Bacon's Rebellion

Tropical Storm Hanna is expected to graze the coast of Virginia this weekend on its northward path, and Gov. Timothy M. Kaine has declared a state of emergency. In a follow-up message, Attorney General Bob McDonnell issued a warning that the Virginia Post-Disaster Anti-Price Gouging Statute is now activated.

And what does that act do?

It “prohibits the charging of “unconscionable” prices for “necessary goods and services” within the affected area during the 30 day period following issuance of a declared state of emergency. The basic test under the statute is whether the price charged for the goods or services “grossly exceeds” the price charged immediately (within 10 days) before the disaster. “Necessary goods and services” includes those goods or services for which demand does, or is likely to, increase as a result of the disaster.

The AG’s office thoughtfully provided a “price gouging complaint form” so citizens can report offenders.

It will be interesting to see what impact the price-gouging statute has on the clean-up after the storm. I’m not persuaded that it will be especially helpful. It might even hurt. Let me explain:

One thing we can anticipate from the tropical storm is a glut of fallen trees. Trees on power lines. Trees on houses (some causing structural damage and others not). Trees across roads. Trees in driveways. Trees in the back yard. Trees in the woods. The urgency associated with clearing any given tree will vary widely. A tree blocking traffic or preventing a roof repair will be a priority; a tree simply looking unsightly in the front yard will be less of a priority.

There will be a finite number of tree service employees, even if they come in from miles around and work 16-hour days. They will not be able to clear everybody’s trees all at one time. Some people will have to wait. Who will decide whose tree gets cleared immediately and who has to wait?

Well, if tree service crews are able to respond to supply and demand and raise their rates to “unconscionable” levels, they will prioritize work based upon on peoples’ willingness to pay. That willingness to pay will reflect, among other things, the urgency of a given situation. Someone with a leaking roof will be willing to pay more than someone who wants to clear a tree from his back yard… which makes total sense.

What happens if tree service crews are worried about getting prosecuted if they charge “too much.” What happens if they don’t feel free to increase their rates? Perhaps they’ll work on a first-come, first-serve basis, regardless of priority. Perhaps some will work only 12 hours a day rather than 16. Perhaps, if they live in Richmond or Fredericksburg, some will figure it won’t pay to drive down to Hampton Roads and check into a hotel. Maybe they’ll just stay home. Maybe it’ll wind up taking twice as long to clear all the trees as it would have if people could charge the market price.

A similar logic applies to the sale of every other product and service, from electric generators to chainsaws, from repairing broken windows to supplying water, ice and food. Economic theory suggests that repressing prices will inflate demand, slow the arrival of new supplies, and create shortages.

Maybe it won’t work out that way. Maybe the inhabitants of eastern Virginia will all pitch in and share in a spontaneous display of good will towards their fellow man. We’ll see. It will be most fascinating to watch.

As we sink into the La-Z-Boy recliner, watch the cable TV news about Hurricane Gustav, pop open another beer and pat our fat, comfortable bellies, it is appropriate to pause and consider the condition of the working man and woman in Virginia and the United States on this Labor Day.

We’ve heard a lot of speeches and commentary in recent days about the miserable condition of the laboring class in the United States. The multimillionaires may be prospering, but everyone else is mired in wage stagnation, home foreclosures and credit card debt. The last eight years have been a disaster. The country is crying out for change.

Carmudgeon that I am, I decided to check the facts. Unfortunately, the Bureau of Labor Statistics’ searchable database only has data through 2006, so I gathered the data from 2001 (the bursting of the Internet bubble) to 2006 for wages and salaries. Note that I focused on wages and salaries because I wanted to exclude the income from interest, dividends, capital gains and other sources of revenue that mainly benefit the plutocracy. I also didn’t want to focus on “per capital income,” my usual favorite metric, because of the need to make adjustments for evolving family size, labor force participation and so on. The numbers I’m provide are plain, old wages and salaries for everyday working Joes and Janes.

