Is Our Democrats Learning?

Sadly, no.

Update 5/25:  Fortunately, the Dems did finally get around to passing health insurance reform.  Good for them.

Open Letter: Congressional Pay

Dear Senators and Representatives,

I am writing today about the ever-contentious issue of Congressional pay. I am tired of hearing about the issue every year or so, and even more tired the political theatrics that accompany each vote. I have a very simple solution: tie the pay of various federal officials to the federal minimum wage.

Tying pay to the minimum wage would have benefits beyond getting rid of silly political posturing. First, it would help people remember exactly how much the current minimum wage is set at. Many federal elected officials (but not the Vermont delegation, of course) would benefit from being reminded on a regular basis. Second, it would help illustrate how excessive the pay packages of executives and financial types have been over the past decade. Even at a salary set at 40 times the minimum wage, the president would be vastly underpaid compared to executives at major corporations, who are often paid 500 or 1000 times the minimum wage – whether or not their companies are profitable.

Below is my proposed pay schedule. The new salaries would give considerable raises to many federal officials because I believe they are currently underpaid relative to the importance of their responsibilities. Higher pay would also reduce the need or incentive for senior officials to become lobbyists after leaving government. Slowing the speed of the revolving door would save taxpayers billions in the long run because former government officials are very good at lobbying for unnecessary spending items, as well as much more costly tax breaks.

• President – 40 times minimum wage of $7.25 per hour – $603,000
• Vice-President, Supreme Court Justices – 30 times – $452,500
• Senators, Cabinet Secretaries – 25 times – $377,000
• Representatives, Appeals judges – 20 times – $301,600
• Under-secretaries, District judges – 15 times – $226,200
• Etc.

Obviously, enacting these changes is low priority right now, but they would probably take a couple of cycles to pass even in good economic times. Nonetheless, I would like the Vermont delegation to begin drafting the legislation so it can be put forward sometime next year.

Thank you for your time.

Open Letter: The Public Option

Dear Senators and Representatives,

I am writing today about the very important issue of health care reform. It appears that something will be passed in Congress this year, but of course the details are critical. Specifically, a bill without a “public option” is unacceptable. Without that provision, the impact of any reform bill would be negligible. You must speak forcefully for the public option.

However, having a public option is just an interim step. The United States must ultimately move to a universal national health insurance system. That is why I am disappointed that you did not co-sponsor S.703 or it's House equivalent, H.676. Though each bill is flawed (S.703 has too many details about health care delivery, while H.676 is essentially a placeholder with not enough details) it is important that you endorse and advocate the ultimate goal of the bills. If you do not understand why you should, please review the following economic issues:

• A free market in health insurance is unworkable because only healthy people are profitable to insure. This fact is completely incompatible with the goal of universal coverage, or even broad coverage. By the time insurers are regulated so that coverage cannot be denied on the basis of race, age, gender, geography, existing conditions, and family history, there would be no purpose in having the insurance companies in the mix. They would merely be providing expensive claims processing.
• The very business model of health insurance creates huge, wasteful bureaucracies in doctors offices' and the insurance companies due to the endless fight over the payment of claims.
• Tying health insurance to employment adds a major overhead cost for employers, while disadvantaging small companies and entrepreneurs relative to large companies which can afford employees dedicated to negotiating lower rates.
• Healthy workers are more productive and take fewer days off (for real illnesses, at least).
• Private insurers have no incentive to invest in preventative care, and preventative care is much cheaper (in the aggregate) than curative care. Up-front investment in good maternity care also yields high returns.
• Emergency room care delivery (where the uninsured cannot be turned away) is substantially more expensive than care provided in a medical office or clinic.
• Government-run health insurance systems in other countries have proven records of costing less while covering more people and producing better results as compared to the U.S arrangement.

Many Senators and Representatives need to be reminded that the benefits of a national health insurance system for their constituents far outweigh any harm their campaign contributors in the insurance industry claim will happen. Please remind them often, and help the nation take the first step towards the ultimate goal by voting for a reform bill with a public option.

Thank you for your time.

