So in the end, is Dodd-Frank a win or a loss for the no-compromise approach to governance?

A. I guess the real answer is, neither. It is a sui generis event, based on the special circumstances I mentioned before. I can't imagine any member today saying, "I'm going to do such and such because that's what worked in Dodd-Frank." In truth there are no usable lessons there.

NI: I'm struck by the power you show banking lobbies exerting on the legislation. You've been in this town a long time. Was it always thus? Or is the role the banks played in shaping the law that would govern them something new and troubling?

RK: The banking lobby has been influential for years. Revision of the bankruptcy code in 2005 was a remarkable victory for the banks, a classic lobbying triumph. In this case, encouraged by Frank, small bankers broke with the big banks and weakened the lobby's ability to influence Dodd-Frank. In the end, Frank boasted that the big banks "got nothing," only a slight exaggeration. It's a great story, and it's in the book!

NI: You show the centrality of congressional staff in drafting major, complex legislation like this. Most memorably, when Treasury officials were freaking out that Dodd might strike a deal while on a trip to Central America with Bob Corker, one of his staffers is amazed by their naivete, in that it would be impossible for two senators alone, without staff, to hammer out a deal on legislation like this. So how much of this is just the inevitable consequence of it being a complex world in which we need specialists to carry out a lot of the work of governing, and how much something that should concern us?

RK: I think what should concern us is the fact that so few of our senators and congressmen are policy experts or good legislators. The people who run for Congress now are much more likely to be political warriors for whom partisan warfare is the name of the game. Too few members know or even care about the details of policy, which of course empowers staff.

NI: Your book is more about how Dodd-Frank came to be than the details of how the financial sector ought to be reformed. But now that it's been the law of the land for three years, what do you think? Do we have stronger, better financial regulation than we did pre-Dodd Frank, or have we not gained enough to offset all the bureaucratic hassle that the banks and others complain about?

A. I don't feel particularly competent to judge this. I do think the system is safer. I think the Dodd-Frank bill will force banks and other financial institutions to be a lot more careful than they were in the run-up to the great crash of 2008.

Bad news for patent trolls, in one chart

Timothy B. Lee — Wed, 22 May 2013 14:46:11 GMT

Why has the software industry seen an explosion of litigation lately? The courts played a big role, by making it easier to get patents in the 1980s and 1990s. But as this chart shows, the pendulum started to swing back in the opposite direction a few years ago:

The chart comes courtesy of Dennis Crouch, a law professor at the University of Missouri. He originally posted it in October. Above is an updated version that accounts for all of 2012.

It shows the number of times courts have cited Parker v. Flook, the 1978 case in which the Supreme Court took its strongest stance against patents on software. The case focused on using a computer to update the "alarm limit" for a chemical process. The court held that the patent effectively claimed a mathematical algorithm, which is too abstract to be eligible for patent protection.

The ruling has never been overturned (though its holding was narrowed by a 1981 ruling). And since all software consists of mathematical algorithms, some software patent opponents cite it as holding that software cannot be patented.

But the late 1970s proved to be the high-water mark for judicially-enforced limits on what could be patented. During the 1980s and 1990s, both the United States Patent and Trademark Office and the Federal Circuit Appeals Court (which hears appeals in patent cases) became more permissive. The result was a gold rush, as software, biotech, financial services, and other industries rushed to patent technologies that had previously been regarded as off-limits.

But then these firms began suing each other with their newly minted patents. According to one estimate, patent litigation now costs the economy tens of billions of dollars a year.

Perhaps spurred by bad media coverage over patent litigation, the courts began scrutinizing patents more closely. Christina Mulligan, a legal scholar at Yale Law School, points to two 2007 decisions by the Federal Circuit that invalidated patents for being outside the bounds of what could be patented, something it had not done in more than a decade.

The Supreme Court got into the act too, invalidating one patent in 2010 and another in 2012.

According to Mulligan, the courts had been so hostile to arguments that a patent was out of bounds that defendants didn't even bother raising them before 2007. But once the courts signaled that they were open to those arguments again, defendants began to raise them.

The results can be seen in the chart above. Not every citation of Flook means that a patent was invalidated. But it's at least a sign that the courts are wrestling with the limits the high court articulated more than three decades ago. And in the long run, stricter rules about what can be patented may reduce the amount of litigation that currently afflicts the economy.

Bernanke to Congress: Seriously, guys, what are you doing?

Neil Irwin — Wed, 22 May 2013 14:05:11 GMT

Ben Bernanke testifies before Congress today for the first time in three months, and the Federal Reserve chairman has a message for lawmakers: You're the reason the economy isn't taking off more.

Of course, Bernanke is too polite to phrase things quite so bluntly. But to anyone versed in Fedspeak, that's the gist of his message. Even as state and local governments are becoming less of a drag on growth, Bernanke says in his prepared testimony before the Joint Economic Committee, "fiscal policy at the federal level has become significantly more restrictive."

"In particular," his testimony says, "the expiration of the payroll tax cut, the enactment of tax increases, the effects of the budget caps on discretionary spending, the onset of sequestration, and the declines in defense spending for overseas military operations are expected, collectively, to exert a substantial drag on the economy this year."

He adds that with the Fed's interest rate policies already near zero, "monetary policy does not have the capacity to fully offset an economic headwind of this magnitude."

It might be one thing if the fiscal retrenchment was also solving the country's longer-term deficits. But, Bernanke says, it has not. "Although near-term fiscal restraint has increased, much less has been done to address the federal government's longer-term fiscal imbalances," he says in the prepared testimony. "Indeed, the [Congressional Budget Office] projects that, under current policies, the federal deficit and debt as a percentage of GDP will begin rising again in the latter part of this decade and move sharply upward thereafter."

That current policy is the exact opposite of the path that Bernanke has advocated countless times in past testimony: Focus on reducing the long-term sustainability of the U.S. government's finances while moving cautiously, if at all, on short-run fiscal austerity. And the chairman repeats that plea in today's testimony: "Congress and the Administration could consider replacing some of the near-term fiscal restraint now in law with policies that reduce the federal deficit more gradually in the near term but more substantially in the longer run."

In other news from the testimony, Bernanke makes a preemptive defense of the Fed's low interest rate policies, which lawmakers have assailed in the past for reducing returns for savers. The Fed chief argues, in effect, that savers will actually be better off if the low rates stay in place for now.

The Fed policymaking committee "actively seeks economic conditions consistent with sustainably higher interest rates," Bernanke says. "Unfortunately, withdrawing policy accommodation at this juncture would be highly unlikely to produce such conditions. A premature tightening of monetary policy could lead interest rates to rise temporarily but would also carry a substantial risk of slowing or ending the economic recovery and causing inflation to fall further," an outcome that would prolong the period of low interest rates and trigger "poor returns on other assets."

Translation: Savers, I know it isn't much fun getting zero interest rates on your savings accounts, but the alternative would likely be worse.

Yes, heads should roll at the IRS

Ezra Klein — Wed, 22 May 2013 13:47:47 GMT

The big IRS news today is that Lois Lerner, the IRS director who oversaw the Cincinnati unit charged with discriminating against the tea party, intends to plead the fifth when she appears before Congress later today.

"She has not committed any crime or made any misrepresentation but under the circumstances she has no choice but to take this course," her lawyer, William Taylor III, wrote in a letter to Rep. Darrell Issa. Taylor went on to ask that Lerner be excused from appearing, as given the circumstances, it would "have no purpose other than to embarrass or burden her." I imagine Issa's staff had to be physically restrained from replying with a note that simply said, "lol."

So far, the only head that's rolled at the IRS is that of acting director Steven Miller. There's a reason for that: Miller was in the top spot, and could easily be fired. As Politico reports Wednesday, the process is considerably more cumbersome as you climb down into the civil service:

Under federal rules, a fired government worker has the right to appeal to the Merit Systems Protection Board. He or she can challenge the decision, argue that their actions don't meet the threshold for termination and ask to be reinstated — especially if there was no warning of trouble in past performance reviews.

The board is set up so fired employees appealing their termination get two chances to prove they should stay. Their first stop is at the merit board's regional level, which — for the Cincinnati-based IRS employees in question — would be in Chicago.

The initial appeals take an average of 93 days to process, said William Spencer, a spokesman for the board.

If the regional board rules against the IRS employees, they could appeal to the national Washington, D.C.-based board, which takes on average another 245 days.

The IRS employees wouldn't collect a paycheck during the appeals process. They would get back pay only if they are ultimately reinstated.

Max Stier, who heads Partnership for Public Service, a nonprofit that recommends ways to improve the federal workforce, says it's "not impossible" to get rid of federal workers. In 2012, he says, 8,755 federal workers were fired, and others likely resigned to avoid the ax — although there are no estimates of how many because it's hard to track those kinds of departures.

Put simply, firing civil servants takes a long time, creates a lot of hassle for management, and needs to be for cause. If it's not for cause, the termination can be overturned, and the entire process would be for naught. This can lead to excessive reluctance on the part of management to go through the trouble of firing anyone. But what remains unclear in the IRS case is whether the directors even wanted to fire anyone.

In Tuesday's hearing before the Senate Finance Committee, Chairman Max Baucus asked this question directly: "Why weren't people then fired or transferred? More significant action taken than just told, 'Don't do this,' given how outrageous this conduct is? Why wasn't more definitive action taken?"

The answer appears to be that in at least one case the IRS attempted to take a half-measure. "I took some some intermediate action, pending [the Inspector General's report], we transferred and reassigned an individual who had been involved in the letters, and I asked that the person who I believed at the time was responsible for the listing, that oral counseling occur," Miller testified. The implication here is that the IG report would provide the definitive evidence necessary to tip the scales towards either firing that employee or letting them stay on.

But the broader answer appears to be that agency leadership simply doesn't believe the IRS targeted conservatives. Doug Shulman, the Bush appointee who was IRS director until November, was clear on this fact. "Frankly, the concept of political motivation here, I did not agree with that in May. I do not agree with that now," he told the committee." We were not politically motivated in targeting conservative groups. That's borne out by [the IG] report."