The rate of inflation over that five-year period was 13.8 percent. The average wage/salary gain for all Americans was 18.0 percent — thus, Americans enjoyed an inflation-adjusted gain of 4.2 percent in wages and salaries. That’s hardly a breathtaking breakthrough in prosperity, but it does contradict the picture of members of the working classes getting their noses ground into the dirt.

Virginia fared somewhat better than the nation as a whole — wages/salaries gained 21.3 percent. That was good enough to rank it the 11th top performing state in the country.

Hampton Roads led the way, rebounding vigorously from its wage stagnation in the 1990s. It was followed by the Charlottesville, Washington and Blacksburg-Christiansburg MSAs. Here are the numbers:

Hampton Roads…24.2%
Charlottesville… 22.6%
Washington… 21.7%
All Virginia metropolitan areas… 21.3%
Blacksburg-Christiansburg… 20.8%
Richmond… 20.2%
All Virginia non-metro areas…17.4%
Bristol-Kingsport… 17.0%
Roanoke… 16.6%
Lynchburg… 16.1%
Harrisonburg… 15.7%
Danville… 13.8%

Poor Danville brought up the rear, but Danville residents can take on small morcel of satisfaction: They performed better than the state of Michigan, which saw wages/salaries increase only 13.1%.

So, Virginians, celebrate this day. Despite what you hear, life is actually OK.

Update: In his Labor Day post on “Growls,” Tim Wise emphasized that American workers not only are making more money but are enjoying more leisure time and spending more of their income on recreation. Since the mid-’60s, the typical worker spend 8 fewer hours per week working, and has increased the percentage of personal expenditures devoted to recreation from 6.6 percent in 1970 to 8.7 percent in 2005.

Tom Vanderbilt has written what looks to be a fascinating book, “Traffic: Why We Drive the Way We Do (And What It Says About Us),” that examines the human interaction with streets, roads and highways. Remember, transportation systems are more than sluices of bedrock, asphalt and steel. They are designed for use by human beings. And humans are often quite perverse.

According to a book review by Slate writer Michael Agger, Vanderbilt visited the city of Drachten, made famous by the “intersection heard around the world.” Dutch traffic engineer Hans Mondermann redesigned a congested four-way crossing in the city of Drachten by removing all of the traffic signs. Uncertain, drivers slowed down, cooperated with one another, and shared the road with pedestrians and bicyclists. Traffic actually flowed more smoothly. Monderman’s animating principle was to put some of the “social world” into the “traffic world.”

(Bacon’s Rebellion blogged about the Drachten experiment here. My question is whether such spontaneous courtesy is the unique product of Dutch or Northern European culture, or whether the behavior that would replicate across cultures.)

Vanderbilt notes other fascinating instances of how human cultures intersect with traffic engineering. In the United States, people slow down their cars to rubberneck at accidents; when screens are placed in the way, people slow down to look at the screens. In the emerging car culture of China, apparently, there’s a problem created by motorists stopping to urinate in the middle of new highways.

Amazon.com links a one-pager on the “Traffic” book page: “Some Things About Traffic that May Surprise You.” Some of the “surprises” are indeed startling, but others would not surprise readers of Bacon’s Rebellion at all:

• 80 percent of all traffic in a typical city runs on 10 percent of the roads. (As I’ve long maintained, we have more than enough lane-miles of road — it’s how we organize and connect them that’s the problem.)
• One in five urban crashes is related to the search for parking.
• It takes longer for people who circle looking for the “best” parking space to get to where they’re going than people who take the first place they see. (Someone please tell that to my wife!)
• Anywhere between 10 percent and 70 percent of urban traffic consists of people just looking for parking.
• Saturday at 1 p.m. has heavier traffic than weekday rush hour. (That’s because everyone’s out running errands… and looking for parking!)

(Hat tip: I owe someone a hat tip, but I lost track. My apologies.)

News from the Times-Dispatch: The GRTC Transit System in Richmond has begin equipping buses on its longer express routes with Wi-Fi service. Riders can use their transit time to respond to e-mails or do other work, says spokeswoman Kathy Shaw Clary. “It’s spreading more. It’s still pretty new.”