Open Letter: Vacation and Overtime Laws

Dear Senators and Represenatives,

I am writing today about some important changes to the country's labor laws I think should made. Compared to other industrialized countries, American workers receive much less paid time off, and much less protection from excessive working hours. I would like to see the situation improved. Here are the issues:

1. Vacation accrual – America is the only industrialized country where workers are not guaranteed paid vacation time. The next lowest is Canada, which requires 10 days per year, and the highest are Finland and France, where 30 days are required. American employers should be required to give a minimum of 4 minutes of vacation per hour worked, phased in at a minute every 3 years. When fully implemented the rule would provide 15 days off for 1800 hours worked. Employers should not be able to force employees to use the vacation for holidays or furloughs, nor force employees to “use it or lose it.”
2. Require overtime pay on federal holidays – National holidays don't really exist for many workers in America, especially those employed in the retail sector. This disparity from the typical office worker is quite unfair. Requiring overtime on those days would close the gap.
3. Extend overtime protection – There are many non-supervisory employees who are overworked, especially in the software industry, because the minimum exempt pay level is far too low. It should be fixed at 6 times the minimum wage (currently equivalent to about $78,000 per year at 1800 hours of work)
4. Set higher overtime rates at extreme hours – All workers regardless of their exempt status should receive double overtime after 56 hours of work and triple overtime after 64 hours of work. The time should be calculated using a rolling 7 day window without regard to pay periods, so that employees are compensated for any block of extreme work. An exception should be made for workers addressing declared state or federal emergencies, where normal overtime rules would apply.
5. Crack down on contractor status abuse – Many companies have been successfully sued for classifying workers as independent contractors in order to evade various taxes and other obligations, but the practice continues. Federal regulation to curb this abuse was proposed in the last Congress, but did not go far. It should be revived and passed.

Obviously the current economic conditions will cause employers to oppose these changes even more vociferously than would be the case during an expansion. Nonetheless, I hope you make an effort to protect American workers from abuse and to give every worker time to rest and recuperate. They all deserve it, not just the people in charge.

Thank you for your time.

Open Letter: Banking and Regulatory Capture

Dear Senators and Representatives,

I am writing today to express my frustration about the ongoing disaster that is the U.S. banking system. As I said in my previous letter of Sept. 23, “The rush to get [the bailout bill] passed is a scare tactic aimed at bullying Congress into passing something that favors Wall Street.” It was passed nonetheless and, unsurprisingly, did little to “calm” the markets. The reason is that the bailout bill did not address the fundamental problem: many of the country's banks are insolvent. Sec. Paulson's changing approaches to implementing the bill – first asset purchases, then cash infusions based on legislative intent, then back to asset purchases, and finally to complete disinterest – were counterproductive as well.

Unfortunately, the Obama administration to-date has not unveiled a better plan to rehabilitate the banking industry. The recent rumors about offering loan guarantees to private sector entities that buy the “toxic assets,” coupled with previous rumors about a “bad bank,” indicate that ultimately another TARP-like giveaway will be offered. The Obama administration continues to show signs of regulatory capture – meaning its thinking is guided primarily by the interests and assumptions of the industry, not the country at large. This is not surprising given that the core people appointed to handle the issue – Geithner, Summers, and Shapiro – all helped create the problem to varying degrees.

So it is now up to Congress to push the appropriate solution. In my previous letter I indicated that a bank rescue plan based on the “Swedish model” was the best approach, and that remains true. The fundamental steps are to 1) guarantee all liabilities (deposits, bonds) of all banks, 2) require the banks to re-value their assets (loans, other investments) either to market or to a very, very small-c conservative model, and 3) “nationalize” the insolvent banks with the goal of either consolidating them into solvent banks, or doing an public offering on the whole entity at some point in the near future. Essentially, it would be the FDIC process writ large, but with preemptive action. The goal is to make sure the banking system is not full of “zombies” – banks that are allowed to live on with poor capitalization and thus limited ability to lend. Japan experienced the effects of a paralyzed banking system during the 1990s, and that period is now referred to as the “Lost Decade.”

A key feature of a good plan is to make the irresponsible parties in the banks – senior management and shareholders, take the losses that should accrue to them. The TARP and other actions taken so far have been giveaways and are completely unacceptable. Shareholders failed to supervise the banks and should be wiped out. Additionally, I do not care about limiting the pay of current bank executives; I want them fired.

The country needs you to take action on the banking issue soon. Thank you for your time.

Open Letter: Bailout Bill

Dear Senators and Representatives,

I am writing today to urge you to oppose the ridiculous financial bailout bill proposed by the Bush Administration and Secretary of the Treasury (and former Goldman Sachs CEO) Hank Paulson. It is easily the most naked power grab in the past quarter century, and if passed as-is, it will go down as the Bush Administration's third biggest screw-up (after Iraq/Afghanistan and Katrina). The plan is undemocratic, unaccountable, and fundamentally unwise. The rush to get it passed is a scare tactic aimed at bullying Congress into passing something that favors Wall Street. We saw something similar before the Iraq war, and we know how that turned out.