That's actually not borne out by the IG report. The report doesn't prove that the criteria was politically motivated or that it wasn't politically motivated. But it almost doesn't matter.

The gravest scandal here would be to find that the IRS was ordered to harass tea party groups by some outside entity connected to the Obama administration or campaign. There is, at this juncture, absolutely no evidence of that. This is an issue the IG report addresses directly: "We asked the Acting Commissioner, Tax Exempt and Government Entities Division; the Director, EO; and Determinations Unit personnel if the criteria were influenced by any individual or organization outside the IRS. All of these officials stated that the criteria were not influenced by any individual or organization outside the IRS."

A few steps down from that would be the revelation that a rogue group inside the IRS developed this criteria as a way of influencing the election, or American politics. Shulman says he doesn't believe that happened, and his actions are consistent with that belief.

But then there's the offense that everyone agrees did occur: A number of IRS employees developed criteria that was politically biased both in appearance and in effect. They were reined in once by their superiors, and then they changed the criteria again, and had to be reined in a second time. Their actions called the fairness of the agency into question and kicked off a national scandal. Even if their intent was pure, they showed bad judgment, more than a bit of incompetence, and perhaps even a touch of insubordination. That is reason enough to fire people, even if the process is difficult.

Millions of Americans don't have bank accounts. That could be a problem for Obamacare.

Sarah Kliff — Wed, 22 May 2013 13:11:39 GMT

Americans shopping for health insurance under the Affordable Care Act next year might hit an unexpected obstacle: the lack of a bank account.

Millions of Americans are expected to qualify for tax subsidies under the health overhaul, which they can use to purchase coverage on new marketplaces. One quarter of those people are effectively "unbanked" and without a checking account, according to a new report from tax firm Jackson Hewitt.

With few regulations around what types of payment health insurers must accept -- whether they will could require direct debit from a bank account or also allow credit cards -- these Americans may run into trouble paying their monthly premiums.

"The reason this is such an issue is that insurers are increasingly saying that they will not accept debit or credit cards as an acceptable form of payment" study author Brian Haile says. "If insurers refuse to accept premium payments made by debit cards, you're going to exclude many uninsured Americans."

The Jackson Hewitt report, first reported by Kaiser Health News, focused on uninsured Americans between 100 and 400 percent of the poverty line, who are eligible to receive tax subsidies under the Affordable Care Act.

It found that, in this demographic, the ranks of the unbanked tend to be highest among states that also have high uninsured rates. In Florida, where 24 percent of the non-elderly lack insurance coverage, Jackson Hewitt estimates that 34 percent of those likely eligible for premium subsidies do not have a regular bank account.

The unbanked rate tends to be higher among minority groups. Thirty-three percent of African Americans in the demographic Jackson Hewitt studied did not have a checking account, compared with 23 percent of whites. Among Hispanics, that number stood at 32 percent.

A letter from the Department of Health and Human Services sent to health insurers on April 5, addressed the this issue. It said that insurance carriers must be "able to accept payment in ways that are non-discriminatory."

Aetna, one of the country's largest health plans, already accepts debit and credit card payments. It will continue to do so on the new health insurance exchanges.

"We accept credit and debit cards for Individual policies today and will have the same payment options for Individual exchange products," spokesman Matt Wiggin wrote in an e-mail.

Still, not all health insurers read that language as requiring them to accept every form of payment that a subscriber might come up with. One possible deterrent to accepting credit cards could be the administrative fee that comes along with a credit card transaction, which could slightly increase premium costs.

"I've not seen any specific guidance that says you have to be able to accept these types of payments," Ray Smithberger, Cigna's general manager of individual and family plans, says. "I have seen the wording around non-discrimination, but if you take that to an extreme, that means people could send cash payments in the mail. That would be a little messy."

Cigna plans to sell in five state health exchanges next year and has run focus groups that explore how subscribers may want to pay their monthly premiums. The health plan has experimented with debit cards, credit cards and even Western Union money orders. It has not yet made any determination on which sort of payments it will ultimately accept.

"We'll need to make some decisions," Smithberger says. "If we do go with money orders, and being able to accept alternative payments, there is some technology that we need to build."

It's difficult to know what type of payments most health insurance plans plan to accept on the new exchanges. America's Health Insurance Plans, which represents insurance carriers, has not collected data on the issue, according to a spokesman.

"They haven't said you have to take debit cards or a certain form of payment," says Judy Solomon, vice president for health policy at the Center for Budget Policy and Priorities. "They've said you can't be discriminatory. And it's hard to know how much of a problem this could be in terms of what insurers were planning to do."

Wonkbook: A thaw in the Senate?

Ezra Klein, Evan Soltas — Wed, 22 May 2013 12:21:27 GMT

Welcome to Wonkbook, Ezra Klein and Evan Soltas's morning policy news primer. To subscribe by e-mail, click here. Send comments, criticism, or ideas to Wonkbook at Gmail dot com. To read more by Ezra and his team, go to Wonkblog.

Two remarkable things happened in the U.S. Senate on Tuesday.

The first is that the immigration bill cleared the Senate Judiciary Committee. The final vote of 13-5 joined 10 Democrats and three Republicans in the "aye" column. If it holds, it's a ratio that could clear a Senate filibuster -- though not one that could survive the House of Representatives. The bill is expected to hit the Senate floor in June.

The second was the forceful entry of Sens. John McCain and Susan Collins in the budget debate. The quick background here is that congressional Republicans have spent years calling for a return to "regular order" in which the House writes a budget, the Senate writes a budget, and the two chambers move to a conference committee to hash out their differences. This year, for the first time since 2009, Senate Democrats wrote and passed a full budget, shepherding it to passage through an open amendment process. Now various Senate Republicans are blocking the move towards conference -- blocking, in other words, the move towards the regular order they demanded.

On the Senate floor last night, McCain and Collins unloaded on their colleagues. "What are we on my side of the aisle doing?" McCain asked. "We don't want a budget unless we put requirements on the conferees that are absolutely out of line and unprecedented?"

For years now, congressional observers have wondered when Republican members of the Senate would tire of gridlock and decide to return to a more traditional approach to legislating. It's too early to say that that's actually happening. But on a couple of issues, at least, there are signs of it. The Senate is beginning to look a bit more like the Senate again.

Wonkbook's Number of the Day: 13-5. That's the vote to bring the Senate's immigration bill out of the Judiciary Committee and to the floor. More below in the lead story.

Wonkbook's Quotation of the Day: "There are going to be some ugly numbers in there It is not the optimal situation," said Rep. Mike Simpson of the House Appropriations Committee bill to reallocate sequestered discretionary funding.

Wonkblog's Graphs of the Day: Tornadoes in numbers.

Wonkbook's Top 5 Stories: 1) here comes immigration reform; 2) a primer on disaster-relief policy; 3) Apple and the American corporate tax code; 4) IRS revelations continue; and 5) turbulence ahead in budget issues.

1) Top story: Immigration floor debate begins in June

Immigration reform heads to the Senate floor. "The Senate Judiciary Committee passed a sweeping reworking of immigration laws on Tuesday evening, giving a bipartisan bill its first formal stamp of approval in Congress. After five days reviewing the more than 800 pages of the bill and accepting 100-plus amendments, the committee voted 13-5 to send the legislation to the full Senate, which is expected to take it up in early June." Kristina Peterson in The Wall Street Journal.

@justinwolfers: I'm in the waiting room at US Citizenship & Immigration Services. It's beautiful seeing people beam with joy at their newfound citizenship.

Debate begins in June. "The legislation emerged with its core provisions largely intact, including new visa programs for high-tech and low-skilled workers and new investments in strengthening border control The comprehensive bill is now headed to the full Senate, where Minority Leader Mitch McConnell (R-Ky.) urged fellow Republicans on Tuesday not to block the bill from a floor vote. The Congressional Budget Office will take two weeks to issue an assessment of the fiscal cost of the bill, so Democratic aides said the floor debate could begin around June 10." David Nakamura in The Washington Post.

@BobCusack: Some on right balking but Hatch's yes vote and McConnell's vow to vote yes on motion to proceed = momentum for immigration reform.

Leahy pulls same-sex amendment to bill. "The most emotional part of the committee process, which stretched over five days and 301 amendments, came late Tuesday, when Senator Patrick J. Leahy, the Vermont Democrat who leads the committee, said that he would not offer an amendment allowing United States citizens to apply for permanent resident status, known as a green card, on behalf of their same-sex partners. Mr. Leahy, according to immigration and gay rights advocates, was under pressure from the White House not to offer this amendment." Ashley Parker and Julia Preston in The New York Times.

@mattyglesias: Cynical take: Dems have an incentive to lose on LGBT equity in immigration deal to be able to use the issue in future fundraising.

Another important change on H1-B visas. "Sen. Charles Schumer (D-N.Y.), a member of the chamber's Gang of Eight, secured a compromise on a package of tech-friendly amendments by Sen. Orrin Hatch (R-Utah) after days of back-and-forth negotiations. The Senate Judiciary Committee approved the compromise language on Tuesday The amendments from Hatch softens the requirements that employers would have to follow when hiring highly skilled workers on H-1B visas. Hatch had argued that the requirements, as written, would make it more difficult for tech companies to secure the visas they need to fill technical job positions, potentially forcing them to move those jobs abroad." Jennifer Martinez in The Hill.

@samsteinhp: remarkable that immigration reform passes 1st major hurdle and it will be, what, 4th most discussed news tomorrow?

And in the House, immigration hangs on health care. "House immigration negotiators have given themselves until the end of the week to hash out language on what kind of health benefits should be available to undocumented immigrants seeking U.S. citizenship, a crucial issue for the talks. If they can't resolve this issue, the four-year immigration negotiations could come to a crashing halt The provision, in essence, said immigrants seeking citizenship must provide their own health care — and if any government entity provides them with services, they would be ineligible for permanent citizenship Top Democrats are concerned that in emergency situations, for example, undocumented immigrants would be forced to undergo procedures that could bankrupt them, and eventually lead to deportation." Jake Sherman and John Bresnahan in Politico.

@thegarance: Obama on immigration bill: Congratulations! But also, "None of the Committee members got everything they wanted, and neither did I."