It’s part of a national movement to make mass transit a more attractive option to drivers as high gas prices prompt them to re-thinking their commuting habits. The technology has been around for quite a while. All I can say is… About time. Mass transit needs to embrace new technologies and market them effectively if they’re ever to gain market share from automobiles.

How much profit is it appropriate for a not-for-profit hospital to make? In a quasi-market economy, even not-for-profits need to make some profit — not only to ensure their long-term financial viability but to invest in expansions, renovations, new services and the like. But how much profit? One percent of revenue? Two percent?

The Roanoke Medical Center, the flagship hospital of the Carilion Health System, reported net patient revenue of $612 million (plus $6 million in other revenue) in fiscal 2006, the most recent year provided by the Virginia Health Information Foundation. That was sufficient to generate $37 million in operating income, not including a non-operating gain of $43 million. Thus, this particular “not for profit” entity generated $80 million in profit that year.

That’s an operating profit margin of 5.7 percent, and a total profit margin of 12.9 percent. Those numbers include, by the way, the $42 million the hospital spent that year on uncompensated “charity care,” which is the traditional justification given for allowing not-for-profit hospitals to block competition through the Certificate of Public Need process and jack up their charges to paying patients.

In the previous post, Peter Galuszka highlights the findings of today’s Wall Street Journal about the extraordinary pricing power that Carilion Health System enjoys in the western Virginia medical marketplace. Carilion possesses near-monopoly control over hospital services in the Roanoke Valley and surrounding counties. Not surprisingly, its charges are the highest in the state, the WSJ reports — even higher than in markets with higher labor costs. What’s more, its profits are massive.

Carilion does play a positive role in the Roanoke community, contributing to civic, philanthropic and economic-development endeavors. But does that excuse such massive profits? Isn’t the foremost mission of a not-for-profit hospital to provide affordable, quality healthcare?

Getting back to my original question, what’s an appropriate level of profitability for a not-for-profit hospital? There’s one obvious benchmark in Roanoke — the for-profit Lewis-Gale Medical Center. There, according to VHIF data, the Fiscal 2006 operating profit was $8.4 million on $189 million in revenue — a margin of 4.4 percent.

When the not-for-profit hospital makes a profit margin that’s 75 percent higher than that of the for-profit hospital, I’d say the Roanoke Valley needs to have a “come to Jesus” meeting with the board members of Carilion.

If you’ve ever wondered about runaway health care costs, maybe you shouldn’t blame the government. Blame non-profit, monopolistic health care organizations.

Such as Carilion Health System in Roanoke.

In a scathing Wall Street Journal story on the front page this morning, Carilion, the only name in the game in Roanoke, was taken apart for excessive power, abusing its pricing, throttling the local news media and harrassing patients for non-payment.

Here are a few choice items from that story:

• Carilion’s monop0oly in Roanoke means that the area has the highest medical costs in Virginia.
• Colonoscopies at Carilion cost four to 10 times what other area centers charge.
• Neck CTs are nearly three times what area centers charge.
• The compensation of its chief executive, Dr. Edward Murphy, has tripled in recent years to $2.07 million.
• After consolidating two hospitals in Roanoke a few years ago, Carilion forced local doctors to sell their private practices to them. If they did not, they got no referrals from Carilion.
• When Jeff Sturgeon, a reporter for the Roanoke Times, covered the controversy aggressively, Carilion complained and Sturgeon was shifted to another beat.
• Carilion is so pushy in going after non-paying patients that the General District Court in Roanoke devotes one day each week to dealing with liens and lawsuits filed by the health system.
• A massive construction project now underway is the object of accusations of self-dealing.

The odd thing about all of this is that non-profit hospitals were originally established to help indigent patients. But Carilion morphed into something else. Just as the federal government warned in 1989, an unhealthy monopoloy was formed when Carilion merged with another hospital.

Issues such as these are huge for Virginia and the rest of the nation. Hopefully cries for universal health care will get some traction because obviously, in this case, the free market is not working. Life, death and health should not be business decisions affected by sharks who run monopolies.

It is especially disheartening the see the local media intimidated. But I can believe it. A few years ago I edited a magazine in Richmond. We ran a legitimate story about doctors in Virginia Beach forming their own boutique practices because they were unhappy with the business-as-usual approaches to health care.