The plan as currently proposed almost certainly won't work. Buying the various CDOs, MBSs, and other financial instruments at “market value” would still leave many banks under-capitalized and thus insolvent. But buying the financial instruments at face value would be a huge give-away to Wall Street and other financial gamblers. The only way to avoid a huge giveaway, eliminate the moral hazard, and keep the system functioning is to take over every institution with a whiff insolvency, recapitalize them directly, and manage them until the financial instruments mature and the firms are solvent. It would be ugly, but the American financial system is broken. But so is the idea that unfettered free market capitalism exists in American, or that it works. That has been proven false by very people who most support it – Republicans and Wall Street.

Here are the conditions that I think should be attached to any bill, no matter the details of how the “bailout” is implemented:

1. It should include a way of at least partially paying for the huge bill the taxpayers will inevitably shoulder. I suggest a) repealing the Bush tax cuts, b) resetting the capital gains tax to the pre-1997 levels, and c) implementing a low (0.01% to 0.05%) transaction tax on all stock, bond, option, future, etc. sales (the UK already has a sales tax on stocks and it hasn't harmed the London stock market).
2. It should include a provision to break up anything that is too big to fail.
3. It should include a provision to regulate anything that functions like a bank as a bank.
4. It should be completely transparent and have accountability. All transactions should be posted on the web immediately. Congress should get weekly reports on what has happened, why, and what the next week's plan is.

Talk about limiting CEO compensation may feel good, but is basically irrelevant at this point, as is talk about “claw-backs” - recovering past unwarranted compensation. Helping homeowners should also be separated as it muddles the issues. The focus needs to be on rebuilding the financial system from the top down with a more small-c conservative culture. Thank you for your time, and I look forward to rational action on your part.

Open Letter: Farm Bill

Dear Congressmen and Senators,

I am writing today to urge you to work to pass a fiscally and environmentally responsible farm bill that benefits both small family farms and Americans consumers. The farm bill is a complex piece of legislation that contains a lot of programs that may cost a relatively small amount individually, but in aggregate are expensive and very important to the health of American citizens. Since I am not familiar with the fine details of farm policy, let me list some of the basic questions I want you to ask when judging the bill.

• Does it support small family farms over agribusiness? Family-operated farms and farmer-owned cooperatives should receive the bulk of farm support, instead of large corporate farms and farm supply companies, which get the most today.
• Does it support environmentally responsible farming practices? The bill should help farmers preserve topsoil, prevent nutrient runoff, preserve wetlands, and otherwise act or not act in ways that are sustainable over many generations.
• Does it support safe and healthy food? The bill support the production of fresh food that is free of excessive levels of hormones, antibiotics, pesticides, and herbicides. In Vermont specifically, the farm bill should support a dairy industry that does not use rbST, or advanced antibiotics that should be reserved for severe infections in humans.
• Does it support increased food inspection, especially of imported food? Many recent deaths and the pet-food disaster point to an inspection system that is broken. The bill should increase funding for food inspectors and dramatically increase inspection of foods from countries which don't have good inspection systems, such as China.
• Does it end support for grain-based ethanol programs? There is no clear evidence that grain-based ethanol has a positive net energy return, meaning that the fossil fuel energy used to produce the ethanol might as well be burned directly. Grain-based ethanol is pork, and always has been. Subsidies for grain-based ethanol also raises the costs of feed for Vermont's dairy farms, which is yet another reason to oppose these programs.
• Does it end support for sugar subsidies? Not only does growing cane sugar in the Everglades hurt that wonderful habitat, the sugar subsidy (which is also a high-fructose corn syrup subsidy) makes many products in America cost more and taste much worse.

I am sure there are many issues related to the farm bill I have not touched on. If you and your staff are not familiar with them, I suggest you reach out to progressive farm and environment think tanks in Washington for more information. I am confident you will end up supporting a farm bill that is good for the environment, good for farmers, and good for consumers.

Thank you for your time.