U.S. already began monitoring immigrant departures at Canadian border. "Hundreds of thousands of foreigners passing into Canada from the United States have unwittingly been a part of a grand experiment by the Department of Homeland Security to crack down on visitors who violate laws governing the length of their stay The pilot project with Canada, conducted from September to January, involved about a third of the traffic across the northern American border, tracking the departure of 413,222 foreigners from the United States. Starting this year, according to Congressional officials who have been briefed on the plan, the information collected at the Canadian border will be used to prevent certain foreigners who have stayed too long in the United States from returning again by revoking tourist visas or taking other steps." Eric Lipton in The New York Times.

Music recommendations interlude: The National, "Trouble Will Find Me." (h/t Sarah Kliff)

Top op-eds

PORTER: A Keynesian victory, but austerity stands firm. "To go by the statements of most mainstream economists, one would be forgiven for believing this is the best of times for Keynesian economics The confluence of [economic] events [has] provided further evidence of Keynes's central proposition: when consumers and businesses set out to reduce their debt burden, and private spending and investment stall, it is the government's job to borrow, spend and pick up the slack But in many ways it is the worst of times for Keynesian economists. For despite all this intellectual firepower, governments across the industrial world are zealously tightening their belts." Eduardo Porter in The New York Times.

ORSZAG: As job flow slows, Americans get stuck. "After analyzing combined data from four employment surveys conducted from 1998 to 2010, Henry Hyatt and James Spletzer of the U.S. Census Bureau concluded that "rates of job creation, job destruction, hiring and separation declined dramatically, and the rate of job-to-job flows fell by about half." In 1998, various surveys suggested that 8 percent to 10 percent of American workers switched jobs. In 2010, just 5 percent to 6 percent did." Peter Orszag in Bloomberg.

SOLTAS: Detroit's slow demise has not been averted. "President Barack Obama hails it. Super Bowl commercials celebrate it. But is it real? I refer, of course, to the vaunted recovery of the Detroit automakers. Do you see the resurgence in the data as well as in the high-gloss ads? Not really There's nothing in production and sales data to convince an objective analyst that Detroit has broken this long-standing pattern [of decline]." Evan Soltas in Bloomberg.

YGLESIAS: The problem with the corporate income tax. "These zero-tax companies weren't doing anything illegal. Rather it was thanks largely to an affirmative act of Congress that enabled companies to claim "accelerated depreciation" of their physical assets to offset earnings The really big losers in the system, meanwhile, are typically big retailers and health insurance companies that don't benefit from manufacturing tax subsidies and don't have major foreign operations where earnings can be hidden. Meanwhile, the absurd stockpiling of cash in offshore tax havens by tech companies means that the money really can't be used." Matthew Yglesias in Slate.

GRAMM AND MCMILLIN: The debt problem has not vanished. "Once the Federal Reserve's easy-money policy comes to an end and interest rates return to their post-World War II norms, the cost of servicing this debt will explode. The cost will increase further as the Fed sells down its $1.85 trillion holding of government bonds, and the Social Security system runs deeper and deeper into the red. The Treasury will then have to pay interest on an ever-growing percentage of the debt." Phil Gramm and Steve McMillin in The Wall Street Journal.

CROOK: Sympathy for the IRS. "I used to be a civil servant, so I also understand how stupid laws can create administrative chaos. The more I read about the scandal of the IRS and its scrutiny of conservative groups seeking tax-exempt status, the more convinced I am that the blame for this mess -- just like the blame for my having to put down my tripod -- lies almost entirely with Congress Yet the intersection of [tax] rules with equally arcane U.S. campaign-finance laws raises the problem to a whole other level. Congress made the really big mistake in all this by mixing the two. Administration of the tax code should be kept separate from regulation of money in politics." Clive Crook in Bloomberg.

Modern Middle East interlude: Doing parkour in a headscarf is not as dangerous as it sounds, or one look at the lives of Iranian women.

2) What you need to know about disaster-relief policy

FEMA has boots on the ground in Okla. "FEMA spokesman Daniel Watson said three of its search-and-rescue teams arrived early Tuesday morning. He said the agency also sent a liaison to the state's emergency-response center on Sunday, well before a tornado claimed dozens of lives while ripping through the city of Moore, Okla. FEMA has also deployed incident-management teams to the affected region to provide technical assistance and help with any needs that state and local officials cannot meet, in addition to sending survivor-assistance personnel to the state to help people register for federal aid, Watson said." Josh Hicks in The Washington Post.

Conservative Okla. legislators face dilemma: Will they support spending on tornado relief? "Oklahoma has one of the most conservative congressional delegations of any state: seven Republican men, including fierce advocates for cutting federal spending. Five of those seven voted no in January on a bill to provide $50 billion in disaster funding for states hit by Hurricane Sandy On Tuesday, the disaster was Oklahoma's instead, a deadly tornado that swept through the town of Moore on Monday afternoon. So those representing Oklahoma all faced the same question: Would they support an influx of new funding — if necessary — for disaster relief efforts in Oklahoma? Coburn has said that any extra federal spending for disasters should be offset by cuts elsewhere. A spokesman said Coburn would stick to that demand." David A. Fahrenthold and Paul Kane in The Washington Post.

But Dems want to move quickly on aid. "The No. 2 House Democrat said Tuesday he wants to make sure Oklahoma has all the money it needs to respond to Monday's devastating tornado. Minority Whip Steny Hoyer (D-Md.) added that Democrats want to move quickly and predicted "overwhelming support" for such funding, similar to last year's Hurricane Sandy." Tarini Parti in Politico.

A short history of violent tornadoes in the U.S. "It's official: The massive tornado that ripped through Moore, Okla., on Monday has been rated an EF-5 — basically at the very top of the scale, with winds over 200 miles per hour So how common is this? An EF-5 only comes around about once a year, on average. Here's the National Climatic Data Center: "On average over 1000 tornadoes hit the U.S. each year, [and] 20 can be expected to be violent and possibly one might be incredible (EF5)."" Brad Plumer in The Washington Post.

And why are tornadoes so hard to predict? "Just 16 minutes before a gigantic twister first developed near Oklahoma City on Monday, the National Weather Service put out a tornado warning But those 16 minutes actually represent an enormous advance for weather science. Back in the 1980s, the average tornado lead time was a scant five minutes. Today, it's about 13 minutes." Brad Plumer in The Washington Post.

Just a reminder: That Hurricane Sandy aid is still moving slowly. "Three-fourths of the small businesses battered by Hurricane Sandy are still waiting for U.S. government assistance, raising concerns among some about Midwest businesses hit by devastating tornadoes. The U.S. Small Business Administration has approved loans to one out of every four business owners who applied for assistance after Sandy hammered the East Coast in October, according to analysis of data the agency submitted to Congress." J.D. Harrison in The Washington Post.

NOAA is planning to furlough storm forecasters due to sequestration. "Some lawmakers are open to looking at sequestration's effects on the National Oceanic and Atmospheric Administration, home to the National Weather Service and its 3,500 forecasters. But they said it's too soon to know whether Congress has an appetite for making a sequester fix for the forecasters, similar to the ones lawmakers approved for air-traffic controllers and meat inspectors." Scott Wong in Politico.

Embarrassing moments interlude: That time when Wolf Blitzer asked an Oklahoma tornado survivor if she "thanked the Lord" on live TV and she responded "I'm actually an atheist."

3) What Apple reveals about the American corporate tax code

Apple CEO defends tax strategies. "Apple chief executive Tim Cook offered no apologies Tuesday for the way his company keeps tens of billions of dollars in overseas profits virtually free of U.S. taxes, amid sharp questions from lawmakers about the practice Cook said the 35 percent corporate tax rate is too high and should be closer to the "mid-20s." Separately, he said companies that bring cash back to the United States should have a tax rate closer to "single digits" on those sums." Cecilia Kang in The Washington Post.

Explainer: 5 things we learned from Apple's hearing. Neil Irwin in The Washington Post.

One response to Apple's tax strategies? Copy it. "The Apple tax tactic that came in for denunciation at Tuesday's Senate subcommittee hearing was not particularly difficult to carry out, and it seems to have been something known to some tax experts — but not to many of those whose job it is to write tax laws. "What impresses me is the effortlessness of Apple's international planning," said Edward Kleinbard, a tax law professor at the University of Southern California and a former chief of staff of the Congressional Joint Tax Committee "It hinges," said Mr. Kleinbard, "on nothing more than an Irish shell company whose management in fact is in Cupertino, and a contract between two arms of Apple's single global enterprise with no economic significance to anyone outside of Apple. It's as if Apple checked a box to elect out of worldwide taxation on a vast swath of their international income."" Floyd Norris in The New York Times.

Sen. Paul, the Apple polisher. "This much is clear from the first hour of the Senate Permanent Subcommittee on Investigations hearing on Apple's steps to avoid paying billions in U.S. corporate income tax: It will be primarily an exercise in righteous indignation for the senators present; and there will be at least one lawmaker with a quite different take "If anyone should be on trial here, it should be Congress," Paul continued. "I frankly think the committee should apologize to Apple. The Congress should be on trial here for creating a Byzantine and bizarre tax code."" Neil Irwin in The Washington Post.

Heartrending interlude: Just watch this. Trust Wonkbook. You'll be glad you did.

4) Revelations continue in IRS scandal

Internal IRS probe had found these problems as early as May 2012. "An Internal Revenue Service review of the agency's approach of scrutinizing conservative groups seeking tax-exempt status questioned the now-controversial policy a year ago, according to House Oversight and Government Reform Committee spokesman Ali Ahmad On May 3, 2012. Marks gave what IRS officials described as a "presentation" to Miller describing her findings. Marks said the investigation had found significant problems in the review process and a substantial bias against conservative group, Ahmad said. No written findings were produced as a result, the aide said, and it does not appear the internal review led to any disciplinary actions against IRS employees." Juliet Eilperin in The Washington Post.

Live blog: Read and watch important moments from the Senate's IRS hearing. Aaron Blake in The Washington Post.