A few months later I was called into a darkened room by the publisher and a representative from human resources. There, I was rebuked and told that the doctor story was “a pencil in the eye of managed care.”

Peter Galuszka

The liberal intelligentsia of the United States appears to be in agreement that white prejudice against African-American political candidates remains a potent force in American politics.

“Call me crazy, but isn’t it possible, just possible, that Obama’s lead is being inhibited by the fact that he is, you know, black?” wrote John Heilemann in New York magazine earlier this month. “What makes Obama’s task of scoring white votes at Kerry-Gore levels so formidable is, to put it bluntly, racial prejudice.” (The Wall Street Journal column I pulled this quote from offers other examples of the if-Obama-loses-it’s-because-whites-are-racist meme.)

Such thinking is deficient on its face — are we supposed to believe that America was less racist a month ago, when Obama did enjoy Kerry-Gore popularity levels, than it is today now that his lead in the polls has evaporated? But such views are given cover by the work of race- and gender-obsessed political scientists…. including those at the University of Virginia.

An article in the current edition of the Arts & Sciences supplement to the University of Virginia Magazine runs a story, “How Open Are We?” In that article, writer Dan Morrell describes the research of Vesla Weaver and other UVa faculty members who are exploring racial bias in voting patterns. I will concede up front that a magazine article does not have the space to express every facet of of a professor’s thinking, so I may not be presenting their arguments fully. But it does strike me that some researchers are finding what they set out to find.

Writes Morrell:

To anyone who questioned what role, if any, race would play in this year’s election, exit polls in the Pennsylvania primary in April made it clearer: One out of five whites surveyed plainly said a candidate’s race was a factor. “And those,” says Vesla Weaver (Government, English Language and Literature ’01), assistant professor of politics, “are just the ones to admit it.”

Let’s drill a little deeper into those poll results (which you can find here). First of all, it was 19 percent of Democratic primary voters, not whites, who responded that the race of the candidate they voted for was “important” in influencing their votes. Of those, 58 percent voted for Clinton and 42 percent for Obama. In other words, only 11 percent of the Democratic voters could be accused of voting against an African American because of his race. At the same time, 7 percent evidently voted for Obama because he was perceived as black. (By the Pennsylvania primary, Obama had overcome the question among race-obsessed liberal commentators of whether he was “black enough.”)

Clearly, a modest fraction of the population still takes race into consideration when voting. What we don’t know from the poll is how significant the race factor was. Did it weigh as heavily as, say, the war in Iraq? Or was it more akin to the candidate’s position on, say, ethanol subsidies? Furthermore, it’s worth nothing that bias cuts two ways. For every three people who voted against Obama in part because of his race, two people voted for him. That’s not surprising when we consider that 92 percent of all black primary voters checked the box for Obama. Net loss for Obama because of race: 4 percentage points. That’s not quite as bad as “20 percent.”

Weaver’s contribution to plumbing the nuances of bias in American society was a research project that measured the response of white voters to lighter- and darker-skinned candidates. Writes Morrell:

In head-to-head match-ups pitting black candidates (both dark- and light-skinned) against white candidates — with controls for ideology and candidate and respondent characteristics — Weaver found that whites generally preferred the white candidate. However, when respondents did choose a black candidate over the white candidate, they preferred the darker one.

This is how Weaver interpreted the results: When a dark-skinned candidate is contrasted to a white candidate, “white respondents think they are being asked about race and will vote to show they have no biases.” When a light-skinned black is offered, the response is not triggered.

What’s interesting to me is that Weaver did not test African-Americans, or if she did, she did not deem the results worthy of conveying to the magazine writer. But I would like to know, would the same pattern of preferring a candidate of one’s own race apply to African-Americans as well? If so, would we conclude that African-Americans are just as biased as whites? Or is it possible that something other than “prejudice” — a term that connotes racism — is responsible? Could people simply favor candidates whom they perceive to be like themselves? Or, alternatively, are the test subjects imputing certain cultural or ideological attributes to the candidates based on skin color?