Open Letter: CAFE Regulations

Dear Congressmen and Senators,

I am writing today to urge you to support the strongest possible CAFE requirement, one that makes no exceptions for so-called 'light-trucks' or for the use of alternative fuels. Various amendments have been offered in the Senate which would alter the deadline for meeting the rather modest standards that have been proposed in S.357. I urge you to reject those amendments and keep the bill clean from unrelated amendments.

Truth be told, CAFE is rather poor policy. It is complicated for manufacturers to calculate and meet. It allows for several exceptions, and it fails to regulate the fuel efficiency of larger vehicles. And it does nothing to alter the fundamental pattern of urban development in America that drives the nation's incredible appetite for oil.

A far better approach would be to replace CAFE with a constantly increasing federal motor fuels tax (aka a gas tax). A gas tax that increased by $0.03 per month (and more after several years) would give consumers a clear reason to reduce their fuel consumption. They would be able to do so in the way that suited them most, be it buying a fuel efficient car, moving closer to work, telecommuting, car-pooling, or many other means. Such a tax would be easy to collect – a federal gas tax already exists - and would eliminate the paperwork created by CAFE. A new gas tax would not cause significant financial hardship because it would give people plenty of time to adapt, as well as clear incentives to do so.

Many people claim to object to a gas tax because it would fall hardest on poorer Americans. However, a gas tax is hardly the only tax that poor people face. A gas tax could easily be offset by using the revenues from it to replace the FICA tax on the first few thousands of dollars of wage earnings. A gas tax plus such an exemption would give poor people a reason to reduce their use of fuel, along with more reasons to work, while still preserving their FICA contributions. A gas tax could also be used to fund improvements in mass transit.

But I am a realist, and recognize that increasing the federal gas tax would be very unpopular. Most Americans are totally uninformed and unrealistic about the viability of our current level of oil usage. Most Americans expect that their grandchildren will drive huge cars everywhere anytime, just like everyone does today. This expectation will certainly be proved terribly wrong. Until the time that Americans support an increasing gas tax, CAFE will be the best policy that can be implemented at the federal level. I look forward to seeing the small improvement that CAFE represents passed soon.

Thank you for your time.

Open Letter: Ending the War in Iraq

Dear Congressmen and Senators,

I am writing today to urge you to work even harder than you have so far to end the disastrous War in Iraq. The War in Iraq has killed thousands of Americans, wounded tens of thousands more, and killed hundreds of thousands of Iraqis. It has cost American taxpayers over $500 billion so far, and its ultimate costs will be well over $1 trillion. It was started under false pretenses for reasons that still remain unclear, and serves no discernible goal. The War in Iraq is wrong, pointless, bad for America, and must be ended as soon as possible.

I realize that any legislation which includes a clear withdrawal timeline will be vetoed by President Bush, and that at some point funding must be passed. Therefore I urge you to pass legislation which funds the War in Iraq for increments of not more than 3 months at a time. This will force the President to provide progress reports and justification for the war again and again. Hopefully after a time enough Republican legislators will defect and the war can be ended, or this process will continue until the 2008 election and the Republicans will be defeated.

If for some reason the President concedes defeat and agrees to end the troops, the withdrawal must be complete. All American troops should be removed from Iraq, including from Kurdistan, and construction on any long-term bases halted. There is no reason for an American presence in Iraq – the well has been too deeply poisoned, and as long as our troops are in the country the Iraqis will be distracted from rebuilding their country. Ideally, all troops would also be withdrawn from the larger Persian Gulf region, but that will take much more time and some significant political shifts here in America. Troops are also need for the War in Afghanistan – a war that was going well until the president foolishly diverted troops to Iraq.

I also urge you to properly fund the Veterans Administration. Our soldiers have served in Iraq honorably (with a very few exceptions) and deserve to receive proper medical treatment for injuries sustained during the war. The VA was doing quite well with the funding and patients it had until this war started, which broke a system not accustomed to treating new patients. I urge you to work hard to remedy yet another shameful failure of the Bush Administration.

But most of all I urge you to attempt to end the war in Iraq as soon as possible. Please do everything you can ,and make it your top priority. Lives are being wasted and families broken every day because of the War in Iraq, and it should not go on.

Thank you for your time.

Open Letter: Immigration Reform

Dear Congressmen and Senators,

I am writing today to urge your support of comprehensive reform of United States immigration policy. A number of proposals are floating around Washington, the most famous of which is the ridiculous “wall” supported by many Republicans. I must emphasize that you should support reform that addresses all aspects of the issue, and not catchy white elephants.