Clarifications only bring confusion on IRS. "Why would it be inappropriate for the president to know what his chief of staff, his counsel and others on his senior staff knew and were talking about with others in the government? Would telling him require him to do something inappropriate? Would he be open to criticism if he knew and stood idly by? Perhaps, but if his top advisers knew weren't inclined to act inappropriately, why would the president?" Dan Balz in The Washington Post.

IRS's Lerner to plead the Fifth. "Embattled IRS official Lois Lerner will invoke her Fifth Amendment right not to incriminate herself when she appears before the House Oversight Committee on Wednesday. In a letter to Oversight Chairman Darrell Issa (R-Calif.), Lerner's attorney William W. Taylor III cites the Justice Department's criminal investigation into the issue of whether the IRS singled out tea party and other conservative groups for extra scrutiny." Lauren French and Ginger Gibson in Politico.

And we haven't received any apologies from Douglas Shulman, yet. "Former IRS commissioner Douglas Shulman doesn't think he has to apologize for the wrongdoing that occurred at the IRS on his watch, and he repeatedly refused to do so at a Senate Finance Committee hearing on Tuesday. We'll see how long that lasts." Aaron Blake in The Washington Post.

Debate: How should we set a balance between media disclosures and national security? The New York Times.

Watchdog group suing IRS for tighter exemption rules. ""As the ongoing IRS scandal shows, the 501(c)(4) regulation is unmanageable," said CREW executive director Melanie Sloan. "It clearly conflicts with the tax code and IRS employees are simply at a loss as to how to apply it."" Josh Hicks in The Washington Post.

The IRS controversy isn't about taxes. It's about disclosure. "[W]hy are these groups so eager to keep their 501(c)4 status if it, if anything, puts them at a disadvantage tax-wise? It's simple: disclosure. 501(c)4s can accept unlimited donations and don't have to tell a soul from whence they came. 527s, including super-PACs, have to file quarterly reports disclosing donors The key question, then, in considering what should come next for 501(c)4s, is not "should groups like this have to pay taxes." They're never going to have to pay taxes. It's whether they should have to disclose their donors." Dylan Matthews in The Washington Post.

"Nontroversies" interlude: Is the G in "GIF" soft or hard?

5) Seeds of turmoil sown in future budget debates

GOP begins intra-party fight over budget procedure. "Long-simmering divisions among Republicans burst into public view Tuesday evening, when GOP moderates challenged tea-party conservatives on the Senate floor over their refusal to proceed to formal negotiations with Democrats over the federal budget Their reason: Democrats can't be trusted not to sneak in an automatic increase in the federal debt limit." Lori Montgomery in The Washington Post.

House panel OKs huge spending cuts. "Sequestration 2 opened at the House Appropriations Committee on Tuesday as Republicans won approval of their dramatic plan to reallocate the reduced funding available after the second round of spending reductions slated for October. Discretionary spending would drop to $967 billion — $17 billion below where appropriations stand now after the first round of cuts in March. And within this tighter cap, labor, health and education programs are to be transformed into a virtual GOP bank to help finance a $28 billion increase for defense Indeed, the $121.7 billion allocated to the giant annual Labor, Education, Health and Human Services bill is the lowest since 1998 when adjusted for inflation. Transportation and housing programs are also hit hard together with the Interior Department and Environmental Protection Agency "There are going to be some ugly numbers in there," Simpson told POLITICO. "It is not the optimal situation."" David Rogers in Politico.

Reading material interlude: The best sentences Wonkblog read today.

Wonkblog Roundup

Self-driving cars are a privacy nightmare. But it's totally worth it. Timothy B. Lee.

Study: Election officials are biased against Latino voters. Dylan Matthews.

A brief history of America's fluoride wars, and some more follow up here. Sarah Kliff.

The end of health price secrecy may be starting in Miami. Sarah Kliff.

A short history of violent tornadoes in the United States. Brad Plumer.

Five things we learned from Tuesday's big Apple tax hearing. Neil Irwin.

The IRS controversy isn't about taxes. It's about disclosure. Dylan Matthews.

Let artists, innovators and the public define our copyright system. Derek Khanna.

Why are tornadoes so hard to predict? Brad Plumer.

Rand Paul unloads on 'bullying, berating and badgering' of Apple. Neil Irwin.

Et Cetera

Obama announces members of commission to review election process. Ashley Southall in The New York Times.

In Europe, a Fed president urges quantitative easing. Jack Ewing in The New York Times.

And the Fed's Dudley wants to play wait-and-see with QE. Michael S. Derby in The Wall Street Journal.

Moniz wants Congress to pass energy-efficiency legislation. Ben German in The Hill.

Senior DoE official suggests more natural-gas export approvals coming. Zack Colman in The Hill.

U.S. court rejects Arizona law imposing new curbs on abortion. The Washington Post.

Got tips, additions, or comments? E-mail me.

Wonkbook is produced with help from Michelle Williams.

The best sentences we read today

Brad Plumer — Tue, 21 May 2013 22:48:23 GMT

-- "More than 800 people have paid as much as $200,000 apiece to reserve seats on commercial flights into space, some of which are expected to launch, at long last, within a year."

-- "Fashion models are almost twice as likely to get their visas as computer programmers, by one rough measure." (Note that this stat is misleading, but the article's interesting.)

-- "Anyone who was alive 2,000-3,000 years ago is either the ancestor of everyone who's now alive, or no one at all."

-- "New research suggests that the container has been more of a driver of globalisation than all trade agreements in the past 50 years taken together."

-- "After spending nearly one-third of a $3 billion budget to build four of the world's most advanced submarines, [Spain's] engineers have run into a problem: the submarines are so heavy that they would sink to the bottom of the ocean."


A short history of violent tornadoes in the United States

Brad Plumer — Tue, 21 May 2013 21:07:25 GMT

It's official: The massive tornado that ripped through Moore, Okla., on Monday has been rated an EF-5 — basically at the very top of the scale, with winds over 200 miles per hour.

So how common is this? Only about 0.1 percent of all tornadoes are EF5s. Here's the National Climatic Data Center: "On average over 1000 tornadoes hit the U.S. each year, [and] 20 can be expected to be violent and possibly one might be incredible (EF5)."

Below are a few more graphs showing some key tornado trends since 1950. The short takeaway is that tornadoes aren't really getting more common or violent over time — but more and more people do seem to be living in tornado-prone areas

1) Severe tornadoes haven't gotten any more frequent since the 1950s. If anything there's been a mild decline:

One caveat: It's possible that tornadoes were under-reported in those earlier decades, before Doppler radar coverage became pervasive, although the NCDC is fairly confident in its data set for tornados stronger than F3.

2) Tornadoes do seem to be getting slightly costlier in recent decades. Here's a chart of tornado losses, in inflation-adjusted dollars. Note the big spikes in the 1960s and 1970s and then the slight upward tick in the last decade or so (this chart also excludes 2011, which would be off-the-charts expensive here):

3) But those increased losses are largely due to more people living in tornado areas. Now look at this chart from Kevin Simmons, Daniel Sutter and Roger Pielke, Jr.:

They adjust the tornado losses to account for the growth in U.S. population, the increase in housing stock, and the fact that we're richer than we used to be — a standard way of "normalizing" disaster trends. Looked at this way, tornado damages have actually decreased slightly since the 1950s, albeit with a huge uptick in 2011, a year that saw six EF5 tornadoes in Missouri, Oklahoma, Alabama, and Mississippi.

In other words, the tornadoes themselves aren't getting more destructive — we're just putting more stuff in the way to destroy. Here's how Bill Hooke of the American Meteorological Society once put it: "[A]s we continue to concentrate our population, the chances for a truly catastrophic tornado event inexorably mount."

4) Fortunately, U.S. tornado deaths are declining over time. This chart comes from Harold Brooks of NOAA:

Even though more and more Americans are living in areas where tornadoes roam, the number of tornado deaths per capita is declining sharply over time — possibly due to improved forecasting and warning systems.

If you want to see total number of fatalities (that is, not adjusted for population growth), Alexis Madrigal passes along this chart, which shows some of the deadliest tornadoes in U.S. history. Note that the 2011 outbreak in the Southeast and Missouri really stands out:

A 2008 study found that most modern fatalities occur in the Mid-South region, for several reasons: There are more mobile homes there (about 44 percent of those killed by tornadoes live in mobile homes). There are more nighttime tornadoes in the southeast and more tree cover, so tornadoes are harder. And there's no regular "tornado season," which makes it harder to predict when a violent storm will strike.

5) Scientists aren't sure whether tornadoes will become more or less frequent in the future. See this story by Andrew Freedman or this old post by Andrew Revkin on what scientists do and don't know about the connection between global warming and tornadoes. Both pieces are interesting throughout, but here's the short version: There's not a lot of great data to work with. No one can really say one way or the other at this point.

Freedman sums up the debate nicely: "While a warmer climate is likely to feature more opportunities for thunderstorms to form, studies also show a lessening of atmospheric wind shear, which would suggest a decrease in the potential for tornadoes to form. How these two trends play out — one increasing the odds of tornadoes, the other reducing them — is a subject of active scientific research."

Related: Why are tornadoes so hard to predict?


Five things we learned from Tuesday's big Apple tax hearing

Neil Irwin — Tue, 21 May 2013 21:07:11 GMT

On Tuesday, Washington took a break from its usual scandals to bring you the Senate vs. Apple, a face-off between the chief executive of the computing giant and a group of senators who seemed shocked — shocked! — that Apple has been able to minimize its U.S. tax obligations by funneling international earnings through holding companies registered in Ireland.

In truth, despite tough talk from Sen. Carl Levin (D-Mich.), the chairman of the Permanent Subcommittee on Investigations, and ranking member John McCain (R-Ariz.), and the occasional tense exchange, this was not particularly toxic as hearings go. Apple CEO Tim Cook could give lessons to some of his fellow CEOs in how to answer aggressive questioning straightforwardly and non-defensively.