I would hypothesize something more complex is going on. Given the extent to which African-Americans overwhelmingly identify themselves as Democrats, and the extent to which the mainstream media has portrayed race hustlers like Jesse Jackson and Al Sharpton as legitimate leaders of African-Americans, and the extent to which rare conservative African-Americans like Clarence Thomas are widely decried as “race traitors,” is it not possible that conservative voters would subconsciously perceive African-American candidates as liberal — overriding Weaver’s effort to control for ideology? Could that not account for some of the “bias” that Weaver found?

The bias in such instances may be real, but it’s not necessarily what we have traditionally labeled prejudice or racism. This is just a hunch, but I suspect that Dr. Weaver, like the New Yorker columnist quoted above, is heavily invested in the idea that white racism permeates American society. If I’m right about that — and I’ll admit that I’m displaying my own prejudices regarding the political leanings of university scholars — she’ll find a way to interpret the experiment results in a way that does not conflict with her mental construct of the world. The likelihood that she would entertain my counter-hypothesis, I expect, is just about nil.

Virginia has a top-down public educational system in which many policies and procedures are dictated by a large educational bureaucracy in Virginia. The Old Dominion, which professedly believes in competition, has among the fewest charter schools of any state in the country. And automatic funding formulas (the Standards of Quality) ensure that taxpayers ratchet state aid for K-12 public education relentlessly higher with little accountability: The main impact of the Standards of Learning, implemented with the dream of creating accountability, has been to incentivize schools and teachers to “teach to the test.”

Despite these obstacles, some public school systems manage to accomplish remarkable things. I’m impressed by the quality of the education provided by Henrico County schools, for instance, on a shoestring — with significantly less spending per pupil than the neighboring City of Richmond. While students in suburban school districts fare reasonably well, students in municipalities like Richmond and Petersburg are terribly short-changed. Worse, they have no option — other than moving into neighboring jurisdictions, which many cannot afford — to improve their lot.

That’s why I’m delighted to note the appearance of a new group on the scene, School Choice Virginia, a non-partisan not-for-profit organization dedicated to expanding “educational choices for Virginia families.”

Founded by Del. Chris Saxman, R-Staunton, the group is supported by the Family Foundation, the Thomas Jefferson Institute for Public Policy, the Virginia Council for Private Education, the Home Educators Association of Virginia, the Virginia Catholic Conference, the Old Dominion Association of Church Schools and even a representative of the Richmond City School Board.

At the moment, School Choice Virginia’s main presence in the marketplace of ideas is a blog, which tracks the “school choice” movement in Virginia and across the country.

The unwillingness to explore alternatives to the bureaucratic — nay, sclerotic — public education system we have in Virginia is, to my mind, one of the greatest indictments that can be leveled against Virginia’s political class. Let us hope that this new group can re-frame the educational debate from “mo’ money” to “mo’ reform.”

The gracious and intrepid Jim Bacon postponed his other pressing duties this morning to join me in a discussion on Virginia’s busted budget and what to do about it.

You can listen to the whole interview here:

Transcript from Real Clear Politics of a Chris Wallace (Fox News) interview with Gov. Timothy M. Kaine:

Chris Wallace: It’s the Democrats’ moment to tell America where they would take the country as Barack Obama becomes his party’s nominee. Can he redraw the electoral map with his politics of change? … Let’s talk Virginia — 13 electoral votes, hasn’t gone for a Democrat since Lyndon Johnson in 1964. But the polls right now say Virginia is dead even. What, if anything, can Joe Biden do for you in Virginia?

Tim Kaine: Well, first, Joe comes from a state, Delaware, that borders Virginia. The eastern shore part of Virginia and Delaware are not only bordering but very, very similar. And I think there’s a lot in common, and Joe understands that.

Tsk. Tsk. Someone needs a geography lesson!

My column for the e-zine takes a look at TELs — Tax and Expenditure Limits — and why it’s high-time for Virginia to have such a law on the books.

Tomorrow at 10AM, our own Jim Bacon will join me on TQ radio to discuss TELs, the budget mess in general and a lot more. If you’ve got a question, comment or beef, call (347) 426-3146 and fire away.