Of course, when immigration is discussed the focus is primarily on illegal Mexicans. Let me be clear in stating that I do not harbor ill will towards Mexicans, Latinos in general, or any other group, and that any bigotry encountered during this policy debate should be thoroughly denounced. The focus on Mexicans actually distracts from the fact that illegal immigrants come from many countries and arrive in a variety of ways, including overstaying legal visas. However, I must also point out that the relative ease that Mexicans have in emigrating to America reduces pressure on the Mexican government to enact meaningful reforms, and an unreformed, highly unequal, and thus unstable Mexico is not in America's best interest.

Foremost in any bill should be enough funds to staff Immigration and Naturalization Service workplace inspectors at much higher levels. Current levels of INS inspection staffing are not sufficient to create a credible enforcement threat. Crucial to any enforcement process is the belief by lawbreakers that they are likely to be inspected. INS should be able to regularly inspect industries where illegal immigrants are concentrated – food service, janitorial, and construction. The INS should also have sufficient resources to be able to track down those who overstay legal visas because history has shown this class of people can be dangerous to America.

Second in any bill should be much stronger penalties for companies that hire illegal immigrants. Current penalties are so low that a simple cost/benefit analysis makes hiring illegal immigrants a rational move for many companies. Penalties need to be raised to a much more punitive level, and any conspiracies to hire illegal immigrants should be subject to additional levels of punishment.

What should not be included in any immigration reform bill is an amnesty program for illegal immigrants already residing in America. America is a nation of laws and that should apply to everyone who wishes to live in America. Many thousands of people are waiting around the world for the chance to enter America legally, and to allow those who entered illegally to jump ahead of those who respect the legal process is unfair, inappropriate, and a bad moral lesson. However, I am not in favor of mass deportations or anything draconian. Once illegal immigrants realize that their prospects for employment are much poorer than for legal immigrants they will leave on their own, or they will be caught in normal INS sweeps.

In conclusion I hope you support a bill that addresses root causes via law enforcement, while ignoring calls to flag-wave at the border. I am confident you will support good policy.

Thank you for your time.

Open Letter: Housing Bubble Bailout

Dear Congressmen and Senators,

I am writing today to express my concern over various proposals being floated that would bail out homeowners who have taken out risky or inappropriate loans in the past few years. I am strongly opposed to any kind of bailout. Bailing out people for reasons other than 'acts of God' is bad policy because doing so creates a 'moral hazard'. A moral hazard teaches people that poor decisions do not have negative consequences, which of course is completely wrong.

The modern practice of American homeownership has existed for several decades. Part of that practice has been the broadly-held knowledge that a household should not buy a home that costs more than 3.5 times the household's annual income. Unfortunately, due to the Federal Reserve holding interest rates too low for too long following the 2001 recession, and due to an under-regulated mortgage industry 'innovating' by creating a wide array of very risky new 'products', a great number of households have purchased homes that they would not be able to afford under normal and more rational circumstances. The two unique factors temporarily lowered the down-payment and initial cash flow required to purchase a home, and allowed some households to purchase homes far more expensive than the 3.5 multiplier rule would otherwise dictate. These lower requirements enabled housing prices to be bid up artificially, and created the current housing bubble. As the two special circumstances disappear, housing prices will come down.

I encourage you to use your office to investigate fraudulent and deceptive business practices in the mortgage industry, as well as the wider real estate industry. There are plenty of reports of appraisers inflating home values, real estate agents pressuring appraisers to do so, agents and mortgage brokers encouraging borrowers to lie on their loan applications, and so on. Proper investigation and oversight of the real estate and mortgage industries is needed, especially since the current administration has not done so. I encourage you to create ways for homeowners who have been victims of fraud and deception to seek appropriate compensation.

However, bailing out homeowners would set a bad precedent, as well as keeping housing prices artificially high. The majority of homeowners have made good financial decisions, and bailing out the minority who made bad decisions would be unfair and inappropriate. That means many homeowners who have made bad decisions will suffer, along with holders of risky mortgage bonds. Financial loss must be the price of making bad financial decisions, otherwise there would be no reason to make good financial decisions. Inaction during widespread financial losses is certainly not a vote-winner, but you were elected to provide quality leadership for this country. The appropriate leadership now would be to make sure the unique factors that enabled the housing bubble do not re-occur, and to investigate fraudulent and deceptive practices in the real estate industry. I am confident you will make the correct choice.

Thank you for your time.