But while the hearing wasn't packed with dramatic exchanges or actual shocking revelations, it did highlight a number of underlying lessons about the U.S. corporate tax code that anyone who wants a competitive economy should pay attention to. Here are five of them:

It's amazing how little it takes for a subsidiary to count as being overseas. Most of us think of the holding companies that Corporate America uses to keep its profits overseas as truly being overseas. But the hearing showed the degree to which these entities can exist on paper only. Apple Operations International, for example, the Irish holding company through which Apple channels all its profits outside the Americas, had 32 of its last 33 board meetings in California. And while there is hot debate about under what conditions Apple would "repatriate" its funds into the United States, a dirty little secret is that the money itself is already here. AOI may be registered in Ireland, but its funds are managed by another Apple holding company, Braeburn Capital, in Nevada, and kept in New York banks!

If Apple was restrained in its use of tax tricks, we have real problems. One of Apple's points in its defense was that it has eschewed the use of the really exotic, out-on-a-limb techniques to reduce its tax burden. Said the company: "Apple does not move its intellectual property into offshore tax havens and use it to sell products back into the US in order to avoid US tax; it does not use revolving loans from foreign subsidiaries to fund its domestic operations; it does not hold money on a Caribbean island; and it does not have a bank account in the Cayman Islands." One of the independent experts who testified Tuesday confirmed as much. "I suspect that what Apple has done is within the bounds of what is acceptable under current international tax law," said J. Richard Harvey, a professor at Villanova University. "In some respects, Apple isn't as aggressive as others."

If you ask a company what changes should be made to the tax code, the answer is easy to predict. It seems reasonable enough that that senators would ask Cook how he would reform the U.S. corporate income tax, but the answer shouldn't be surprising. Inevitably, when corporate executives are asked that question, they offer an answer that would be highly convenient for their own companies. In Cook's case, he argued for a main corporate income tax rate of around 20 percent, not the current 35 percent, with fewer special deductions. And for overseas money that companies wish to bring back into the United States, Cook proposed an even lower rate of 5 percent to 10 percent. It's no secret that this would be quite beneficial for Apple, allowing it to simplify its corporate structure while paying only a modest tax bill on the international earnings it brings back to the United States to be returned to its shareholders.

The case for no corporate income tax — but higher individual taxes — looks pretty good. Moving to a system where taxes are only leveled on individuals would avoid a lot of the elaborate shenanigans Apple has gone through to keep its earnings in overseas holding companies. To make the revenue number work out, you would have to charge higher rates on individual income and capital gains taxes, but on the plus side the millions (billions?) of man-hours that American companies and their tax lawyers spend trying to avoid the corporate tax. Corporate income taxes raised only about $242 billion last fiscal year (compared with almost $2 trillion for individual income and payroll taxes), which was a relatively small chunk of government revenue for a massive distortions in business strategy and compliance costs. The reasons it won't happen: The politics are terrible (most Americans would rather big corporations pay taxes than individuals), and it would cause problems in international relations, as the United States would become the low-tax haven to the rest of the world, supplanting Ireland.

Sen. Claire McCaskill (D-Mo.) loves her Apple products. She started her questioning by gushing about the company and its products, stating at one point that she has spent thousands of dollars on the gadgets over the years. "I love Apple," she said. "I love Apple." In a day that wasn't great for Apple's public relations, this was its silver lining.


The IRS controversy isn't about taxes. It's about disclosure.

Dylan Matthews — Tue, 21 May 2013 19:43:10 GMT

At some level, the scandal around the IRS's targeting of conservative 501(c)4 groups has nothing to do with taxes. That may sound weird -- 501(c)4 is a section of the Internal Revenue Code, the entire 501(c) section exists to list groups that are exempt from some federal taxes, the IRS is the tax man, etc.

But there's no universe in which the groups in question are going to pay taxes. Think about it. Let's say they instead register as 527 groups, enabling them to make unlimited independent expenditures. Those organizations don't have to pay taxes on contributions they receive either. Or maybe they want to be super-PACs (which are 527s, technically, for tax purposes), which can spend unlimited amounts to openly support candidates. They don't pay taxes on contributions either.

What's more, neither super-PACs nor other 527s have to tell their donors that they may be required to pay gift tax on some of their donations. 501(c)4s, on the other hand, have to make that disclosure according to the Congressional Research Service. Even if, for some crazy reason, they filed as a for-profit C corporations, they'd have to spend less than they take in to be eligible for any taxes. And political groups generally like to spend whatever they can get their hands on.

So why are these groups so eager to keep their 501(c)4 status if it, if anything, puts them at a disadvantage tax-wise? It's simple: disclosure. 501(c)4s can accept unlimited donations and don't have to tell a soul from whence they came. 527s, including super-PACs, have to file quarterly reports disclosing donors. That's why so many super-PACs have attached 501(c)4s, which can collect unlimited donations and then donate them in turn to the super-PAC, as Fred Wertheimer explained to me last week.

The key question, then, in considering what should come next for 501(c)4s, is not "should groups like this have to pay taxes." They're never going to have to pay taxes. It's whether they should have to disclose their donors.

A lot of people think they should. Notre Dame's Lloyd Hitoshi Mayer supports requiring 501(c)4s to disclose their donors, and the University of Illinois's John Columbo wants to eliminate the category altogether. Let the political ones become 527s and the charitable ones become 501(c)3s, Columbo figures. And when you think of the examples of groups that the 501(c)4 section was actually designed to help — volunteer fire departments, town beautification efforts, etc. — there isn't much reason to believe donors to those groups would be embarrassed. Who doesn't want people to know they helped out the fire department?

But there's a decent case to be made on the other side. As Neil Irwin explained last week, there's a long history of IRS persecution of LGBT-oriented charity groups, including denying one group tax-exempt status and making another demonstrate that it would not "encourage or facilitate homosexual practices or encourage the development of homosexual attitudes and propensities by minor individuals." Making all charitable groups 501(c)3s could open them to that kind of scrutiny, particularly for any that deal with controversial topics, which could be far worse than anything that's happened in the current scandal.

Or the groups could become 527s. But that's not ideal either. It's easy to imagine that, in a climate of intolerance, people would be afraid to donate money to civil rights groups if it was clear those donations would become public, and their neighbors would know. Or, more generally, people could be deterred from donating to causes they believe in but which are unpopular in their area. A Berkeley, Calif. resident who joins the NRA may have a good reason to want to keep that private for fear of being socially shunned by neighbors. Maybe they even have a right to keep that private.

Then again, maybe that's not good enough a reason. Maybe groups like the NRA or the Human Rights Campaign are powerful enough that the people have a right to know who's funding them, regardless of the effect on that donor's privacy.

But that's a values judgment about the importance of disclosure in a democracy, rather than a technical question of who pays what in taxes. Some of the last week's headlines might have led you to believe that there's some controversy over whether tea party groups should have to pay taxes. There isn't. No one thinks they should. The dispute is over whether they should have to disclose their donors, as a legal matter and as a moral one.

Update: Professor Mayer writes in to clarify his position: "While the piece was titled "Require Disclosure of Their Donors" (I did not choose the title), what I said in the piece was 'Congress needs to revise the disclosure rules to target the political activity for which it believes disclosure is required and apply those rules to all groups, regardless of tax classification.'"

"I therefore left open the question of what political activity should be subject to disclosure, including disclosure of donors' identities. I therefore agree with you that in designing such disclosure rules consideration needs to be given to the fact that political activity sometimes has to be anonymous to protect its supporters from harassment and retaliation, as not only evidenced by the LGBT rights movement but also by the civil rights movement."


Self-driving cars are a privacy nightmare. And it's totally worth it.

Timothy B. Lee — Tue, 21 May 2013 19:22:15 GMT

Will self-driving cars let the government track your every move? Greg Beato says yes, and Randal O'Toole disagrees. Beato is right: Self-driving cars will make it easier for the authorities to track you everywhere you go. But the benefits of self-driving cars are likely to be so enormous that American consumers will sign up in droves, regardless of the privacy implications.

We know this because American consumers have already enthusiastically adopted a technology that allows the government to track their every movement: the cellphone. To complete incoming calls, your cellphone company needs to know where you are at all times. A few brave souls have rejected the technology on privacy grounds, but most have signed up without giving it a second thought.

The story will be much the same for self-driving cars. "None of the self-driving cars being developed by Volkswagen, Google or other companies rely at all on central computers. Instead, all the computing power is built into each car," O'Toole writes. It's true that self-driving cars won't be directly controlled by a central computer. But there are several reasons to expect self-driving cars to be equipped with always-on cellular connections.

The most important is safety. Software bugs in a self-driving car are a matter of life or death. So companies in charge of self-driving software will want a mechanism to push out software updates as soon as they are ready. Waiting until a vehicle happens to be near a WiFi connection could lead to preventable accidents.

An always-on wireless connection has other benefits, too. It can alert vehicles to hazardous conditions such as slippery roads, flooding or collapsed bridges. It can provide real-time traffic updates, allowing autonomous vehicles to automatically route around traffic jams.

And a cellular connection will be essential for vehicles to navigate without anyone inside them. This will allow them to drop off their passengers at the door and then look for parking farther away. It will make possible driverless taxis, which will be affordable to many more people. Such cars will need a wireless connection so they can be hailed when needed.

So self-driving cars will have an always-on wireless connection, which will make them inherently trackable. And while that will alarm some privacy advocates, the benefits of self-driving cars dwarf the potential harms. Cars driven by human beings kill about 30,000 people each year in the United States. Self-driving technology could dramatically reduce that figure. Self-driving technology will enable expanded car-sharing, saving thousands of acres currently wasted on parking lots. And the technology will free up billions of person-hours currently devoted to the drudgery of commuting every year.

Fights over privacy in the self-driving future will focus on many of the same issues that are currently being debated with regard to cellphones. Governments currently claim broad power to seek location records from cellphone companies without judicial oversight. Reforming those laws to require the government to get a warrant before seeking historical records for a cellular connection would protect the privacy of both mobile phone users and self-driving car passengers.

Better data retention policies could also enhance users' privacy. If companies delete information about users' locations promptly, that would reduce the potential for the information to be abused later.

Finally, some privacy-conscious consumers buy prepaid cellphones to avoid having their calls linked to their identities. Self-driving taxi companies may offer similar options for those who want to travel without leaving a trail.

But opposing self-driving technology because of the privacy concerns makes about as much sense as opposing cellphones for privacy reasons.


Study: Election officials are biased against Latino voters

Dylan Matthews — Tue, 21 May 2013 17:33:26 GMT

There's an election coming up, and Greg Walsh wants to be sure he's ready. So he shoots a quick e-mail to his county election commission to clear up what documentation he needs to vote. The note goes like this:

Hello,

I've been hearing a lot about voter ID laws on the news. What do I need to do to vote?

Thank you,
Greg Walsh

An official at the commission shot him a link to his state's voter ID regulations, which clearly state if he needs an ID, under what circumstances an ID is needed, whether it can be expired, whether it needs to be a photo ID, etc.

Luis Rodriguez has similar questions. He sends an e-mail to his local election official. In fact, he sends the exact same e-mail Greg sent:

Hello,

I've been hearing a lot about voter ID laws on the news. What do I need to do to vote?

Thank you,
Luis Rodriguez

He didn't hear back.

Greg and Luis aren't real people. They're aliases used in an experiment by Harvard political science grad students Julie Faller, Noah Nathan, and Ariel White, which finds that local election officials are less responsive to requests for basic information about voting when they come from people with Latino-sounding names.

Faller, Nathan, and White "contacted every local official or election commission responsible for overseeing elections for each county or municipality at which elections are administered in 48 states."* One quarter of the e-mails used a Latino-sounding name, like "Luis Rodriguez," and asked the voter ID question you see above. Another quarter used a non-Latino-sounding name, like "Greg Walsh". The other half asked a control question ("Do you have to vote in the primary election to be allowed to vote in the general elections?") using both sets of names to see if asking about voter ID in particular had any effects.

After all the responses were back, they had a sample including 6,825 sent e-mails to officials in 46 states.** At least 4,557 officials replied. But the interesting story is in who they did and didn't reply to. "Responses to Latino names," the researchers write, "are three-and-a-half to four percentage points less likely than to non-Latino white names." The bias against Latino e-mailers was about three points greater in voter ID questions, though the difference between that and the primary election question wasn't statistically significant.

The finding holds up when you drop certain regions, when you drop small towns, and when you control for whether officials are elected or appointed. What's more, they find that there are actually statistically significant differences in the quality of response from officials, depending on what kind of name is used. Responses to Latino voters were likelier to be non-informative, less likely to be "absolutely accurate" (that is, giving complete and accurate information about the relevant topic), and even less likely to take a friendly tone:

It's worth noting that an "absolutely accurate" response could be something as simple as e-mailing a link to a state's voting regulations. "We ended up going with what we thought was the most conservative approach, which was giving them credit when they sent you to an institution that should be giving out the data," White tells me. But many didn't do even that.

Interesting, the researchers found no evidence that states with stricter voter ID laws are likelier to discriminate against Latino e-mailers. But they note that the results still bear on that debate. They write, "Our results indicate that changes to existing voting regulations are likely to differentially increase information costs for Latino voters because public officials are less responsive to their inquiries than to non-Latinos."

Similarly designed studies have also found evidence of bias on the part of local political officials. Yale's Daniel Butler and David Broockman (now at Berkeley) found that state legislators are less likely to respond to requests for information from people with black-sounding names. The researchers in this study said they focused on Latinos in part due to public debate over whether or not lax voter ID laws were letting undocumented Latino immigrants vote. "When we started thinking about voter ID, we thought this might be the most relevant reference group," White says.

For what it's worth, voter ID advocates dismiss the findings. Catherine Engelbrecht, president of True the Vote, calls the paper "a conclusion in desperate search of a viable methodology." "In reality, the Pew Hispanic Center found that 71 percent of Latinos support voter ID, which is consistent with national polling just short of 80 percent," she said. "Pew also found that 97 percent of Latinos surveyed were confident they had the identification required to meet local standards. This safeguard has long been a part of the Latino electoral culture, because every single Latin American country uses photo voter identification."

Update: Keesha Gaskins, senior counsel at the Brennan Center for Justice and a critic of voter ID laws, comments: "Based on the results of this study, we see another example of institutional barriers, beyond the control of individual eligible voters, that may impact their ability to vote. Understanding that voter ID laws affect the ability for voters to obtain a ballot, where there are institutional barriers that are exacerbated by race, it provides additional reasons why these laws are bad policy."

* Maine didn't list e-mail addresses for officials, and in Alaska the officials' boundaries didn't correspond to Census categories that the researchers used to see districts' demographics, such as racial makeup, average income, etc. So neither state's officials were e-mailed.

** Minnesota officials conversed with each other about the e-mails they were getting, and Virginia officials forwarded e-mails to each other, resulting in some officials getting multiple categories of an e-mail. The researchers dropped the states from the sample because of these issues.


Swastikas and 'witch hunts': On the front lines of the fluoride wars

Sarah Kliff — Tue, 21 May 2013 16:22:14 GMT

After I posted my history this morning of the fluoride wars, Wonkblog reader Sandra Guerard wrote in with her own experience more than four decades ago. After reading through the literature on the fluoride battles, hers seems like one of the more extreme fights that has occurred over fluoridating a city's water supply:

In the '60s, I was a teacher in the small CT town of Lisbon, where the fluoride war escalated and finally impacted the school. During that period, opponents of fluoride painted swastikas on the doors of homes of physicians who supported adding fluoride to the water.

The school superintendent, who had made a statement in support of fluoride, soon became the subject of a "witch hunt." Anti-fluoride members of the community hired private detectives to find some "dirt" on the superintendent and were ultimately successful in driving him out of town.

We teachers at the school were "clocked" in and out of school property by folks sitting in cars across from the school; the custodian was terminated and the teachers became responsible for cleaning their own rooms; as a music teacher, I had public student performances disrupted; teachers were under unbelievable scrutiny for months. One teacher was fired for "inappropriate use of bulletin boards," others were hounded.

At the end of the year, I threw in the towel and quit, as did the majority of teachers at the school.

I was in my early 20s and had only been teaching for a few years. It was a nightmare, but I learned a lot!

It was a good life lesson, albeit one I certainly didn't look for or completely understand at the time, given my youth and being one of the supposed "silent generation." I have never been silent since that experience, but I pick my battles.



The National's new album is out! Here's one song.

Sarah Kliff — Tue, 21 May 2013 15:58:16 GMT

The National put out its eighth album, "Trouble Will Find Me," on Tuesday. Public radio station WFUV recently had the band play one of its new tracks, "Graceless," in its Cutting Room Studio.



Let artists, innovators and the public define our copyright system

Derek Khanna — Tue, 21 May 2013 15:37:00 GMT

Robert Goodlatte (R-Va.), the chairman of the House Judiciary Committee, has vowed to conduct a comprehensive review of our nation's copyright laws to determine whether they are "still working in a digital age." That's a long overdue task. But there's a danger that the process will be dominated by a handful of special interest groups that have long been reflexively hostile to technological progress.

Last year's defeat of the Stop Online Piracy Act (SOPA) caused industry groups to intensify their lobbying efforts. And they haven't been subtle about it. In the wake of the SOPA defeat, Motion Picture Association of America chairman Christopher Dodd warned legislators: "Don't ask me to write a check for you when you think your job is at risk and then don't pay any attention to me when my job is at stake."

Goodlatte was one of the founders of the Internet Caucus back when Netscape and AOL were leading the country onto the information superhighway. With vision and backbone, he can modernize the law and end the grip that select special interests have on this highly specialized area of the law. If our legislators are serious about economic growth this is long overdue. If he does so, he will have important allies. Thanks to the invention of the Internet and other modern technologies, copyright law is no longer just the domain of the movie and record industry.

The last major revision to copyright law was the Digital Millennium Copyright Act (DMCA), passed in 1998. That was three years before the iPod, six years before Google Books and nine years before the Kindle. Thanks to heavy lobbying from established industries, the DMCA restricts entire classes of technology and hampers innovative products and services from being offered to the public.

For example, some cellphone owners would like to unlock their phones after their service contracts have expired. This practice is legal in other countries, allowing for more intense market competition, as consumers can switch providers without buying a new phone. But under the DMCA, unlocking "for purposes of commercial advantage or private financial gain" may be punishable by five years in prison on the first offense.

The DMCA empowers the Library of Congress to grant exemptions, which must be renewed every three years. Unfortunately, the Library's decisions have been all over the map. In the last six years, cellphone unlocking was legal. In the current cycle, which lasts until 2015, unlocking will be banned. Last year, jail-breaking your iOS device in order to run software not authorized by Apple was illegal. Now it's legal — but only for iPhones, not iPads, and only until 2015. Why do we let the Librarian of Congress decide which uses of technology are legal? Congress should permanently legalize cellphone unlocking, jailbreaking, and other uses of digital devices that do not infringe copyrights (as Lofgren's introduced legislation would do).

Of course, the content industry will oppose these kinds of reforms. They have a long history of opposing innovation and blocking new technologies. In the early 1980s, they fought to ban the VCR, which they saw as a competitive threat. Jack Valenti, the long-serving president of the MPAA, argued that "the VCR is to the American film producer and the American public as the Boston strangler is to the woman home alone." Content went after the digital audio tape, the first iPod (the Rio), the first DVR (ReplayTV) [this is just a small sample]. We shouldn't expect Hollywood to adopt a reasonable posture today.

So in its deliberations, Goodlatte's committee should ensure that Hollywood isn't the only voice at the table. Both content creators and innovators desperately want to see copyright reform.

Brad Burnham, a principal at Union Square Ventures, has said that he avoids investing in companies related to the music industry because of the copyright risks. Congress should consider whether copyright law is chilling innovation in media technologies.

Hank Shocklee of Public Enemy, who makes a living producing copyrighted music, has spoken on how copyright has stifled their artistic expression and innovation even changing the composition of their music from album to album as case law has changed. Congress should examine whether copyright law is hampering the creation of certain types of music through a more clear and effective policy of fair use.

Edward Felten, a computer science professor at Princeton, was once blocked from publishing his computer security research due to a legal threat based on the DMCA. Congress should study how to reform the DMCA to make it more hospitable to scientific research.

Pandora has argued that current copyright laws put it at a competitive disadvantage compared to terrestrial and satellite radio. Congress should evaluate this issue.

We can craft a system of copyright that compensates rights holders and incentivizes innovation for start-ups and new artists. It is not an either or proposition. But we'll only get a balanced copyright system if Congress hears from a broad range of voices. It can't just be special interests controlling the debate, writing the amendments in backrooms, and writing big checks to members of Congress.

Derek Khanna is a Yale Law Fellow with the Information Society Project. He was previously a House and Senate staffer. His Twitter handle is @DerekKhanna.


The end of health price secrecy may be starting in Miami

Sarah Kliff — Tue, 21 May 2013 15:21:16 GMT

When Medicare released thousands of health-care prices this month, one of the biggest criticisms was that these figures didn't represent what patients actually paid.

Medicare, for example, pays hospitals on a set fee schedule, regardless of their prices. Health insurance plans typically negotiate a lower rate with a hospital than the sticker price that showed up in the new data. Those prices still remain secret -- but that may change.

Spurred by the release of the Medicare data, the chief executive of Mt. Sinai Medical Center in Miami has now pledged to release those negotiated rates that tend to be kept secret. Via MedCity News:

Steve Sonenreich, chief executive of Mount Sinai Medical Center in Miami Beach, made a public pledge Monday to divulge the contractual rates the hospital pays private insurers for diagnoses and treatments.

"We will post our prices relative to Blue Cross, and Aetna, our contractual prices, and we'll challenge Baptist and the other systems in the community to do the same," said Sonenreich, who made his pledge during a studio interview on WLRN 91.3-FM with host Tom Hudson.

This is a pretty big step for a hospital to take. Typically, hospitals and health plans closely guard their negotiated rates as a competitive advantage. A hospital doesn't want its competitor down the street to know it's getting paid a lot more by an insurance company for the exact same procedure. Likewise, health plans don't want their competition to know when they've gotten a low rate with a provider.

One hospital promising to release its rate is by no means a sea change, and there's still a lot of distance between one hospital promising to release its contracted rates and those in the rest of the country. Getting other hospitals on board will near certainly prove a difficult task. In a perhaps telling example, another local hospital CEO, Brian Keeley of Baptist Health South Florida, has already demurred from matching Mount Sinai's pledge.


Rand Paul unloads on 'bullying, berating and badgering' of Apple

Neil Irwin — Tue, 21 May 2013 15:16:30 GMT

This much is clear from the first hour of the Senate Permanent Subcommittee on Investigations hearing on Apple's steps to avoid paying billions in U.S. corporate income tax: It will be primarily an exercise in righteous indignation for the senators present; and there will be at least one lawmaker with a quite different take.

"Frankly, I'm offended by the tone and tenor of this hearing," said Sen. Rand Paul (R-Ky) in his opening statement. "I'm offended by a $4 trillion government bullying, berating and badgering one of America's greatest success stories."

"If anyone should be on trial here, it should be Congress," Paul continued. "I frankly think the committee should apologize to Apple. The Congress should be on trial here for creating a Byzantine and bizarre tax code."

Paul aside, the bipartisan tone was one of assailing Apple for using Ireland-based shell companies to avoid U.S. corporate income tax. Said Sen. Carl Levin (D-Mich.), chairman of the subcommittee: "The offshore tax-avoidance tactics spotlighted by the subcommittee do real harm. They disadvantage domestic U.S. companies that aren't in a position to reduce their tax bills using offshore tax gimmicks. They offload Apple's tax burden onto other taxpayers in particular, onto working families and small businesses. The lost tax revenue feeds a budget deficit that has reached troubling proportions, and has helped lead to round after round of budget slashing and the ill-advised sequestration now threatening our economic recovery."

And ranking member John McCain (R-Ariz.) added, "Apple's corporate tax strategy reflects a flawed corporate tax system that allows large multinational corporations to shift profits offshore to low-tax jurisdictions. For years, Apple has opted to forgo fully contributing to the U.S. treasury and to American society by shifting profits and circumventing U.S. taxes. In the last four years alone, Apple has avoided paying taxes on $44 billion in income."

Update: Here is the full text of Paul's statement as prepared for delivery:

I am offended by the tone and tenor of this hearing. I am offended by a $4 trillion government bullying, berating and badgering one of America's greatest success stories.

Tell me one of these politicians up here that doesn't minimize their taxes. Tell me a chief financial officer that you would hire if he didn't try to minimize your taxes legally. Tell me what Apple has done that is illegal.

I am offended by a government that uses the IRS to bully groups such as the Tea Party but I am also offended by a government that convenes a hearing to bully one of American's success stories.

I am offended by the spectacle of dragging in here executives from an American company that is not doing anything illegal. If anyone should be on trial here, it should be Congress.

I frankly think the Committee should apologize to Apple. I frankly think Congress should be on trial here for creating a bizarre and byzantine tax code that runs into the tens of thousands of pages, for creating a tax code that simply doesn't compete with the rest of the world.

This committee will admit: Apple has not broken any laws. Yet, they are forced into a show trial at the whims of politicians, when in fact; Congress should be on trial for chasing the profits of great American companies overseas. You haul before this committee one of America's greatest success stories and you want applause?

I say, instead of Apple executives, you should have brought in a giant mirror, so we could look at the reflection of Congress because this problem is solely and completely created by the awful tax code.

If you want to assign blame, the Committee needs to look in the mirror and see who created this mess, see who created the tax code that drives American companies overseas.

Our corporate tax is more than double Canada's. I never thought I would be complimenting Canada's tax code our tax code is double Canada's. Our corporate tax is over ten points higher than Europe. Instead of saying theirs is too low, why don't we set about to work that ours is too high.

Apple has 600,000 jobs they've created, American jobs and we want to drag them before this committee to chastise them. I find it abominable. Just in my state, we have $700 million in sales from Dow Corning. They make Gorilla Glass.

They were virtually out of business. In the 1990s, Apple struggled if I had to guess, unfortunately, I didn't guess enough to invest in Apple, but the thing is that in the '90s, people were worried they might go out of business. You know they had one computer that wasn't doing well and then all of a sudden the innovation that came about. And we want to bring them forward and chastise them for their success.

A couple years, we did repatriation of foreign capital. If we want the capital to come home, don't double tax it. We tax it 35 percent. Let's tax it at 5 percent.

I have a bill that would repatriate profits from foreign companies at 5 percent and put it into infrastructure. Our country is woefully short of money for infrastructure. But you're not going to get it at 35 percent-- you are getting zero. Let's make it 5 percent and create and infrastructure fund.

There are probably 70 votes for that in Congress but nobody will bring it up. Why? They saw, "Oh it's the sweetener for overall tax reform, which is illusive and a hill too tall to climb that it never seems to get here."

Why not tomorrow pass it? Why do you think people are frustrated with Congress? Because we don't do the right thing. Everybody admits, even those that want to drag Apple before this committee, they admit that the tax code is our problem.

But if we had repatriation at 5 percent, then they would bring money home. Why don't we just pass it? Instead it has to be revenue neutral, scored by the CBO just pass it if it's the right thing to do.

I would say what we really need to do is to apologize to Apple, compliment them for the job creation they are doing, and get about doing our job.

Look in the mirror and let's make the tax code better, fairer, and more competitive world-wide. Money goes where it is welcome and currently our tax code makes money not welcome in our country.

Thank you, Mr. Chairman.



Why are tornadoes so hard to predict?

Brad Plumer — Tue, 21 May 2013 14:47:11 GMT

Just 16 minutes before a gigantic twister first developed near Oklahoma City on Monday, the National Weather Service put out a tornado warning.

That doesn't sound like very much time to get out of the way. For many, it wasn't: At least 24 people died when the tornado ripped a mile-wide path through the city of Moore, Okla.

But those 16 minutes actually represent an enormous advance for weather science. Back in the 1980s, the average tornado lead time was a scant five minutes. Today, it's about 13 minutes.

What's more, meteorologists are now able to issue alerts and storm forecasts even earlier, thanks to powerful computers that allow them to run detailed weather simulations. The Oklahoma City area had been identified as an at-risk area days before the twister actually struck. And the National Weather Service's Rick Smith issued an eerily prescient forecast at 11:30 a.m. Monday, alerting people to the threat of tornadoes that very afternoon.

So could tornado forecasts keep improving? And how many lives would better warning systems actually save? A few points here:

Tornado detection is likely to improve in the years ahead. Scientists are developing a wide array of technologies to fine-tune their forecasts, from advanced radar systems to lightning mapping arrays that will help peer into the innards of storms. What's more, the National Oceanic and Atmospheric Administration is set to upgrade its computers that analyze weather data. That could all help lengthen the lead time for tornado warnings.

"Anything that gives us even a few additional minutes is extremely valuable," says John Trostel, director of the Severe Storms Research Center at Georgia Tech.

(That said, there may be some questions about the government's ability to conduct forecasts in the near term. The National Weather Service is facing an 8.2 percent cut from sequestration that could "trim already financially-depleted programs critical for maintaining and improving the NWS' weather capabilities.")

But there's a limit to how accurate those predictions will ever be. "We will never have the degree of resolution we need in atmospheric variables and measures in order to achieve some perfect forecast," explained Greg Carbin of the National Weather Service Storm Prediction Center in a 2011 interview with Scientific American. "It's just not possible. We might be able to get, say, an hour lead-time on a tornado."

While meteorologists have made enormous strides in predicting tornadoes once an individual storm has actually formed, that's still extremely difficult before the storm appears on the radar. (The National Weather Service operates 120 radar sites around the country.)

Here's Carbin's explanation for why it's so difficult: "There are so many mild adjustments, slight adjustments that can make a huge difference in whether you end up getting the formation of storms. The sensitivity the atmosphere has to ingredients in the formation of tornados and magnifying that slight change in something we can't even observe can have a dramatic impact on the forecast."

Better warnings are one thing — getting people to listen is another. Trostel points out that storm researchers are paying just as much attention to the sociological aspect of warnings. "That's an area people are working hard at," he says. "How do we get the warnings to people? How do we get them to pay attention? How do we get them to do the right things?"

This is trickier than it sounds. For instance, many people still rely on outdoor sirens, which are meant to be a warning system of last resort and are often difficult to hear in high winds. What's more, the weather service doesn't want to "over-warn" the public or produce too many false alarms — otherwise, there's a risk people will tune out.

Even a good warning system can't help if there's no place to hide. It appears that a large number of houses in Moore had no basements. "An F4 tornado" — the twister in Moore was likely a 4 or 5 on the Enhanced Fujita scale — "will wipe those houses right out," Trostel says.

The Oklahoma government has been offering $2,000 rebates to some residents to help defray the cost of building "safe rooms" in their homes, which research shows increase the likelihood of surviving a severe storm.

But even as the population of Moore has tripled since 1970, and even though Oklahoma has historically been at high risk for tornadoes, the local building codes don't require these rooms.

Then there are the elementary schools in Moore, which lay directly in the path of both a deadly 1999 tornado and Monday's twister. Those schools don't have underground shelters, either. (Many students at Plaza Towers elementary school were moved to a nearby church Monday, although the third-grade class is still unaccounted for.)

Over at Dot Earth, Andrew Revkin posts a note from Kevin Simmons, an economist at Austin College, who notes that there were two elementary schools in Moore a mile apart that suffered very different fates. "As of this writing," he notes, "there are no fatalities at Briarwood and many from Plaza Tower." Was that because of the way the storm shifted? Was it engineering? A difference in evacuation procedures? Or something else?

It's still way too early to say for sure. But it's a reminder that even our much-improved warning systems aren't always enough.

Related: Live updates on the Moore, Okla. tornado news.

Just 16 minutes before a gigantic twister first developed near Oklahoma City on Monday, the National Weather Service put out a tornado warning.

That doesn't sound like very much time to get out of the way. For many, it wasn't: At least 24 people died when the tornado ripped a mile-wide path through the city of Moore, Okla.

But those 16 minutes actually represent an enormous advance for weather science. Back in the 1980s, the average tornado lead time was a scant five minutes. Today, it's about 13 minutes.

What's more, meteorologists are now able to issue alerts and storm forecasts even earlier, thanks to powerful computers that allow them to run detailed weather simulations. The Oklahoma City area had been identified as an at-risk area days before the twister actually struck. And the National Weather Service's Rick Smith issued an eerily prescient forecast at 11:30 a.m. Monday, alerting people to the threat of tornadoes that very afternoon.

So could tornado forecasts keep improving? And how many lives would better warning systems actually save? A few points here:

Tornado detection is likely to improve in the years ahead. Scientists are developing a wide array of technologies to fine-tune their forecasts, from advanced radar systems to lightning mapping arrays that will help peer into the innards of storms. What's more, the National Oceanic and Atmospheric Administration is set to upgrade its computers that analyze weather data. That could all help lengthen the lead time for tornado warnings.

"Anything that gives us even a few additional minutes is extremely valuable," says John Trostel, director of the Severe Storms Research Center at Georgia Tech.

(That said, there may be some questions about the government's ability to conduct forecasts in the near term. The National Weather Service is facing an 8.2 percent cut from sequestration that could "trim already financially-depleted programs critical for maintaining and improving the NWS' weather capabilities.")

But there's a limit to how accurate those predictions will ever be. "We will never have the degree of resolution we need in atmospheric variables and measures in order to achieve some perfect forecast," explained Greg Carbin of the National Weather Service Storm Prediction Center in a 2011 interview with Scientific American. "It's just not possible. We might be able to get, say, an hour lead-time on a tornado."

While meteorologists have made enormous strides in predicting tornadoes once an individual storm has actually formed, that's still extremely difficult before the storm appears on the radar. (The National Weather Service operates 120 radar sites around the country.)

Here's Carbin's explanation for why it's so difficult: "There are so many mild adjustments, slight adjustments that can make a huge difference in whether you end up getting the formation of storms. The sensitivity the atmosphere has to ingredients in the formation of tornados and magnifying that slight change in something we can't even observe can have a dramatic impact on the forecast."

Better warnings are one thing — getting people to listen is another. Trostel points out that storm researchers are paying just as much attention to the sociological aspect of warnings. "That's an area people are working hard at," he says. "How do we get the warnings to people? How do we get them to pay attention? How do we get them to do the right things?"

This is trickier than it sounds. For instance, many people still rely on outdoor sirens, which are meant to be a warning system of last resort and are often difficult to hear in high winds. What's more, the weather service doesn't want to "over-warn" the public or produce too many false alarms — otherwise, there's a risk people will tune out.

Even a good warning system can't help if there's no place to hide. It appears that not many houses in Moore had basements or storm cellars. (Here's why.) "An F5 tornado" — the twister in Moore was likely a 5 on the Enhanced Fujita scale — "will wipe those houses right out," Trostel says.

The Oklahoma government has been offering $2,000 rebates to some residents to help defray the cost of building "safe rooms" in their homes, which research shows increase the likelihood of surviving a severe storm.

But even as the population of Moore has tripled since 1970, and even though Oklahoma has historically been at high risk for tornadoes, the local building codes don't require these rooms.

Then there are the elementary schools in Moore, which lay directly in the path of both a deadly 1999 tornado and Monday's twister. Those schools don't have underground shelters, either. (Many students at Plaza Towers elementary school were moved to a nearby church Monday, although the third-grade class is still unaccounted for.)

Over at Dot Earth, Andrew Revkin posts a note from Kevin Simmons, an economist at Austin College, who notes that there were two elementary schools in Moore a mile apart that suffered very different fates. "As of this writing," he notes, "there are no fatalities at Briarwood and many from Plaza Tower." Was that because of the way the storm shifted? Was it engineering? A difference in evacuation procedures? Or something else?

It's still way too early to say for sure. But it's a reminder that even our much-improved warning systems aren't always enough.

Related: Live updates on the Moore, Okla. tornado news.


A brief history of America's fluoride wars

Sarah Kliff — Tue, 21 May 2013 13:14:11 GMT

The fluoridation war is alive in Portland, Ore.

The city is one of the few major American cities that does not fluoridate its water supply. It is now in the middle of a heated battle about whether to change that. While the Portland City Council voted last fall to reverse policy and begin fluoridating the city's water, it drew the ire of anti-fluoride activists, who gathered the 20,000 signatures required to put the issue on the ballot. The fight has drawn comment from bands including the Dandy Warhols (anti-fluoridation) and the Decemberists (pro-fluoridation.)

In Portland, the fluoride vote will happen Tuesday and the most recent polls have the anti-fluoride camp up 50 percent to 43 percent. If Portland voters reject fluoridated water, it will follow in the path of many cities before it. Forty-four cities around the world -- largely in the United States, Australia and Canada -- have passed anti-fluoridation policies this year, according to the Fluoride Action Network.

The fluoride battle has a lengthy history. One article, published in 1985, described the fluoridation fight as "America's Longest War."

"A few things remain constant in America -- death, taxes, baseball and, since the 1950s, widespread, often successful efforts by a passionate minority to keep fluoride out of drinking water," Donald R. McNeil wrote in Wilson Quarterly.

McNeil has written one of the more complete histories of the fluoridation wars that I was able to find. It starts on Jan. 26, 1945 when the city of Grand Rapids, Mich. became the first city to fluoridate its water supply. It was meant to be a public health experiment, to test whether fluoridation could protect against tooth decay, especially among younger children.

It would take decades to have any results and, therefore, "the pioneers of fluoridation were generally a cautious lot," McNeil writes, noting that they thought "that communities should at first fluoridate only on a test-batch basis."

Public health officials in nearby Wisconsin had other ideas; they began clamoring for statewide fluoridation as soon as possible. They began spreading the pro-fluoridation gospel and that's when the anti-fluoride advocates showed up. Their ranks were diverse including, in one fight over fluoridating Seattle's water in 1951, "Christian Scientists, a few dentists, health food operators and fervent anti-Communists." They won the Seattle vote, 84,000 to 44,000.

The medical establishment near universally supports fluoridation. The American Dental Association has endorsed the practice since 1950. The Surgeon General Regina Benjamin supports fluoridation and the Centers for Disease Control, which has described wide-spread water fluoridation as one of the 10 most important public health accomplishments of the 20th century.

Fluoridation opponents, meanwhile, have cited research finding that high levels of fluoride -- about 4 milligrams per liter -- can cause harmful health effects. The Department of Health and Human Services and the Environmental Protection Agency have recommended, since 2011, that cities maintain 0.7 milligrams per litter of fluoride in the water supply.

In Portland alone, this is now the fifthtime the city has voted on the water fluoridation issue, according to the Oregonian newspaper. The last vote, Brad Schmidt reports, was in 1978, when voters overturned the city council's decision to fluoridate the water.

Except, what we know about the fluoride wars suggests that the fight might actually be waning. Between 1950 and 1967 there were 1,009 fluoridation referendums, according to a Centers for Disease Control report. Forty-one percent of those fluoride proposals were adopted and 59 percent rejected.

Right around the same time, fluoridation became a plot line in the 1964 film Dr. Strangelove, where fluoridation is described as "the most monstrously conceived and dangerous Communist plot we've ever had to face," with the Soviets accused of attempting to poison Americans' "precious bodily fluids."

From 1980 to 1988, there were fewer fluoridation votes, 150 in total, with a 36 percent success rate.

The early 90s were a bit of a golden age for fluoride advocates, who won 59 percent of the 32 referendums conducted. In the 2000 election cycle, there were 23 fluoridation ballot initiatives and those were bad news for fluoride advocates, who lost 14 of those fights. They did, however, win "in the largest cities or counties where it appeared on the ballot in San Antonio, Texas and Clark County, Nevada, which includes Las Vegas," according to the CDC report.

Fluoridation rates, meanwhile, have creeped up in recent years. Americans living in areas with fluoridated water increased from 62 percent in 1992 to 69 percent in 2006, the most recent year for which data is available.

The American Dental Association now estimates that 72.5 percent of Americans live in areas with fluoridated drinking water.